The governments of Brazil and Argentina are making plans to create a new currency for Latin America, called the Sur (“south” in English). Other countries in the region will also be invited to use the currency. 

Their goal is to “boost regional trade and reduce reliance on the US dollar”, according to a report in the Financial Times, citing government officials.

Argentina’s Economic Minister Sergio Massa told the FT that the South American nations will soon “start studying the parameters needed for a common currency, which includes everything from fiscal issues to the size of the economy and the role of central banks”.

Brazil has the largest economy in Latin America, and Argentina has the third biggest (after Mexico). However, Argentina is currently hampered by a $44bn debt with the US-dominated International Monetary Fund (IMF). This dollar-denominated foreign debt has led to a constant drain of foreign currency out of Argentina, fuelling high levels of inflation.

Argentina’s President Alberto Fernández visited China and Russia in February 2022, seeking alternatives to the US-dominated financial system, and joining Beijing’s Belt and Road Initiative. Argentina has also applied to join the extended BRICS+ bloc, with Brazil, Russia, India, China, and South Africa.

The new currency union could become the world’s second largest after the 20-nation Eurozone if established. Latin America accounts for 5% of the world’s GDP, while the Eurozone accounts for around 14%.