Common currency between Argentina and Brazil, "peso real", would require addressing macroeconomic challenges

The eventual creation of a common currency "peso real" between Argentina and Brazil is not feasible in the short term because it would imply a treatment in the economic asymmetries of both countries as well as actions to correct the macroeconomic imbalances in the Argentine case.

The currency is not viable in the short term, first because there are very strong asymmetries in the economic conditions of both countries, and for investment and trade development, in addition the size of the market between Argentina and Brazil is different. Image: Pymemag
The currency is not viable in the short term, first because there are very strong asymmetries in the economic conditions of both countries, and for investment and trade development, in addition the size of the market between Argentina and Brazil is different. Image: Pymemag

The announcement of the creation of a peso real made by the president of Brazil, Jair Bolsonaro, during a meeting with businessmen from both countries in the framework of his state visit to Argentina, generated reactions from economists, local analysts, and media, who deliberated on the viability of the project.

The Argentine Minister of Finance, Nicolás Dujovne, ratified the announcement made by the Brazilian president although he said that "it will take a long time", mentioning that convergence is required in tax, tax and labor aspects.

It is complex the accommodation of both economies in virtue of achieving that purpose because it coincides with a bad moment in the financial and balance of payments conditions in Latin America. These imbalances generate a situation, a scenario that is not the most appropriate to move forward.

The bilateral announcement is more striking and political, which aims to direct a message to each country as well as to the world. In that sense, in the case of Argentina, the monetary uncertainty is present, the monetary stability of the country is not reached, and the economy is still in difficulty. The Argentine government wants to give an announcement of a greater approach to the world, and in the case of Bolsonaro has political difficulties.

First, macroeconomic issues must be resolved alluding, in the case of Argentina, to the instability of the currency (volatility), indebtedness and foreign exchange income, as well as its imbalances in the trade and payment balances. At the moment, the project is unfeasible, referring to Argentina's high country risk and inflation.

The government of Argentina sees in the future start-up of the peso real, a process of greater political and economic integration with Brazil, in which converging a common currency would be a way to promote greater stability and greater trade between both countries.

By Mexicanist Source: Xinhua