Brazil/Argentina: Talks about Currency Union

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The Brazilian real and the Argentine peso may at some point get replaced by a common currency. We will see. "Brazil and Argentina aim for greater economic integration, including the development of a common currency, Brazilian President Luiz Inacio Lula da Silva and Argentine leader Alberto Fernandez said in a joint article they penned." (from the Reuters story, see link below)

https://www.ft.com/content/5347d263-7f24-4966-8da4-79485d1287b4
https://www.reuters.com/markets/currencies/brazil-argentina-begin-preparations-common-currency-ft-2023-01-22/

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If you understand Portuguese, here is the joint statement:
https://brasil.perfil.com/politica/lula-e-alberto-fernandez-escrevem-relancamento-da-alianca-estrategica-entre-argentina-e-brasil.phtml

Well, we already have a somewhat cautious comment from the Brazilian government: Finance Minister Fernando Haddad apparently said that >a "common unit of trade" could be developed, but dismissed the idea of a unified currency in wider circulation.< (Source)

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For background, both countries have a tradition and recent history of bouts of inflation (flanked by capital flight) caused by mis-management. Another such period in either country would spell the immediate end of a currency union and cause financial chaos and economic damage to both countries. In theory, this should not occur if the rules were strict enough. In practice, such rules would be disregarded by any extremist, left or right, or dictator, military or other.

In addition, Brazil is not a member of Mercosur, but Argentina is. Argentina's Mercosur partners, notably Chile would not look kindly on being left out.

Maybe there was some kind of a communication problem between government officials and journalists?

Haddad's reaction is quite diplomatic. I take it he meant something like "let's try a clearing/settlement bank first". If it doesn't exist already, that's not a bad idea: it is feasible and Argentina already has a working clearing arrangement with Chile.

Peter