President of Brazil Luis Inacio Lula Da Silva clarified the scope and reach of the common currency that Brazil and Argentina are studying to issue in Latam. Lula Da Silva clarified that he believed this currency would be used to settle cross-border payments between the two countries and also countries from BRICS and Mercosur.
Lula Clarifies Latam Common Currency Intention
Luis Inacio Lula Da Silva, president of Brazil, has clarified the facts surrounding the intention that Argentina and Brazil have of creating a Latam common currency, that would be later extended to all of Latam. Upon his arrival in Buenos Aires for the CELAC summit of chiefs of state, Lula explained that the discussion would circle around the launch of a currency for multilateral settlements amongst countries of different integration groups, including BRICS and Mercosur.
Lula Da Silva stated:
Why not create a common currency with the Mercosur countries, with the BRICS countries? I think that is what is going to happen. You can establish a type of currency for trade that the central bank sets.
Lula also stated that he would prefer international trading transactions to be always settled in currencies native to their countries to reduce dependence on the U.S. dollar.
Fernando Haddad, minister of economy of Brazil, offered more insight into the objectives of the two countries, explaining:
Trade is very bad and the problem is precisely the foreign currency, right? So we are trying to find a solution, something in common that can grow the trade.
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President of Argentina Alberto Fernandez also referred to the hypothetical currency in the same terms that Lula did. Fernandez clarified:
The truth is that we don’t know how a common currency between Argentina and Brazil works, nor do we know how a common currency will work in the region. But what we do know is how the economy works with foreign currencies to trade.
The joint statements of Fernandez and Lula Da Silva went against the expectations that some had on the retail and widespread character that this currency would have, fueled by the statements that the minister of economy of Argentina, Sergio Massa, offered Financial Times.
Also, reports from O’Globo explain that a common currency memorandum to be signed by the two governments includes a clause to protect the fiat currencies of each country, the Brazilian real and the Argentine peso, from being substituted by this settlement-focused currency.
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