Single currency and common currency: understanding the proposal for a regional currency in Mercosur

Abstract

The purpose of this study is to identify the historical context and current status of the debate surrounding the implementation of a regional currency between Brazil and Argentina. This research was motivated by the proposal to adopt a regional currency for bilateral commercial transactions, which was discussed during the official visit of the current Brazilian leader to Argentina on January 23, 2023. The idea of adopting a regional currency has been under consideration between these two countries for some time and was even discussed within the framework of Mercosur. For this study, the research is based on the analysis of economic indicators, academic texts, and, most importantly, news reports, meeting minutes, and the Mercosur norm itself. This allowed for an understanding of how the proposal has evolved over the years and in what context these changes occurred. This study can be divided into three distinct phases. The first phase focuses on the potential advantages and disadvantages, as well as the impact on transaction costs associated with the adoption of alternative currencies in bilateral trade. It also provides the necessary terminology and conceptual framework. In the second phase, the historical evolution of the proposal to adopt a regional currency is examined, and in the third phase, the current proposal itself is explored.