Amid concerns regarding Argentina’s foreign reserves and the devaluation of its national currency, Foreign Minister Santiago Cafiero expressed support for the creation of a LATAM common currency.
Such a currency, he believes, would alleviate the stress associated with Argentina’s dollar issues.
The potential benefits of a LATAM common currency
In a recent meeting between Brazilian President Luiz Inacio ‘Lula’ da Silva and Argentine President Alberto Fernandez, Santiago Cafiero underscored the advantages of establishing a shared currency for Latin American countries.
Although the meeting addressed various proposals, the topic of a common Latin American currency was not explicitly discussed.
Cafiero stated that a common currency would significantly reduce the stress Argentina faces due to its ongoing dollar problems.
The country has been grappling with a decrease in its foreign reserves, which are required for import payments under the current international trade structure.
This has prompted the Argentine government to consider using the Chinese yuan in its bilateral transactions with China to conserve its diminishing reserves.
Brazilian President Lula, during his presidential campaign, had proposed a common currency for the region as a means to reconnect with other Latin American countries and to challenge the widespread use of the dollar.
Initial reports suggested that this project would resemble the Euro, replacing the national currencies of various countries in the region, with Argentina and Brazil leading the initiative.
Progress toward a LATAM common currency
In January, at the CELAC commitment event in Buenos Aires, the governments of Argentina and Brazil discussed the proposal and signed a document to commence work on the creation of a common currency.
They clarified that its usage would be limited to settlements between countries of the Common Southern Market and the BRICS bloc, which is also exploring the issuance of its own shared currency.
Foreign Minister Santiago Cafiero confirmed that during the recent meeting between Presidents Lula and Fernandez, Argentina proposed a mechanism to facilitate trade between the two countries using the Brazilian real. Both countries’ economy ministries agreed to continue working on the issue collaboratively.
Cafiero emphasized the importance of finding a mechanism to alleviate the pressure on dollar exchange in trade, as Argentina relies heavily on Brazilian industrial inputs.
He justified Argentina’s proposal to create a real-based payment mechanism that could be compensated, explaining that this would function similarly to import mechanisms but would rely on the real instead of the dollar.
Although Argentina’s current economic situation is challenging, Cafiero remains optimistic about the country’s prospects towards the end of the year.
He believes that the growth and job creation figures demonstrate that a productive model is more beneficial for the people than the financial and extractivist speculation model proposed by the Macrismo.
As Argentina and Brazil work towards strengthening their ties, they also aim to recreate integration mechanisms essential for South America.
Both presidents share an integrationist vision and understand that South American unity is the only way to counterbalance geopolitical tension between the United States and China.
The upcoming summit of South American presidents in Brazil on May 30 will further facilitate discussions on regional cooperation and resource management.
