The Brazilian President, Luiz Inácio Lula da Silva has bolstered his support for the creation of a common South American currency while hosting a regional summit with heads of state of South America in Brasilia. The proposal is destined to overthrow the hegemony of dollarization and create a channel for greater integration in the region.
Figure1 Image Source: Reuters
Why was the proposal thwarted earlier?
Here, it is important to note that the subject of building a common currency for South America has not come out of the blue. The discussions are as old as the MERCOSUR bloc when the idea emanated in 1991. Fast forward to 2008, the year when an inter-governmental organization called Unasur or Union of South American Nations was formed which aimed at trade-related cooperation and political integration. It was meant to emulate the European Union but due to inherent deficiencies, it could not succeed.
One of the reasons that Unasur was inoperative was due to the conflicts over leadership. During that time, the countries in South America were mostly ruled by right-wing leaders who relegated the organization to a standstill. Now decades later, when the region is swarmed with left-leaning rulers, an attempt is being made to rekindle the fossilized organisation.
A concerted effort by South American leaders
Lula’s initiation has been joined by other leaders wholeheartedly. In his opening words, the President strongly asserted that they aim to reinforce the unique South American identity in monetary policy, through finer compensation techniques and the development of a shared currency, thereby minimizing the use of “extra-regional currencies”.
Figure2 Image Source: Press TV
The idea of an alternative collective currency is also meant to subvert the domination of the US dollar which has been in place since World War II. This leverage in the global market has given the US economic supremacy. The status quo arrangement has bestowed enormous advantages to the global hegemon but there lie vulnerabilities too.
According to critics, the relentless dependence on a single currency in the global arena puts economies in a state of instability and external shocks, therefore, diversification is the need of the hour.
Lula also put forth that regional development banks like the Andean Development Corporation (CAF), the Bank of the South, and Brazil’s development bank BNDES should put efforts to financially aid the social and economic reconstruction in the region.
The highly ambitious idea might get faltered as analysts argue that there are inconsistencies and differences in the monetary policy of the region.
Apart from South American aspirations, it is anticipated that BRICS countries are likely to discuss the formation of a unified currency for the group when they meet for the summit in Johannesburg in August.
Inclusion of Maduro in the Summit
In an unprecedented move, Nicolas Maduro, the incumbent Venezuelan President was also invited to attend the summit. This is a break from the past because right-wing leaders like the former President of Brazil, Jair Bolsonaro had severed ties with his Venezuelan counterpart. Moreover, in 2019 Venezuela was removed from Unasur. This inclusion in the summit signifies reinvigoration in the relations between both countries.
Figure3 Image Source: Press TV
Lula also condemned the economic sanctions imposed on Venezuela by the US. He argued that labelling Maduro’s regime as authoritarian by the US government is a narrativized agenda floated by Western countries.
He also said to Maduro “to make Venezuela a sovereign country once again and their opponents will have to apologize for the damage they’ve done.“
Other leaders also supported the Venezuelan comeback including Argentinian President Alberto Fernandez. However, Chile’s Gabriel Boric expressed his discontentment at Lula’s words. He advocated that the region should pay attention to human rights issues.
