February 3, 2023

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A common currency for Argentina and Brazil would be impossible | economy

A necessary parameter will be a decision to start reading common currencyIt covers 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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César Romero, head of ‘research’ at Renta 4 SAB, could in theory establish a currency for commercial transactions between the two countries. However, he warns that this is risky because it will be marketed in two very different economies.

For that to be possible, you need macroeconomically equivalent economies. in between Brazil Y Argentina There is a big difference. The economy of Argentina It has damaged macroeconomics and affected the value of its currency. [En esta figura] This volatility affects Brazilian consumers as the Argentine peso falls at the same time against the Brazilian real today. If this situation occurs, [la volatilidad de Argentina] It weakens a better performing currency“, he said.

Brazil December 2022 closed with a 0.7% increase in its Consumer Price Index (CPI). inflammation The cumulative annual rate is 5.9%. On the other hand, monthly increase in CPI Argentina was 5.1% inflammation By 2022, it was 94.8%.

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Additionally, the value of the dollar over the past year Brazil It fell 0.4% and was trading at 5.21 reais per dollar as of January 23, 2023. Meanwhile, the price of the US currency Argentina It traded at 184.37 pesos per dollar, up 76.68% over the past year.

If two economically very different countries have the same currency, a common central bank, it is not a central bank. Brazil or central bank Argentina But a new one has to be opened and it cannot take the same monetary policy in the region because one region is different from another. At some point the unit will break, so it is not stable”, explained Alberto Arispe, General Manager of Calpa SAB.

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Brazil A much less restrictive monetary policy is needed Argentina can grow. when you inflammation So high that the central bank has to raise interest rates to control it inflammation. As later Brazil Not so much inflammationWith monetary policy you will reduce its economic growth“, he added.

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Both experts agreed that governments’ decision to work on a common currency would be highly responsive to ideological position.

A few years ago, in 2019, this possibility of a common currency was raised. Now they’re both presidents, they’re left-wing and Mercosur leaders in general are left-wing. It is possible if there are agreements between themRomero said.