A single currency between Brazil and Argentina? | Alterconsumismo Blog

Surprising news came from Buenos Aires where Brazilian President Jair Bolsonaro, during his official visit to Argentina, proposed to the River Plate country the possibility of introducing a common currency between the two countries, then with Paraguay and Spain. 'Uruguay. I would like to badyze the impact that this hypothetical monetary union could have.

It is obvious that the monetary union facilitates exchanges between countries sharing the same means of exchange. Nobody doubts that the euro is very convenient for tourists arriving in Spain from other countries in the euro zone, as they do not need to calculate the exchange rate or the 39, go change the currency of their country, and that their use The unit of account facilitates the transactions as there is no risk of rising or falling the currency, thus favoring the integration regional. Another very significant fact is that since the euro area has an economic size comparable to that of the United States, this single currency is much more resistant to speculation than each one. It should be noted that the pound sterling and the Icelandic krona, being small economies, faced speculative attacks respectively.

A disturbing factor, however, can ruin this attempt in the southern cone: the Argentine currency is much more vulnerable than the Brazilian currency. The Argentine peso has lost 80% of its value in recent years (in June 2015, a dollar was worth nine pesos and now about 45 pesos), while the exchange rate of the Brazilian currency has remained more stable over the same period . (A dollar is worth between three and four reais). The fact that the Argentine economy is inferior to the Brazilian economy does not justify this phenomenon, the Uruguayan peso also enjoying relative stability (during the same period, a dollar is worth between 27 and 35 Uruguayan pesos).

The first step for the monetary union would, of course, be to create a mechanism obliging all candidate countries to comply with convergence criteria similar to those imposed on all countries wishing to adopt the euro in terms of the stability of the euro area. price. , the state of public finances (annual government deficit and public debt), the exchange rate and the long-term interest rate. As we have seen, central banks would be required to put an end to inflation, reduce public debt and maintain the exchange rate, but I am afraid that no country will ever be able to do so. South America is really willing to submit to this scheme.

Another important step would be to create another mechanism to prevent the accumulation of money somewhere in the monetary zone to the detriment of the rest, ie to prevent the more industrialized regions from enriching themselves while others. regions would continue to lose cash without being able to recover it. The best redistribution of wealth was achieved by the state, which levied taxes in more prosperous areas and spent in less favored areas in order to balance the national economy. However, the absence of similar bodies within Mercosur would risk reproducing the same situation that Eduardo Galeano described at the beginning of his masterpiece, The Open Veins of Latin America: "According to the International Division of Labor, some countries specialize in victory and others in the loss"What would this great Uruguayan writer say if he discovered this proposal of the current Brazilian government?

Personally, I have nothing against South American integration, but I would recommend to my friends out there to plan carefully if they wish to achieve more prosperity by using a common currency.