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Montevideo, March 29th 2024 - 06:53 UTC

 

 

Brazilian minister denies single currency: no death sentence for the Real

Wednesday, February 8th 2023 - 17:25 UTC
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Haddad, who floated such a possibility in an article last year, said removing trade barriers could involve using a single currency for commerce Haddad, who floated such a possibility in an article last year, said removing trade barriers could involve using a single currency for commerce

Argentina and Brazil are looking at ways to stimulate bilateral trade and investments but not eliminate their own currencies, according to Brazilian Finance Minister Fernando Haddad, who played down the idea of a single shared currency between the two Mercosur partners.

 During Brazilian president Lula da Silva's recent visit to Argentina, where he met with his peer Alberto Fernández, the pro Argentine government daily Perfil said in an article the two countries would “advance discussions on a common South American currency that can be used for both financial and commercial flows.”

The news was immediately echoed in regional and global financial media, but the version had short legs.

Haddad, who floated such a possibility in an article last year, said removing trade barriers between the two largest economies in South America could involve using a single currency for commerce, given a lack of U.S. dollars in Argentina. But that does not spell the end of the Brazilian Real, he said.

“Trade is really bad, and the problem is precisely the foreign currency, right? So we are trying to find a solution, something in common that could make commerce grow,” Haddad told reporters.

He said Argentina’s trade with Brazil had suffered due to a lack of dollars in Buenos Aires, where an economic crisis has left the government battling to replenish foreign currency reserves, with an inflation rate of 100% last year.

Haddad noted Argentina was an essential buyer of Brazilian industrial goods and that “several possibilities” were being floated to circumvent its currency problems, though no decision had been made.

Asked if he could provide further details on the currency issue, Haddad confirmed he would clear the matter, adding ironically: “especially because some people are saying the real will end.”

The negotiation, he explained, currently revolves around resolving Argentina’s foreign exchange difficulties. The Spanish-speaking country has only around 40 billion dollars in reserves, which creates problems with imports, which directly harms Brazil, its leading trading partner in the region.

In 2022, Brazilian exports to Argentina reached US$ 15.3 billion, 29% more than the previous year. Even so, they have not yet returned to 2017 values, when they reached US$ 17.6 billion.

Some of the ten main Brazilian exports to Argentina, Aluminium casks, cans, etc: 24.5%; Vehicle parts and accessories : 19.8%; ​tyres: 11.4%​; Uncoated kraft paper: 8.9%​; Artificial corundum: 7.8%;​Ethylene polymers: 6.9%; ehicles for goods transportation: 6.8%;​Polyacetals: 4.8%​; Surface cleaning agents: 4.7 %; Refrigerators: 4.3%

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