Brazil and Argentina prepare to create common currency
The two South American economies will meet this week to discuss a plan for the common currency at a summit in
Buenos Aires, inviting other Latin American countries to join and contribute to the creation of the currency bloc.
At the beginning of this process, the focus is on creating a currency that will boost regional trade while reducing reliance on the USD. Suggested by Brazil as `sur`, the new currency should be run at first in parallel with the Argentinian peso and the Brazilian real, and, with time, will be aimed to become the main currency of these regions.
For now, the steps towards this aim are being taken with caution, as per the press release. The focus is momentarily on delivering good results and allowing the community the opportunity to see how useful this change could be.
This process was discussed by Brazil and Argentina in the past few years by the Brazilian president Luiz Inacio Lula da Silva and Argentine leader Alberto Fernandez, as this currency would strengthen regional value chains, and allow them to take advantage of opportunities while making progress on a currency union.
According to Financial Times, a currency union that will cover all the Latin American regions would represent approximately 5% of the global Gross Domestic Product (GDP). One of the aims based on this project is to create the second-largest currency union, after EUR, which encompasses approximately 14% of the global GDP, when measured in USD terms.
Latin America’s payments strategy
Payments and transfers are crucial for the good development and improvement of a country’s economy.
The announcement of the creation of a new, common currency across these regions was made, aiming to improve in the long run the payment experience for customers from Latin America.
In November of 2022, Ézio Pontes talked in a Voice of the industry article for The Paypers about the tendencies that should not be missed for LATAM in 2023. From instant payments and Buy Now Pay Later to the establishment of Open Banking, the Head of Operations for PagSegutp provided information about instant payments and what customers want and expect from merchants and companies, markets that are or need to adjust to the `new normal`, BNPL’s slow but steady rise, as well as details about Open Banking services and data security measures.
Making the most of the region’s possibilities of services takes a deep and secure understanding of the place, including its changes, challenges, and even opportunities. Especially after the pandemic, advances and developments in the payments industry are quick and seamless, so regions need to keep up with the accelerated digitalization processes and banking penetration.
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