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Hinting At A Proximity

Brazil and Argentina, the two neighbouring countries in Latin America, are all set to get closer yet again, after sharing not-so-cordial relationships for the past few years. An article, recently published on an Argentinian website, has hinted at this proximity. Interestingly, the article has been co-authored by Brazilian President Luiz Inácio Lula da Silva and President of Argentina Alberto Ángel Fernández. In this article, the respective Heads of the two States have advocated for the introduction of a common currency, like Euro.

It may be noted that the European Union (EU) had officially adopted Euro, the second-largest reserve currency as well as the second-most traded currency in the world after the US Dollar, on December 16, 1995 in Madrid. The Euro was introduced to global financial markets as an accounting currency on January 1, 1999, replacing the former European Currency Unit (ECU) at a ratio of 1:1 (USD 1.1743). Currently, the Euro (symbol: €; code: EUR) is the official currency of 20 of the 27 member-states of the European bloc.

The article, published on the Argentine website Perfil in January 2023, stated: “We intend to overcome the barriers to our exchanges, simplify and modernise the rules, and encourage the use of local currencies.” It further mentioned: “We also decided to advance discussions on a common South American currency that can be used for both financial and commercial flows, reducing costs, operations and our external vulnerability.

In fact, Brazil first made a proposal in this regard. The idea of a common currency was raised originally in an article written by Brazilian politicians Fernando Haddad and Gabriel Galipolo in 2022. Later, Lula mentioned the idea during his Presidential campaign. Now, Haddad is serving as the Finance Minister of Brazil, while Galipolo has become his Executive Secretary.

President Lula chose Argentina for his inaugural international trip since taking office, keeping with the tradition of first visiting the largest trading partner of his country in the region. The two Latin American powerhouses shared strained relations during the four-year tenure of former Right-wing President of Brazil Jair Messias Bolsonaro. On January 23 (2023), the Edge Markets reported that Lula’s trip to Buenos Aires also marked the return of Brazil to the Community of Latin American and Caribbean States (CELAC). Brazil had left the Community in 2019 under order from former President Bolsonaro, who had refused to participate in the regional group due to the presence of Cuba and Venezuela. Although Bolsonaro wanted Cuba and Venezuela to leave the group, other CELAC member-states rejected his demand.

Meanwhile, both President Lula and President Fernández have stressed on the need for maintaining cordial relationships between Brazil and Argentina in an attempt to strengthen regional integration. They have further emphasised on bolstering the Mercosur trade bloc, which includes Argentina, Brazil, Paraguay and Uruguay. In their article, the two Presidents wrote: “Together with our partners, we want Mercosur to constitute a platform for our effective integration into the world, through the joint negotiation of balanced trade agreements that respond to our strategic development objectives.

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