Haddad: Common currency of Brazil and Argentina is advancing – 01/23/2023 – Market

Finance Minister Fernando Haddad said this Monday (23) that the plan to create a common currency between Brazil and Argentina is moving forward and has nothing to do with the idea of ​​a single currency defended by former Economy Minister Paulo Guedes.

“My predecessor defended a single currency, that’s not what we’re talking about, it’s not about Paulo Guedes’s idea, it’s about moving forward with the planned instruments that did not work satisfactorily”, he said, at an event during a trip to Buenos Aires, in Argentina.

In August 2021, Guedes stated that a single currency for Mercosur would enable greater integration and a free trade area, and would create a currency that could be one of the “five or six relevant currencies in the world”.

In an interview with journalists, Haddad and Sergio Massa, Minister of Economy of Argentina, stated that the two countries advanced in the idea of ​​a common currency, which would be used in commercial negotiations between the countries – unlike a single currency that would replace the real and the peso. .

The minister reinforced that the value of each currency is not at risk with the plan.

“We had a series of mechanisms that stopped working. Now, we are creating a way to meet the demands, a common means of payment between the two countries, which does not depend on the exchange rate situation of each country”, said Haddad.

He cited as examples that did not work well the possibility of payment in local currency by both countries and the CCR (Reciprocal Payments and Credits Agreement), a compensation mechanism between central banks.

Argentine Massa stated that the common currency project could lead other countries in the region to study the possibility of a market advance that does not affect local currencies, but that facilitates exchange and trade, and defended that the economic asymmetries of the countries are respected.

“Uruguay is a smaller brother, Brazil and Argentina have the responsibility to act as bigger brothers in Mercosur”, said Massa.

This Monday, the executive secretary of the Ministry of Finance, Gabriel Galípolo, also explained that the idea of ​​creating a common currency for transactions between Brazil and Argentina has nothing to do with replacing national currencies.

“It is precisely because of the low convertibility of the peso, and because we understand that it is difficult to accept the peso in international trade today, that another form of unit of account and means of payment is being considered,” he said in an interview with GloboNews.

Galípolo emphasized that the objective of the initiative is not to surpass the dollar as an international currency, pondering that “it seems to make little sense” to have trade in the region constrained due to the US monetary policy.

Haddad also said that the integration of Latin American countries should be “a little more radical”, mentioning that “Mercosur was a great initiative, but I think the time has come to be more ambitious”.

The minister stated, however, that he is not in favor of monetary integration between the countries and that the creation of a single currency is not feasible.

With Reuters