Why Latin America is eyeing a common currency union
Brazil and Argentina began discussions about a common South American currency that could become the second-largest currency bloc in the world after the euro.
Here's what you need to know about the proposed currency, which Brazil has suggested calling the "sur" (south):
- Initially pegged as a bilateral project between Brazil and Argentina, South America's two biggest economies, the sur will be discussed at a conference later this week with the 33 members of the Community of Latin American and Caribbean States.
- The currency is aimed at forging greater economic integration in the region and would extend to Mexico, Central America, and the Caribbean.
- The idea of a South American common currency has been discussed in the past but talks have been revived under the “pink tide” of leftist Latin American leaders, including Brazil’s new president, Luiz Inacio Lula da Silva, and Argentine leader Alberto Fernandez.
- South America already has a powerful EU-inspired trading bloc called Mercosur: Brazil, Argentina, Uruguay, and Paraguay have traded tariff-free since 1991. Residents are permitted to live and work anywhere within the bloc whose combined GDP has grown nearly fourfold to over $2 trillion.
- In an interview with the FT, Argentina’s finance minister Sergio Massa noted that it took Europe 35 years to create the euro, suggesting a Latin American common currency may be decades in the making. “I don’t want to create any false expectations," he said. "It’s the first step on a long road which Latin America must travel.”