Latin America leftists renew push for shared currency, but its chances are slim

Illustrations of coins arranged in the form of Latin America.

Illustration: Megan Robinson/Axios

With more leftists coming to power throughout Latin America, the idea of ​​a single shared currency is a hot topic again.

  • This has been leftist politicians in particular, Brazilian President-elect Luiz Inácio Lula da Silva among them, who has championed a single currency as necessary to reduce dependence on the dollar, but the idea is likely to face many challenges, analysts say.
  • Still, other areas of regional cooperation on critical economic, migration and environmental issues could become a reality soon.

big picture: When Lula takes power on January 1, Latin America’s five largest economies – Argentina, Brazil, Chile, Colombia and Mexico – will have left-leaning governments.

Running news: Lula wants to create “sur,” a regional version of the euro, he said while campaigning.

  • This is an interesting idea for some politicians because the dollar exchange rate is destroying countries like Argentina.
  • In Chile, President Jibril Boric said last month he was going to negotiate a shared currency.
  • Members of parliament representing Bolivia, Colombia, Argentina, Venezuela, Peru and Ecuador signed a declaration last week calls for a new Latin American parliament and a single currency.
  • Mexican President Andrés Manuel López Obrador has twice formed a European Union-like coalition in Latin America and the Caribbean.
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Yes, but: A common currency is likely to be a “non-starter,” indicating how past attempts at other types of regional integration have crashed and burned over disagreements, Latin American analyst Shannon K. O’Neil Council on Foreign Relations Axios tells Axios.

  • In the 1990s, 34 countries pledged to create a regional free trade agreement, but most countries rejected it by the 2005 deadline due to political divisions.
  • A virtual currency called the sucre, proposed by former Venezuelan President Hugo Chávez in 2007 for regional use, has never taken off.
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But the left leaders have a common goal can produce other major forms of business and economic cooperation, experts said.

  • O’Neil said nations could agree to build supply chains and economies of scale to pull factories together; they can also invest in digital and electronic systems to jointly manage migration
  • Cecilia Tornaghi, senior director for policy at The Americas Society/Council of the Americas, said most leaders’ emphasis on environmental conservation could produce regional initiatives ripe for US cooperation.

Between the lines: Rising inflation and economic problems related to the pandemic could hinder regional integration.

  • “However, at the same time, having regional success and integration can offer (leaders) achievements that they can champion in contrast to the domestic crisis,” said Tornaghi.
  • O’Neil says “political alignment makes this more likely than before.”
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What to watch: The leaders of Mexico, Chile, Colombia, Peru and Ecuador are scheduled to meet on November 24 for the summit of the Pacific Alliance (Brazil and Argentina are also invited).

  • They are expected to discuss a new trade agreement and add Costa Rica to the group.

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