Brazil, Argentina to encourage trade, says Finance Minister; plays down common currency

Brazilian Finance Minister Fernando Haddad played down the idea of a single shared currency between Argentina and Brazil late on Sunday (Jan 22), saying the countries were looking at ways to stimulate bilateral trade but not extinguish their own currencies.

Earlier on Sunday, Lula and Fernandez said in an article published on the Argentine website Perfil they would “advance discussions on a common South American currency that can be used for both financial and commercial flows.”

Haddad, who floated such a possibility in an article last year, said removing trade barriers between the two largest economies in South America could involve using a single currency for commerce, given a lack of U.S. dollars in Argentina. But that does not spell the end of the Brazilian real, he said.

“Trade is really bad, and the problem is precisely the foreign currency, right? So we are trying to find a solution, something in common that could make commerce grow,” Haddad told reporters as he arrived in Buenos Aires ahead of Lula’s first international trip since his Jan 1 inauguration.

He said Argentina’s trade with Brazil had suffered due to a lack of dollars in the southern neighbor, where an economic crisis has left the government battling to replenish foreign currency reserves, with an inflation rate of nearly 100% last year.

Haddad noted Argentina was an essential buyer of Brazilian industrial goods and that “several possibilities” were being floated to circumvent its currency problems, though no decision had been made.

Asked if he could provide further details on the currency issue, Haddad confirmed he would clear the matter up in the coming days, adding ironically: “especially because some people are saying the real will end.”

The negotiation, he explained, currently revolves around resolving Argentina’s foreign exchange difficulties. The Spanish-speaking country has only around 40 billion dollars in reserves, which creates problems with importing, which directly harms Brazil, its leading trading partner in the region.

In 2022, Brazilian exports to Argentina reached 15.3 billion dollars, 29% more than the previous year. Even so, they have not yet returned to 2017 values, when they reached 17.6 billion.

See below Brazil’s top ten exports to Argentina in containers from Jan 2022 to Nov 2022, according to Datamar’s business intelligence service DataLiner.

Top 10 exports to Argentina | Jan 2022 – Nov 2022 | TEUs

Source: DataLiner (click here to request a demo)

The Financial Times had previously reported, citing Argentina’s Economy Minister Sergio Massa, that the neighboring nations would announce they were starting preparatory work on a common currency this week.

Source: Reuters and Uol

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