Lula Da Silva said he thought that this currency would be used to settle cross-border payments between the two countries and also the BRICS and Mercosur countries.
Lula clarifies intention of a common Latam currency
Luis Inacio Lula Da Silva, president of Brazil, clarified the facts regarding the intention of Argentina and Brazil to create a common Latam currency, which would then be extended to the whole of Latam. Upon his arrival in Buenos Aires for the CELAC heads of state summit, Lula explained that the discussion would revolve around the launch of a currency for multilateral settlements between countries in different integration groups, including BRICS and Mercosur.
Lula Da Silva said:
Why not create a common currency with the Mercosur countries, with the BRICS countries? I think that’s what’s going to happen. You can establish a type of currency for trade that the central bank sets.
Lula also said he would prefer that international trade transactions always be settled in the national currencies of the countries involved to reduce dependence on the U.S. dollar.
Fernando Haddad, Brazil’s economy minister, elaborated on the goals of the two countries, explaining:
Trade is very bad and the problem is precisely foreign currency, right? So we are trying to find a solution, something in common that can make trade grow.
The president of Argentina, Alberto Fernandez, also referred to the hypothetical currency in the same terms as Lula. Fernandez clarified:
The truth is that we don’t know how a common currency between Argentina and Brazil works, and we don’t know how a common currency will work in the region. But what we do know is how the economy works with foreign currency to trade.
The joint statements by Fernandez and Lula Da Silva went against the expectations that some had about the retail and generalized nature that this currency would have, fueled by the statements that Argentina’s Minister of Economy, Sergio Massa, offered to the Financial Times.
Also, the O’Globo article explains that a memorandum on the common currency to be signed by the two governments includes a clause to protect the fiduciary currencies of each country, the Brazilian real and the Argentine peso, from being replaced by this fiduciary currency.