Common currency negotiations between Brazil and Argentina, however, deal only with a common unit for financial transactions
The president Luiz Inacio Lula da Silva (PT) defended this Monday (23.jan.2023) that countries from the same economic blocs create commercial and financial transaction systems independent of the dollar. He also said that the Brazilian and Argentine governments are working to propose a common currency for trade between the two countries.
“If it were up to me, we would always have foreign trade in the currencies of other countries so that we don’t have to depend on the dollar. I think that over time this will happen and it needs to happen, because many times there are countries that have difficulty acquiring dollars and you can make agreements, establish a type of currency for trade in which central banks settle accounts so that countries can continue doing business”said Lula.
In the morning, the PT member visited the president of Argentina, Alberto Fernández, in Buenos Aires. Both discussed common interests between the 2 countries and signed memorandums and binational agreements.
One of them was the memorandum of understanding on financial integration, signed by the Minister of Finance, Fernando Haddad, and his Argentine counterpart, Sergio Massa.
like the Power360 showed, Brazil included a caveat in the document to clarify that the Brazilian government only accepts the creation of a common unit for financial and commercial transactions.
With that, the country wants to stop the noise about the creation of a single currency in the region, which is rejected by the Brazilian government.
According to Power360 found out, the signing of the memorandum between Haddad and Massa is a political signal from the Brazilian government towards the neighboring country.
The Brazilian government intends to move forward in the negotiations because it is concerned about the growth of China’s share in the Argentine trade balance.
With the devalued currency and rising inflation, Argentina has had difficulty maintaining imports of Brazilian products, especially manufactured goods.
The subject had gained traction over the weekend due to a joint letter signed by the presidents of Brazil and Argentina and an interview given by Sergio Massa to the British newspaper Financial Times.
According to Lula, the economic team of each country will draw up proposals for foreign trade and transactions so that a “common currency to be built with much debate and many meetings”. A new commercial transaction unit should not be defined yet in 2023.
In his speech, Lula also stated that, in 2008, Brazil and Argentina had an experience similar to the one under study, but as the rule was optional and not mandatory, the adoption of local currencies for business ended up being disused.
“If my memory serves me right, it was in 2008 that we established that Argentines could buy by paying in their currency and Brazil could buy by paying in their currency. It was a very timid experience because our decision was not mandatory, it was optional. And it was not something that flowed with the force that we imagined”said.
Also commenting on the matter, Fernández said that Lula made a “very interesting reflection”. “We don’t even know how a common currency works in the region, but we know how economies depend on the need to work with foreign currencies”said.
About Alberto Fernandez
Alberto Fernández, 63 years old, is in his 1st term as president of Argentina. He will seek re-election on Oct. 29, when Argentina holds presidential and legislative elections. The official calendar can still be changed, though.
Born in Buenos Aires, Fernández is a lawyer and professor. He was elected president in 2019 by the left-wing Justicialist party, after defeating then-president Maurício Macri, who was trying to be re-elected. Its vice president is former president Cristina Kirchner.
Between 2003 and 2008, Fernández was chief of staff for former President Néstor Kirchner and part of Cristina Kirchner’s government. The two broke up when the current Chief Executive became critical of Kirchnerism. In 2019, however, they teamed up again to form the presidential ticket. Currently, they are apart again.
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