During the week that we spent, we witnessed a new beginning in the economic-financial relationship with Brazil through the launch of the common currency.
With this I want to express that from the formal launch of a common virtual currency between both countries, which will be called “south”, and since in these beginnings the “euro” will not work as we know it in daily transactions, but will principle, as an exchange currency so as not to have dependence on an extra-regional currency such as the US dollar, euro, yen or yuan. Therefore, to better understand the value of the “south” will be internal convertibility in Mercosur, which is relaunched after the contempt and mistreatment of the governments that preceded the current ones in both countries. We can provide a crude example, but it will serve to better understand the subject, in Argentina a sur could be equivalent to $105 while in Brazil the convertible value should be R$1.5; This would provide a situation of greater stability in the prices of both countries and later in the region, because the inputs or material to be purchased would always be worth the same value. Knowing that the economies of Argentina and Brazil are complementary due to the level of industrialization that both countries have, while the rest of the block is managed mostly with primary economies based mainly on mining, which generates temporary stability until those natural resources run out or stop being consumed by the world; consequence of climate change and its different derivations. For example: Bolivia is managed with gas, oil and now lithium; Peru and Chile with minerals such as gold, silver and lithium; o Paraguay as it was lately with gas, oil and access to residences of citizens of other countries for low or no level of taxation, as in Argentina after being approved on 12/28/2017 they were placed on the AFIP list as countries with low or nil taxation –what is generally called a tax haven–.
But going back to the origin of this column, we can say that this virtual currency can help to lower inflation until it stabilizes a posteriori in our country, and together generate that the objectives set in the agreement with the IMF on the subject continue to be met. international reserves of the BCRA, such as the strategic agreement that was signed at the 2008 Summit in San Miguel de Tucumán between the two Central Banks of Argentina and Brazil, through their presidents and the chief executives of both countries (for better understanding, for our country was signed by Martín Redrado as head of the BCRA and CFK as president of the Nation), which lost interest and meaning between 2016-2019, returning at that time to using US dollars from the international reserves of both countries, even when we were in recession from January 2018 onwards, a consequence of allowing exporters not to compulsorily liquidate operations until until 08/31/2019 inclusive. If this is done accordingly, it can establish an inflation floor lower than the 60% provided in the 2023 Budget based on the exchange rate stability that it will grant.
We are talking about a common currency, but not a single one, because each of the signatory countries will continue to maintain their currencies (peso and real) and the virtual currency at this time becomes used for international transactions. In order to reach a single currency, it is necessary to return to the paths of harmonizing/equalizing the financial + tax systems + accounting regulations that it will use at some point and that can take at least five or six years. We must also be aware that we would be carrying out an inverse process to that carried out in Europe and we are going to have to review/change the attributions of Parlasur so that, in the manner of the European Parliament, it can generate common laws that are ratified by the member countries, in instead of just making recommendations and then they make their own laws on the various issues. This is much more similar to the financial scheme that the BRIC had before it entered our country than the European Union.
*Economist and Tax Expert.
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