Economic unions and common currencies is a concept new to our world. When Europe came together as an economic union in 1967, it made the participant member states stronger. Later on, the Association of Southeast Asian States (ASEAN), came together known as the tiger economies to build a formidable trading block now outputting a combined GDP of $3 trillion. All this to say when Brazilian President Bolsenero proposed the peso real in 2019, it made a bold statement to the rest of the world that Latin America is looking to the horizons.
The peso real was proposed to peg the Argentinian peso against the Brazilian real to prevent hyperinflation in Latin America. So, in January of 2023, when both the Brazilian president Lula da Silva and Argentinian president Alberto Fernandez proposed the sur it might finally show that Latin America and South America mean business.
South America has the potential to be a strong economic hub in the future. It is sitting on trillions of dollars of oil and lithium, the potential to become a large manufacturer, and the ability to move grain and wheat. Combining all economies under a common currency will be beneficial for all parties. Financial sectors will only use one currency across each sector, make trade deals in their currency, and move commercial items in their currency. On the face of it, it seems like a home run. But getting all countries on board with the idea will be difficult.
The idea is difficult to pitch for many reasons, but the one that hits the top of that list is making sure that no country takes advantage of another. The second is high corruption. Many South American and Latin American countries are underdeveloped or developing. Each leader will want to make sure their people and their country get a fair share and do not lose out on the high potential upside of the common currency. Do not forget that the BRICS can affect the outcome. Brazil has obligations to the bloc, and creating a common currency could be seen as a shift in priorities to those in the BRICS and within South America.
The difficulties for the foreseeable future are not at the top of the list for Brazil and Argentina. Both leaders want to keep this currency bilateral for the time being and invite more members once it takes off. This can be a new beginning for South America and Latin America, especially for Brazil and Argentina. Both want to bring Latin America to the world stage, but will it truly happen?
Author: Joshua Cheatham
