Brazilian President Lula proposes common currency for South America

The idea of a shared currency within the bloc has been discussed intermittently since its establishment in 1991

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Brazilian President Luiz Inácio Lula da Silva speaks during a meeting with fellow South American leaders at the Itamaraty palace in Brasilia on May 30, 2023.—AFP
Brazilian President Luiz Inácio Lula da Silva speaks during a meeting with fellow South American leaders at the Itamaraty palace in Brasilia on May 30, 2023.—AFP

Brazilian President Luiz Inácio Lula da Silva, during a meeting with South American heads of state in Brasilia, put forward a proposal to establish a common currency for the Mercosur trade bloc, which includes Argentina, Brazil, Paraguay, and Uruguay. 

The idea of a shared currency within the bloc has been discussed intermittently since its establishment in 1991. Lula emphasised the need to strengthen the South American identity in monetary policy and reduce reliance on external currencies by creating a unified unit of transaction for trade.

Furthermore, Lula called for increased financial support from regional development banks such as the Andean Development Corporation (CAF), the Bank of the South, and Brazil's development bank BNDES to drive social and economic development in the region. The notion of a common currency in South America has been raised by regional leaders before, but analysts remain sceptical about its feasibility due to varying monetary policies across the region.

Ives Gandra, a Brazilian jurist, pointed out the challenges of implementing a common currency, drawing a comparison to the Eurozone's development. Gandra highlighted that discussions on the Eurozone's common currency began in the 1950s and were followed by the establishment of free trade zones, customs agreements, and a common market. Only after these foundational steps were taken did they form a commission, a common council, and a European tribunal to guide the process.