Brazil calls for common currency for South America; UNASUR Bloc to be revived

In its efforts to reduce dependence on the US dollar, the Brazilian President Luiz Inacio Lula da Silva has urged the leaders of South America to establish a common currency for the region and sought a more integrated bloc to address common problems.

The meeting took place at Itamaraty Palace in the capital Brasilia on Tuesday and the continent’s Heads of State were present and Peru was represented by a cabinet minister. Those present at the invitation of the Brazilian leader included: Argentina, Bolivia, Chile, Colombia, Ecuador, Guyana, Paraguay, Surinam, Uruguay, and Venezuela. According to reports for diplomatic reasons Peru’s President Dina Boluarte did not attend the summit and was represented by the leader of the Council of Ministers.

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The proposal for creation of a common currency comes ahead of the meeting of the Foreign Ministers of BRICS (Brazil, Russia, India, China & South Africa) in Capetown on June 1, 2023.  The BRICS FMs too are expected to discuss developing mechanisms which can help to bypass dependence on the US dollar and trade in local currency. Many countries including Saudi Arabia, China, Brazil, India have initiated the process of dealing in local currencies. In fact as reported recently New Delhi has inked agreements with several countries to trade in local currencies. The Brazilian president had proposed developing a BRICS Currency, which according to experts the member countries will not agree to.

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In his address to the leaders of South America, the Brazilian President proposed creating a common credit in trade and to reduce dependence on extra-regional currencies. This, according to him, would strengthen the region’s identity in monetary policy. And to effectively deal with problems he called for the revival of the regional bloc — the Union of South American Nations (UNASUR).

This is basically a summit of UNASUR, the regional group launched in 2008. The last summit meeting was held in 2014 in Quito, Ecuador.

What is UNASUR?

“The Group was established for regional cooperation and integration. There were projects to forge connectivity between roads, ports, electricity grids and even the oceans with the ambitious BioOceanic corridor,” explains former Ambassador R Viswanathan.

According to Ambassador Viswanathan, “UNASUR was a kind of regional security group since it had some defence elements. But Hugo Chavez, former president of Venezuela, spoiled the image of the Group by pushing his extreme leftist ideology into the group. Later, the rightist Jair Bolsonaro withdrew Brazil from UNASUR.”

Given the triumphal return of Lula, the resurrection of UNASUR was expected, he says. In his speech, President Lula admitted, “We let ideology divide us and interrupt our efforts to integrate. We abandoned our channels of dialogue and our mechanisms of cooperation, and we all lost because of it.”

President Lula urged state banks across the continent to work together to reduce dependence on “extra-regional currencies” for trade, without mentioning the US dollar by name. There is a proposal for a common regional currency.

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Significance of UNASUR

In the opinion of Ambassador Vishwanathan, “UNASUR could be a useful regional group for cooperation in South America. It gives collective strength. The leaders of the region need to build it with pragmatism and avoid ideology so that it lasts beyond their term even under centre-right governments.”