Brazilian President Luiz Inácio Lula da Silva met with his Argentinian counterpart Alberto Fernández this week for the fourth time this year to discuss economic issues and bilateral cooperation. So far, so good. But one of the main topics of discussion was Lula’s proposal for a new common currency for regional trade in South America.
This is not the first time that Lula has floated the idea, raising concerns and expectations about a controversial issue. In January, the Brazilian leader said the idea would help the region reduce its dependence on the U.S. dollar.
However, critics have pointed out that the region’s economies are too diverse to be embraced by a single currency, to say the least.
The differing current economic situations in the neighboring countries would also make it difficult to implement. This is especially true of Argentina, which has been wracked by hyperinflation for years and where citizens are still heavily dependent on dollars due to a national distrust of banks. Moreover, Latin America as a whole is still feeling the limits of its pandemic-stricken developing economies.
In this sense, Lula’s proposal for a new currency seems more than ambitious, it seems utopian. At least until further studies and projections are done to eliminate the risks associated with a region-wide extreme currency makeover.
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