Brazil’s Lula proposes common South American currency

President Luiz Inácio Lula da Silva proposed on Tuesday, the 30th, during the South American summit hosted by Brazil, the establishment of a common currency for commercial purposes among the 12 countries of South America.

In his address, Lula echoed his previous criticisms of the predominance of the US dollar in global financial transactions and advocated for the adoption of a common currency within the region. The proposal was made during the “retreat” of South American presidents, organized by Lula in Brasília, to promote continental integration and foster an ongoing dialogue between leaders.

Common reference

Lula put forth several suggestions, including creating  “a common reference unit for trade” to reduce reliance on currencies from outside the region. As outlined by the Workers’ Party, the objective is to “deepen our South American identity, particularly in the monetary sphere.” Lula also proposed the development of more efficient compensation mechanisms between countries.

It is important to note that Lula’s proposal does not entail replacing the real or national currencies of other countries, which are commonly used by their respective populations. Instead, the idea is to introduce a currency specifically for import and export payments.

Dollar depletion

The discussion surrounding the creation of a common currency has gained traction due to the scarcity of US dollars and the impact of monetary policies on trade, notably in countries such as Argentina.

This is not the first time President Lula has broached the topic of a common currency. During a visit to Argentina in January, he also raised the possibility of establishing a common currency between Brazil and its neighboring country. Although the groundwork for such transactions has been laid in the past, the mechanism has yet to be implemented.

Lula’s critical stance on the global dominance of the US dollar has been evident during recent trips to Japan and China. His position has drawn disapproval from Washington while finding support from Beijing and Moscow, rival powers to the United States as the sole issuer of the global currency.

Expressing his aspirations, Lula has stated his “dream” of seeing the BRICS countries create a currency for foreign trade purposes, similar to the euro used in the European Union. He hopes to further this discussion within the New Development Bank, a financial institution established by Brazil, Russia, India, China, and South Africa.

In a significant development, the central banks of Brazil and China have initiated cooperation this year to facilitate trade and investments between the two countries, bypassing the use of the US dollar. They aim to enable direct transactions between the real and the yuan through clearing houses without exchanging currency in US dollars.

Source: Exame

To read the original news report, see: https://exame.com/economia/lula-propoe-a-criacao-de-moeda-comum-na-america-do-sul-para-importacao-e-exportacao/

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