Banknotes from different Latin American countries. Iara Venanzi (Getty Images/iStockphoto)
The financial revolution that Russia's war against Ukraine is creating reveals the importance of nations that, like the United States or the Member States of the European Union, have a strong currency used as a weapon to sanction the oppressive country and deal with the problems economic generated by the war.
This reality that we are touching with our hands has led Brazil to think of an important initiative for South America: the creation of a single and strong currency that would amortize the economic shocks of the future.
The continent has suffered all these years from the difficulty of having a weak currency, incapable of facing international crises.
The idea of creating such currency was launched in
Folha de Sao Paulo
, the country's largest newspaper, by the intellectual politician of the Workers' Party (PT) Fernando Haddad, a graduate in Economics and a doctor in Philosophy.
Haddad was Minister of Education in the governments of Lula da Silva and Dilma Rousseff and mayor of São Paulo, the largest city in Latin America.
Haddad underlines the need for a strong currency after noting the international fragility of South American currencies which, unlike the United States with the dollar, prevents it from having the privilege of issuing international currency.
And, indeed, the ongoing war is revealing how the US and Europe are using the strength of their currencies to impose severe sanctions on Russia, excluding it from the international payment system (Swift).
And it is true that, for example, in 1990, the global crises made Latin American countries have to resort to the IMF in order to honor their payments in international currency.
If today Latin America had a strong and single currency, it could enjoy monetary sovereignty that would create a new dynamic and could constitute a strong economic bloc.
The new currency could be issued, according to Haddad, by a South American Central Bank with an initial capitalization made by the member countries.
It could be used “both for the international flows of the countries and for a tax on the region's exports”.
Also for commercial and financial flows between the countries of the area.
According to Larry Fink, CEO of BlackRock, Latin American countries, starting with Brazil, should take advantage of the economic effects generated by the war to reduce their dependence on global clients, focusing their attention on regional businesses.
Latin America should take advantage of the new opportunities that are emerging as a result of the reorganization that the conflict in Ukraine is generating in the global economy.
There is indeed the impression that the war in Ukraine could mean the end of globalization as we have known it until now, and that it could favor countries that, like Brazil, export raw materials to the rest of the world.
Even being aware of the concrete difficulty of creating this new strong currency for the countries of South America, it is positive that the idea has come from Brazil, considered as the country that feels least Latin American, since it has always seen itself as as a new empire more connected to Europe than to the rest of the continent.
The initiative to create a single currency for South America will largely depend on the result of the presidential elections next October, in which everything points to a duel between President Jair Bolsonaro and former President Lula da Silva.
As has been revealed in these three and a half years of ultra-right government, foreign policy, which has been a disaster, has totally forgotten Brazil's relations with the rest of Latin America.
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