In Latin America there are projects that are already part of the continent's political mythology. Proposals in the Pan-American spirit that for decades the presidents on duty have been announcing, whose application seems imminent but which finally come to nothing and years later are refloated as if they were innovative. This is the case of the common South American currency, which the progressive leaders of Brazil and Argentina have just proposed in a joint article published on the eve of the summit of the Community of Latin American and Caribbean States (CELAC), which is taking place this Tuesday in Buenos Aires.
"We decided to advance in the discussions on a common South American currency that can be used for both financial and commercial flows, reducing operating costs and our external vulnerability," wrote the Brazilian Lula da Silva and the Argentine Alberto Fernández, in a text published by the Buenos Aires newspaper Perfil, last Saturday.
Historically, this proposal has always been dismissed as unfeasible in the short or medium term by economists due to the great asymmetries existing between the different countries of the continent. The same differences -economic and political- that turn another dream project into a chimera, such as creating a Latin American common market, following the European model, and which could never go beyond the customs mechanism represented by Mercosur.
On this occasion, the Brazilian Minister of Finance, Fernando Haddad, began to add water to wine, who, upon landing in Buenos Aires, lowered expectations and ruled out a single currency from the outset and went on to speak of a “common means of payment”. Haddad declared that "we have to see how we will do it, but the idea is that we can have a common means of payment between both countries." The minister clarified that "we are talking about a system that is not based on payments in local currency, that did not work, but that will not reach the level of monetary unification that was seen with the euro."
The idea that Brazil and Argentina –the two main South American economies- are working on and the only one that could have the prospect of becoming a reality is to establish a payment clearing mechanism between the two countries. Although the new mythical currency has already been named “south”, it would apply to this hypothetical payment system, but the disappearance of the Argentine peso and the Brazilian real is not thought of.
For his part, the Argentine Minister of Economy, the conservative Peronist Sergio Massa – who sounds like a candidate for Justicialist unity in this year's presidential elections – wanted to show off his chest in an interview published on Sunday in the Financial Times. "There will be a decision to start studying the necessary parameters for a common currency, which includes everything from fiscal issues to the size of economies and the role of central banks," Massa said. However, he added: "I don't want to create false expectations... it's the first step on a long road."
The optimism of the presidents of Argentina and Brazil expressed in their joint article is directly related to the image of a turn to the left in the region that has occurred after the return to the presidency of Lula, whose figure as a moderate progressive and development leader serves an example to the leftist leaders of the continent. And among them the Peronist Fernández, who needs more than any other to take photos with Lula given his questionable future within the movement founded by Perón, who could end up renouncing to run for re-election in favor of Massa.
The last time Argentina and Brazil talked about a single currency was in 2019, when both countries were led by the right. Then, the currency was also baptized: it was going to be called “real peso”, as the far-right Brazilian president, Jair Bolsonaro, announced during a visit to Buenos Aires to meet with his liberal counterpart, Mauricio Macri.
Already in 1987 the single currency was put on the table on the occasion of an official visit to Argentina by the then Brazilian president, José Sarney, when the Casa Rosada was occupied by Raúl Alfonsín. Back then, the coin was going to be called “gaucho”.
Argentina closed 2022 with 94.8% inflation. Brazil, with 5.8%. This data alone allows one to get an idea of the unfeasibility of a single currency, no longer between the two countries, but also on the continent. Another piece of information: the Brazilian central bank is autonomous, but not the Argentine one.
Perhaps the most eloquent reaction to the umpteenth proposal for a single South American currency has been that of the US economic news agency Bloomberg, which on Monday headlined one of its cables as follows: "Economists laugh at the idea of a common currency in Southamerica".
