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From a political and social point of view, Latin America is one of the most homogeneous regions in the world: in terms of language, culture and religion, most of the countries in this region share the same roots.
However, all these similarities and all these ties have a very clear limit: the economy. Surprisingly, in the economic field, the region is very poorly integrated and the variety of policies is vast.
Despite this, the dream of a single currency, the dollar or the “Latin American euro”, has emerged periodically. Now it is Brazil and Argentina who are leading this trend. In this video we tell you all the details.
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Have you ever noticed that Latin America Is from a political social point of view One of the most homogeneous regions in The world In Latin America most of the countries Have the same language the majority Religion is Catholicism and almost all Of them have a common history if only Because most of them emerged after Gaining independence from the Spanish Empire and in the case of Brazil with Certain shades of difference naturally The path is in many ways very similar Let's look at politics Latin America Shares a culture of presidential Government with leadership ranging from The right to the left but often with a Common ingredient populism so in short In Social political terms we could say That the countries that make up this Region are at worst first cousins However all these similarities and all These ties have a very clear limit the Economy surprisingly in the economic Field the region is very poorly Integrated and the variety of policies Is vast from Peru's unwavering prudence And controlling Public Accounts to Cuba's communism to El Salvador's Blockchain populism by the Argentine Government Central bank's addiction to Printing money however in spite of Everything did you know that for decades There have been numerous proposals for
Latin America to have a common currency Will we see the birth of the Latin Euro Well let's find out [Music] And by the way if you like economic Topics don't miss our sister Channel Visual economic on it we talk about Interesting topics such as the minimum Wage house the sanctions against Russia Are working and what problems the Dollarization of a country can have if You haven't discovered it yet check it Out and tell us what you think that Being said no let's get cracking [Music] Visual politic Community I don't think I Have to convince you of this idea Currency is an essential key fundamental Element in every economy of course not All countries have their own currency in The world there are some currency areas That include more than one country Membership in any of these currency Areas means that for the member Countries seed part of their sovereignty And adopt a common currency either for Day-to-day business or in the more Limited case for trade relations among The member countries This is something that can fundamentally Occur in two different ways first there Is the case of formal and agreed unions As is the case for example with the European Union and the Euro on the other
Hand there is the case of informal Unions which consist of unilaterally Adopting a foreign currency in other Words in this case monetary sovereignty Is seeded to a third country whose Central Bank is perceived as more Reliable this is for example the case of Dollarized countries such as Ecuador or Panama Be that as it me we are not talking About processes that can be developed Overnight especially if we are talking About formal unions in this case for Things to work a series of conditions Must be met these conditions are more or Less what we can all imagine a low Inflation rate a controlled budget Deficit tight controls on debt levels And a similar interest rate policy now Then we're not going to get too Theoretical on this subject it is enough For us to know what the monetary areas Are in general terms and now we know That the question is how did the Latin American experiments to advance along This path go let's take a look Foreign Central America a pioneering project but Stormed On the 25th of February 1964 Costa Rica El Salvador Guatemala Honduras and Nicaragua signed the agreement for the Establishment of the Central American Monetary Union with this agreement these
Countries urged their respective central Banks to integrate into a Central American Central banking system which Would be led by the Central American Monetary Council the cooperation Mechanisms established by the central Banks point out the need and the Opportunity to adopt measures tending to Achieve the monetary integration of Central America in stages fourth point Of the agreement for the establishment Of the Central American monetary Union In 1964. however despite being a Pioneering initiative in the region the Central American Civil Wars completely Curtailed this project in fact they Plunged these countries into a very long Process of political violence as for Instance the Sandinista revolution in Nicaragua among others Nevertheless a new Regional monetary Agreement was reached in 1974. a first Step that was again modified in the 1990s to relaunch a common monetary Council this was a body headed by the President of the Central Bank of Costa Rica El Salvador Guatemala Honduras and Nicaragua its main objective was to Advise the various governments on how to Move forward with the reforms needed to Establish the long-awaited common Currency the council shall promote close Coordination and harmonization of Monetary policies with the fiscal
Integration and economic development Policies of Central American countries Article 39 of the 1999 Central American Monetary agreement later in 2002 the Dominican Republic joined this agreement But the currency was never heard of Again and in fact El Salvador for Example dollarized its economy in 2000 Today this body based in San Jose Costa Rica is basically a forum for dialogue But hey we have to keep in mind that This was a project that emerged in the 1960s and it was truly pioneering Initiative at least we'll give it that Credit [Music] The socialism of the 21st century Against the dictatorship of the dollar According to Federal Reserve estimates Between 1999 and 2019 the dollar Accounted for 96 of trade turnover in The Americas an area where neither the Ruble nor the Yen nor the Euro nor any Other currency has been able to displace Uncle Sam's paper money of course this Is not necessarily a bad thing however For The Architects of 21st century Socialism this was nothing less than the Dictatorship of the dollar something That of course was absolutely Unacceptable for the icon of this Movement Hugo Chavez who launched a Crusade against the Greenback although On a personal level he would turn out to
Love the greenbacks quite a lot is [Music] Idea In order to put an end to the supposed Monetary dictatorship chavism had in Mind various ways to avoid the use of The dollar in its commercial Transactions And finally in 2009 it was decided to Implement a regional unitary Compensation system generally named by Its acronym tsukure and reference to Latin America's Independence hero Antonio Jose Suare Venezuela and Bolivia Debut the sukra both countries will Debut the new payment clearing system Created last weekend by the Alba Countries as its name suggests this Mechanism was not a currency in itself But rather a payment system where an Exchange rate of 1.25 for each tsukure Was established which decoupled the use Of U.S currency and imports and exports Of the countries participating in this Scheme in other words it operated mostly In a symbolic manner but technically They were no longer operating in dollars And so in the common unit of account of The Central Bank of each country the Entry of dollars was not recorded but Rather the amount in tsukaris even Though these sucres were equivalent to a Certain amount of dollars which is what Gave them their value I know this is
Kind of gibberish it's a bit absurd but What can I say Latin America is kinda Like that Initially this system was implemented by The Bolivian Alliance or the members of The Alba an organization in which Venezuela Cuba Bolivia Ecuador and Nicaragua participate you know the creme De La Creme is Since 2010 the javista propaganda Apparatus has been spreading the idea of The sukare to the Four Winds it was Portrayed as an ideal mechanism which Could give rise to a new currency with a Projection of replacing the dollar in a Relatively short period of time September 2011 Chavez calls for the Creation of a Latin American currency in The face of the dictatorship of the Dollar however the mechanism never Managed to develop as a currency and Remains stagnant as an alternative System to theoretically circumvent the Use of the dollar despite the fact that Hugo Chavez insisted again and again and Again to the point of exhaustion on this Issue is Incidentally it was the Ecuadorian President Rafael Correa who we have just Seen alongside Chavez who led one of the Countries that made most use of the Tsukure [Music] Between 2011 and 2016 Ecuador executed
At least 6 319 transactions through this Scheme which totaled almost 3 billion US Dollars and it seems like the Politicians in this country know how to Use it in a more beneficial way check This out what was originally intended as A multilateral payment compensation System in reality operated as a Mechanism for mostly fictitious and Overvalued exports from Ecuador to Venezuela which additionally served to Channel operations related to money Laundering illicit enrichment and Embezzlement fragment of the report of The permanent specialized Commission on Political oversight and control report Number cep FCP 2021 2023-002 well what do you think of that I'm sure you weren't expecting that one The fact is that for this reason since 2015 Beth the Ecuadorian justice system And various investigations of the Ecuadorian legislative have identified Several money laundering schemes run Through the use of tsukure which by the Way ultimately ended up like almost all The promises of the almighty socialism Of the 21st century somewhere between Drifting hopes and novel tools to expand Corruption [Music] Timidity and caution the Latin American Integrated Market Myla Before continuing we must digress
Briefly economic integration in South America basically Has Two Faces one is The southern Common Market known Commonly as macro Sur this is an Organization made up of Argentina Uruguay Brazil Paraguay and Venezuela Although the latter has been suspended Since 2019. the other is the Pacific Alliance in which Peru Colombia Mexico And Chile participate well it is the Latter that in 2011 formed the Latin American integrated Market known as Mila This project is not a currency in itself Nor even is it a payment system in the Pacific Alliance things are being taken Very slowly and the first step towards True financial and economic integration Was taken through this initiative which Does not unify currencies but Capital Markets this project currently brings Together more than 700 companies from This economic block which represents More than 40 of the GDP of Latin America In the Caribbean and 38 of the total Foreign direct investment flows in the Region it must be said that for the time Being there is no concrete project of a Monetary Union but the stability of the Alliance members and their greater Degree of openness and economic freedom Suggests that they may decide to move in This direction in the not too distant Future but we're not done yet so let's Keep going
[Music] Foreign The most recent bets between Tango and Samba In April 2019 an important meeting Between the then Argentine minister of Economy Nicolas dejovny and his Brazilian counterpart Paulo garez was Confirmed this meeting was held in Washington amid an agenda of Appointments with the IMF and the World Bank at that meeting both officials Discussed the peso real a common Currency managed by Brasilia and Buenos Aires into which the other macrosore Countries could eventually join having a Common currency throughout Latin America Would be very good I believe in 15 years There will be four or five major Currencies in the world in 15 years There will be the dollar the Euro the Chinese Renminbi and hopefully there Will be the real peso I think we are Going to end up with a common currency In the future Paolo guedes in July 2019. However months after this bold statement Argentine president Mauricio macri was Defeated in the presidential elections And a new government took power in Argentina then the project was Completely Frozen among other reasons Because Alberto Fernandez and guiller Bolsonaro did not get along particularly Well
Bolsonaro and Fernandez exchange insults Despite Brazil and Argentina's Interdependence but wait a minute Because just as some elections wiped the Issue from the agenda in Argentina other Elections brought the idea of a single Currency back this time in Brazil check This out This uh a currency as a campaign promise Banker Gabriel galipolo and former labor Party presidential candidate Fernando Haddad who by the way was defeated by Bolsonaro in 2018 made public the idea Of creating the Sur a regional currency That would be issued by a South American Central Bank this bank would be Constituted through the contribution of Foreign exchange by its member countries In proportion to their respective shares In regional trade the capitalization Would be done with the country's International reserves and or with Attacks on exports from countries Outside the region the new currency Could be used for both trade and Financial flows between countries in the Region Fernando Haddad and Gabrielle Gallipolo in May of this year Lula de Silva recently brought up this matter Himself incorporating it as part of his Presidential campaign God willing we will create a currency in Latin America because we cannot remain Dependent on the dollar Louise Ignacio
Lula da Silva in principle The Sur is Somewhat more complex than the real peso But the main difference is that now Argentina is no longer that dreamy Country of 2019. This year the Argentine peso is one of The most devalued currencies in the World with inflation expected to be Close to 100 in 2022 and perhaps that is Why in July of this year the then Argentine minister of productive Development stated this I spoke for more Than an hour with Minister guadas and a Central point of the conversation was The updating of transactions with local Currencies Daniel cioli 14th July 2022. The reserves of the Argentine Central Bank are completely decimated so as long As they do not use dollars the officials Of the castle rosada are willing to Throw themselves into the arms of any Other alternative deputies debate the Possibility of reaching a single Currency with Brazil the project that Supports the creation of this currency Was presented by the opposition but has The approval of the ruling party of Course this does not seem to be the best Context for designing a program as Serious as monetary unification so I am Sorry but as much as Argentina would Like to move forward it is not Surprising that Brazil would like to put On the brakes for the time being
[Music] Building the house from the roof up Visualpolitan Community Latin America is Very homogeneous region socially but With low levels of consensus Constitutions that change every few Years and governments that often hang by A thread and those things really Complicate the idea of having a common Currency which as you have seen has Universal support to the left and to the Right now here is something to keep in Mind countries stabilize their economies In order to achieve monetary unification They do not unify their currencies in The hope of stabilizing their economies Which indeed seems to be what most Regional leaders are hoping for in other Words in Latin America those who argue For a common currency seem to be Supporting it in order to deal with Structural problems such as chronic Inflation and that is the same as Putting the cart before the horse having A common currency could facilitate a low Inflation rate positive growth rates and Reduce uncertainty it could facilitate Prosperity but what it cannot do is Guarantee it and a common currency Launched with so many imbalances could Be born doomed to failure from the Outset if however clear rules were set a Completely independent monetary Authority was established and monetary
Policy adhered to price control then at Least High inflation rates could be Eradicated from the continent and both Savers and investors would gain a lot of Legal certainty but of course without Being able to get their hands on it how Many countries would remain loyal to This currency [Music] But having reached this point it's now Over to all of you do you think we will Really see a common currency in Latin America could governments like Argentina's overcome their addiction to Central Banking would politicians be Willing to give up control of monetary Policy altogether do you think Brazil Will be able to lead such a project in The short term leave us your answers in The comments below and let's start a Debate of course if you found this video Interesting don't forget to like And Subscribe to all of us here at Visualpolitik and don't forget to check Out our sister Channel visual economic Once again thanks very much for watching All the best and I'll see you next time [Music] Foreign [Music]