Citing officials, the Financial Times said on Sunday: Brazil and Argentina plan to create a common currency.
According to the newspaper, this move could finally create the world’s second-largest currency bloc with roughly 5% of global GDP, if the initiative is successfully implemented across all of Latin America.
The plan will be discussed and officially announced at a summit in Buenos Aires this week, according to the report.
“There will be a decision to start studying the parameters needed for a common currency, which includes everything from fiscal issues to the size of the economy and the role of central banks,” Argentina’s Economy Minister Sergio Massa told the news outlet.
According to Massa, other Latin American nations will be invited to join the common currency project. Brazil is proposing calling the new currency ‘sur,’ which translates as ‘south.’
Massa noted that the creation of the ‘sur’ is likely to take years, pointing to the fact that it took Europe 35 years to create the euro.
The minister said: “It would be a study of mechanism for trade integration. I do not want to create any false expectation. It is the first step on a long road which Latin America must travel.”
Other officials who spoke to the news outlet said the new currency is expected to boost regional trade and help cut the countries’ reliance on the U.S. dollar.
Brazil and Argentina have discussed the idea of a common currency for several years, but Brazil’s central bank previously blocked efforts to get such an initiative off the ground, sources told the Financial Times.
The two countries boast the largest economies in South America. Brazil is a member of the BRICS group and has enjoyed relative economic stability in recent years, although analysts point to a number of headwinds that could dampen growth this year. Argentina has been plagued by economic instability for decades. The country has defaulted on its debt several times, most recently in 2020, and has had to resort to capital controls to protect its currency. Inflation in the country is currently soaring and it has a roughly $40 billion debt to the IMF.
Another media report said:
The initiative is expected to be announced during Brazilian President Luiz Inacio Lula da Silva’s visit to Argentina that has kicked off Sunday night.
Brazil’s Central Bank has criticized the idea and hindered the negotiation progress, an official close to the matter told the newpaper. However, the rise to power of left-wing leaders in both countries has eventually provided the proposal with a greater government support, the official added.
The common currency is likely to be called the “sur” (south), as suggested by Brasilia.
China Wants To Drop Dollar In Oil Trade
An earlier report by Reuters said:
Beijing will work to make energy purchases in yuan instead of the U.S. dollar signaling another step towards shifting further away from the greenback, China’s President Xi Jinping has told Gulf Arab leaders.
China’s leader highlighted the necessity of the move while speaking at a Chinese-Arab summit that was hosted by Saudi Arabia. Xi had held separate talks with the heads of the Persian Gulf states at the summit that reportedly brought together 30 leaders from across the region.
The world’s biggest crude importer, China in November ramped up purchases of oil by 12% year-on-year, marking the 10-month high despite the severe pandemic-related restrictions. Chinese state refiners stepped up purchases of U.S. crude oil, while maintaining high imports of Russian oil prior to the December 5 European embargo and imposition of an oil price cap.
China’s independent refiners also moved a record amount of deeply discounted Iranian crude passed off as oil sourced from Malaysia, which is commonly used as a transfer point for oil originating from the sanction-hit Venezuela and Iran.
Saudi Arabia was China’s number one oil supplier in the first ten months of 2022, making up 18% of China’s total crude oil purchases, with imports totaling 73.54 million tons, or 1.77 million barrels per day, Chinese customs data showed.
Keen interest in the yuan and other currencies from major oil importers have arisen in the wake of unprecedented sanctions introduced by Washington and the allies against Russia, one of the world’s biggest oil producers and exporters over Moscow’s military operation in Ukraine.