The Brazilian President Lula, after strongly rebuffing the attempts of the former right wing president Jair Bolsonaro to foment riots to unseat the left wing incumbent, has taken a major step to consolidate the economic cooperation of the left leaning ruling governments of the Latin America. The leaders of Brazil and Argentina have pledged to work towards greater economic integration, including the development of a common South American currency, under the direction of the Brazilian president who took over on January 1 this year..
In a joint statement on the Argentinian website Perfil on Sunday, Brazilian President Luiz Inacio “Lula” da Silva and Argentinian President Alberto Fernandez said that they intended “to break down the barriers to our exchanges, simplify and modernise the rules and encourage the use of local currencies.“We also decided to advance discussions on a common South American currency that can be used for both financial and trade flows, reducing operating costs and our external vulnerability,” the two leaders wrote.
The idea of a common currency was raised in an article written last year by Fernando Haddad and Gabriel Galipolo, now Brazil’s finance minister and his executive secretary respectively. Lula also raised the prospect of a new Latin American currency on the presidential campaign trail.
Initially, the initiative will focus on reducing dependence on the United States dollar and stimulating regional trade. But subsequently, other Latin American countries will be invited to participate. If this happens, the new monetary alliance would likely eclipse the population covered by the euro — currently about 341 million.
Argentina and Brazil alone have an aggregate population of about 300 million people. Brazil, which currently uses the real, has suggested calling the new currency the “sur” (south), a clear nod to more multilateral ambitions.
Argentina’s Economic Minister Sergio Massa told reporters that the South American nations will soon “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.”He said this was just a “first step on a long road which Latin America must travel.”
Brazil and Argentina will discuss the plans for the currency at the meeting of the Community of Latin American and Caribbean States in Buenos Aires, which begins today. The meeting will see the return of Brazil to the Community of Latin American and Caribbean States, which it left in 2019 because former president Jair Bolsonaro objected to the presence of Cuba and Venezuela.
Argentina-based Spanish economist Alfredo Serrano Manc, the director of the Latin American Strategic Centre of Geopolitics, said that “the path is to find mechanisms which substitute the dependence on the dollar.”He said that now is the moment, given that “there are many governments that are ideologically similar” with left-wing leaders in Latin America.
Lula took over in Brazil amidst Brazil’s own economic woes as also recent setback to the left wing regimes of Latin America which came to power in the recent years. In Peru, the elected president in 2022 general elections Pedro Castillo has been arrested in corruption charges and removed from power. The vice president Dina Boluarte has been nominated as the new president. Castillo is a pro people leader and he was planning to make lot of changes in favour of the underprivileged, but he did not consult properly his allies and took some decisions unilaterally making him vulnerable. At a time, when the Left was hoping for a transformation in Peru, this is a setback.
Similarly in Argentina, the vice president Kichener has been arrested and removed for corruption charges. She belongs to the Peronist Party and has been in the forefront being the president earlier. This is also a big setback in the context of the next national elections in the country. The economy in Argentina is yet to come out of the crisis and this moment, this political shock has weakened President Fernandez’s government in 2023. But Argentina has allied with Brazil to start the process of tackling the economic problems of the respective country and the region through cooperation. Earlier Argentina concluded an agreement with Mexico for collaboration in a number of areas.
The Latin American experts expect both political and economic instability in the region as the left forces are still trying to consolidate in the countries they have been ruling. Further, the far right and the other anti-left forces have gained some strength due to the failure of some of the regimes to improve the ground situation affecting the common people…Lula has got wide experience in economic management. It is expected that he will be more cautious this time and take steps which will help in improving the economic situation in Brazil which has been in very bad shape during the previous regime due to the impact of Covid 19 on the health of the people as also economy.
Experts point out that the global macroeconomic and geopolitical environment is unlikely to improve much, in 2023 which will impact the region deeply. Mediocre growth in Latin America—currently expected to fall to a meagre 1.7% in 2023, according to the IMF—is likely to keep public discontent high and the approval ratings of the region’s leaders low. This will increase the political costs of necessary fiscal adjustments, so most leaders will likely delay them or abandon them altogether, economists point out.
The political situation in other countries of the region is equally under strain. In El Salvador, the political alternative to the president is not there even though there are enough developments about his gross undemocratic actions. Political tensions will also increase in Argentina, Paraguay and Guatemala as they prepare to hold elections amid major corruption allegations against the ruling party leaders. Elections are due in Argentina in October 2023. The ruling combination has to do a lot to improve its image for winning the elections, otherwise, the right will takeover. In the neighbouring Paraguay, on the other hand, the leftist opposition has a fighting chance against the ruling Colorado Party which is enmeshed in corruption scandals.
The left observers of Latin America is hopeful that president Lula with his enhanced stature after his latest victory wil make special, efforts to consolidate the unity of the pink regimes since this is very essential to combat the offensive from the right who are still entrenched. This is only possible through the improvement of the economy in each country and organizing synergies through maximum use of the raw materials and resources in the interests of the region. The Brazil- Argentina agreement is the starting point of that long term process of collaboration in Latin America. (IPA Service)
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