THURSDAY, February 29, 2024

Lula says Brazil and Argentina will study common currency for trade

Lula says Brazil and Argentina will study common currency for trade

Brazil and Argentina are in early talks to establish a shared unit of value for bilateral trade to reduce reliance on the US dollar, Brazilian President Luiz Inacio Lula da Silva said on Monday, although the move is not aimed at replacing existing currencies.

In Buenos Aires on his first international visit since taking office, Lula made the comments alongside Argentine President Alberto Fernandez, a leftist ally, who said there was little decided about what would be involved in such a proposal.

"Our finance ministers are currently working (Brazil's and Argentina's), each with his own economic team, to make us a proposal for foreign trade and transactions between the two countries that is done in a common currency to be built after much debate and many meetings," Lula told reporters in Buenos Aires.

The instrument is aimed at boosting trade within the Mercosur bloc - Brazil, Argentina, Paraguay, Uruguay, and Venezuela - and reducing reliance on the U.S. dollar.

The two South American leaders met on Monday to sign an agreement to boost bilateral trade ahead of the Summit of Heads of State and Government of the Community of Latin American and Caribbean States (Celac).

Leaders from both countries are meeting at a regional summit in the Argentine capital, where Lula vowed to resume a closer relationship after former Brazilian president Jair Bolsonaro distanced himself from Argentina.

The discussions surfaced as part of an agreement to boost bilateral trade with more Brazilian export financing backed by Argentina's international collateral, a Brazilian government source said on Monday.

Argentina’s Economy minister, Sergio Massa, and his Brazilian counterpart, Fernando Haddad, gave details on shared currency to reduce reliance on the US dollar.

Massa said the shared value would be based on each member’s gross domestic product, as Haddad said it was time to boost the Mercosur trade bloc integration.

Argentina's economy is suffering from a series of challenges, including a lack of dollars, with the government battling to replenish foreign currency reserves while also grappling with an inflation rate of nearly 100% last year.

Venezuelan President Nicolas Maduro said Monday that his country supports the creation of a common currency for South America in response to the proposal by the Brazilian President and his Argentine counterpart.

"I announce that Venezuela is ready, and we support the initiative to create a Latin American and Caribbean currency," Maduro said after leading a march against the US sanctions.

The Venezuelan leader said Brazil and Argentina's project aims at the region's unity as it will contribute to the "independence, union, and liberation of Latin America and the Caribbean."