Interview: Common South American currency can spur regional integration, says Argentine academic-Xinhua

Interview: Common South American currency can spur regional integration, says Argentine academic

Source: Xinhua

Editor: huaxia

2023-01-27 13:44:15

BUENOS AIRES, Jan. 26 (Xinhua) -- Creating a common South American currency, an idea floated this week by Argentina and Brazil, could pave the way for regional integration and growth without leaving anyone behind, Argentine academic Hernan Letcher has said.

The move could also promote economic stability in Argentina, the director of the Argentine Center for Political Economy told Xinhua in an interview.

"A common currency requires convergence of the main macroeconomic variables. In the case of Argentina, our country has exchange rate and monetary issues that need to be controlled," said Letcher.

A common currency will also benefit Brazil, Latin America's largest economy.

"Brazil and Argentina account for 50 or 60 percent of the region's GDP, so it is very significant for Brazil in terms of geopolitics and trade ties," Letcher said.

"Brazil is Argentina's main trade partner. In 2022, it ... became the leading destination for Argentine exports, accounting for 14 percent of the total, or almost 12 billion U.S. dollars," said the expert.

Meanwhile, "purchases from (Brazil) accounted for 20 percent of Argentine imports, or about 15 billion U.S. dollars, ranking second after China," Letcher said.

"For Brazil, Argentina represents 7 percent of its foreign trade, the third most important market, after China and the United States," he added.

On Sunday, Argentine President Alberto Fernandez and his Brazilian counterpart Luiz Inacio Lula da Silva proposed establishing a common South American currency ahead of the 7th Summit of Heads of State and Government of the Community of Latin American and Caribbean States (CELAC), held Tuesday in Buenos Aires.

On Monday, Lula da Silva said creating a common South American currency would eventually reduce the region's dependence on the U.S. dollar, though the move would initially have a mainly bilateral impact by eliminating trade barriers between Argentina and Brazil.

However, there are challenges to creating a common currency, namely transitions of power that bring in new governments. Such "political fluctuations" could throw a wrench in the process "because institutional commitments must be sustained over time" to ensure the idea succeeds, Letcher said.

"The road to a common currency is not easy ... because it entails productivity and economic policy issues that must be synchronized," he added.

For now, a common currency is an idea "that is beginning to be discussed," but implementing it will be "at the very least a medium-term" project, said Letcher.

A common currency between Argentina and Brazil, or other nations in the region, "must serve as a tool that leads to countries' integration and growth," Letcher noted.