“There will be a decision to start studying the necessary parameters for a common currencywhich includes everything from tax issues to the size of the economy and the role of central banks”, Massa told the Financial Times.
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For César Romero, head of ‘research’ at Renta 4 SAB, in theory it is possible to establish a currency for commercial exchange between two countries. However, he warns that it would be risky because it would be marketed in two very different economies.
“You need economies that are equal in macroeconomic terms for it to be viable. Between Brazil y Argentina there is a big difference. The economy of Argentina it is macroeconomically damaged and that affects the value of its currency. [En esta figura] The volatility will affect the one who is better off, the Brazilian consumer, because today the Brazilian real can appreciate against the dollar at the same time that the Argentine peso is plummeting. If this situation occurred, [la volatilidad de Argentina] would weaken the currency that is doing better“, he claimed.
Brazil closed December 2022 with an increase of 0.7% in its consumer price index (CPI) and with a inflation cumulative annual rate of 5.9%. On the other hand, the monthly increase in the CPI in Argentina was 5.1%, while its inflation in all of 2022 it stood at 94.8%.
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In addition, in the last year the price of the dollar in Brazil it fell by 0.4% and until January 23, 2023 it was trading at 5.21 reais per dollar. Meanwhile, the price of the US currency in Argentina it grew 76.68% during the last year and is sold at 184.37 pesos per dollar.
“If two countries that are macroeconomically very different have the same currency, the common central bank, which is neither the Central Bank of Brazil or the Central Bank of Argentina but rather a new one that will have to be opened, it could not take the same monetary policy in the region because one area is very different from the other. At some point the unit would break, so it is not sustainable,” explained Alberto Arispe, general manager of Kallpa SAB.
“Brazil needs a much less restrictive monetary policy than Argentina to be able to grow. When you inflation is very high, the Central Bank has to raise interest rates to control the inflation. then as in Brazil there is not so much inflationwith monetary policy you will slow down its economic growth”, he added.
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Both specialists agreed that the governments’ decision to work on a common currency would respond more to an ideological position.
“A few years ago, in 2019, this possibility of the common currency was raised. Now they are both presidents, they are from the left and in general the leaders of Mercosur are from the left. It is more probable that it could if there could be agreements between themRomero said.