The Eurozone of the South: A Regional Currency to Strengthen Trade and Reduce Dependence on the US Dollar

The governments of Brazil and Argentina will discuss in the next few days the basic guidelines for launching a common currency between the two countries. It would constitute the second largest economic bloc in the world, behind the European Union and its currency, the euro.

According to the Financial Times (FT), the summit where the remaining details of the project will be defined will be held in Buenos Aires during the week of January 23–27. On Sunday evening, January 22, Brazilian President Lula Da Silva will arrive in the country on an official visit.

A possible name for this new currency would be “ sur “. Its main objectives would be to boost trade in the region and reduce the dependence of South America’s two largest economies on the U.S. dollar.

Representatives of other governments from the southern part of the American continent could join not only the meeting in the Argentine capital, but also the currency project. According to FT, a currency union of all Latin America would represent 5% of the world’s gross domestic product (GDP). The European Union, meanwhile, accounts for 14%.

In principle, the currency would coexist with each country’s current currencies, the real and the Argentine peso. Argentine Economy Minister Sergio Massa told the newspaper quoted above that “the necessary parameters for a common currency will be evaluated, which includes everything from fiscal issues to the size of the economy and the role of central banks.”

“I do not want to create false expectations, it is the first step of a long road that Latin America must travel,” the official added. Finally, he clarified that the project may take many years to materialize.

The devaluation of the Argentinean peso and the inflation experienced by the country have been reported on several occasions. In this context, its inhabitants -as well as those living in Venezuela — found in bitcoin (BTC) and other cryptocurrencies a solution to keep their savings safe from these evils.

While people seek access to more stable currencies such as the US dollar, Argentina’s financial crisis has led the government to place more and more restrictions on access to the currency. In response to this, stablecoins have flourished as an alternative.

The creation of a common currency between Brazil and Argentina could address this problem, although the criteria for the issuance of the new currency, its functions and who could access it are unknown. For the time being, this is an issue that will surely have more news in the coming days.