2023-04-16 07:00:16
The President of the Republic, Luiz Inácio Lula da Silva (PT), proposed this week the adoption of a common currency for commercial operations between the members of the Brics — Brazil, Russia, India, China and South Africa — as a way of reducing dependence on against the dollar and also to ease the operational costs of transactions involving countries. His idea, in the opinion of economists, may even bring positive results for the bloc’s economy, but it should not be easily implemented.
“The positive point is that you can calibrate the price of the products, because the group’s countries are going to define the strategy for that currency. Thus, they are no longer at the mercy of exchange variation and start to exchange products 1 for 1, without risk of variation or loss of value”, assesses finance specialist Marlon Glaciano.
He believes that the single currency would not replace the dollar so easily, as it would take time for it to have solid results. On the other hand, he says that the creation of the currency could guarantee more predictability for the Brics negotiations.
According to economist Newton Marques, creating a currency would require a series of macroeconomic conditions, such as a similar competitiveness of the economy of all Brics countries and similar fiscal parameters in relation to the GDP (Gross Domestic Product) of each nation. With very different realities, he says that one country in the group could be at a disadvantage in relation to another and that using the single currency would actually be harmful.
“Is it possible for each country to have a public deficit in relation to GDP at a tolerable level? Will inflation have to have a range of targets to be pursued? The countries would also need foreign exchange reserves in this new currency and there would need to be competitiveness between nations, otherwise the exchange rate will be different for each one. It’s not such a simple solution”, analyzes Marques.
In addition, the economist says that the Brics countries would have to align different political and financial interests for the currency to achieve stability. “Would India agree to adopt practices that are in force here, for example? Today, the interests of each country are conflicting. It is not enough for Brazil to want the currency, it is necessary to consider what other countries think.”
Mário Battistel, exchange manager at Fair Corretora, adds that getting rid of the dollarization of international trade is another obstacle. According to him, Brazilian producers would continue to have to negotiate goods with countries that use the American currency and could face difficulties due to the different exchange rates.
“It would have to involve a series of mechanisms to set the cost of production for exports in a single currency. In addition, this cost would have to evaluate the expenses of producers in relation to the currency of other countries. But, with the fluctuation of each one in relation to to the dollar, this would be compromised. Today, it is very daring to think of a proposal like this. I do not see the possibility of implementation in the short or medium term.”
What do you think Lula
According to the Brazilian president, a common currency among the Brics countries would allow for a “more peaceful situation”. “We need to have a currency that transforms countries into a slightly more peaceful situation. Because today a country needs to run after the dollar to be able to export, when it could export in its own currency, and central banks could certainly take care of that,” he said. he, during an official visit to China.
“Why can’t we do our trade backed by our currency? Why don’t we have a commitment to innovate? Who decided that the dollar was the currency after gold disappeared?” added Lula.
The speech by the Chief Executive took place during the inauguration ceremony of Dilma Rousseff as president of the New Development Bank (NBD), the BRICS bank. He asked Dilma to present the suggestion of a single currency throughout her mandate at the head of the institution.
“It is necessary to be patient. But why can’t a bank like the Brics have a currency that can finance the commercial relationship between Brazil and China and between the other Brics countries? world depends on a single currency.”
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