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The leaders of Brazil and Argentina have penned a joint article, pledging to work towards greater economic integration, including the potential development of a common South American currency.
- The leaders said they "decided to advance discussions on a common South American currency"
- The move is intended to boost regional trade and reduce reliance on the US dollar
- Brazil has suggested the new currency be called the "sur", meaning "south" in Spanish
Writing on the Argentinian website Perfil, Brazilian President Luiz Inacio Lula da Silva and Argentinian President Alberto Fernández said they intended "to break down the barriers to our exchanges, simplify and modernise the rules and encourage the use of local currencies".
"We also decided to advance discussions on a common South American currency that can be used for both financial and trade flows, reducing operating costs and our external vulnerability," they wrote.
The idea of a common currency was raised originally in an article written last year by Fernando Haddad and Gabriel Galípolo, now Brazil's finance minister and his executive secretary respectively, and it was mentioned by Mr Lula during his presidential campaign.
Brazil currently uses the real, which was worth about 27 Australian cents as of Monday afternoon and is the country's eighth currency since 1942.
Argentina uses the Argentinian peso, equal to about 0.0078 Australian dollars.
Common currencies such as the euro, which is used by 20 of the European Union's 27 member states, are an efficient way of boosting economic integration between participant countries, by providing increased competition and price transparency and reducing transaction costs.
The drawbacks include the need for a single central bank, making monetary policy less effective as a way to address unique economic conditions within individual countries.
The news of the preparatory work towards a common Brazilian-Argentinian currency was broken by Britain's Financial Times newspaper earlier in the day.
The newspaper reported that the plan was set to be discussed at a summit in Buenos Aires this week, where advocates would focus on how a new currency — which Brazil has suggested calling the "sur" (south) — would boost regional trade and reduce reliance on the US dollar.
Initially starting as a bilateral project, the initiative would later be extended to invite other Latin American nations, the report said.
Mr Lula chose Argentina for the inaugural international trip of his current term, keeping with the tradition of first visiting Brazil's largest trading partner in the region.
It follows four years of tense relations during the government of Brazil's right-wing former president Jair Bolsonaro.
The Argentina trip also marks the return of Brazil to the Community of Latin American and Caribbean States (CELAC), the regional group which Brazil left in 2019 because Mr Bolsonaro objected to the presence of Cuba and Venezuela.
Reuters