Argentina and Brazil are gearing up for a joint currency

There is talk of Argentina and Brazil establishing a common currency in the near future, but what impact might this have on drinks producers in the South American countries? db investigates.

In a joint statement made to Perfil newspaper on Sunday, Brazil’s new president Luiz Inácio Lula da Silva and Argentine leader Alberto Fernández said that a common currency between their two countries could help to boost South American trade.

“We decided to advance discussions about a common South American currency that could be used for both financial and commercial trade flows, reducing operational costs and our external vulnerability,” the pair added.

Similar to the Euro, the long-term vision would be to allow other South American nations to join the joint currency in future. The big idea behind it is to chip away at the dominance of the US dollar and for the ‘sur’ (as Brazil wants to call the new currency) to be used in bilateral trade between Latin American countries.

Some financial analysts have expressed concern over past proposals for a joint South American currency, as such a move would effectively tie together several volatile economies with high levels of inflation and debt. Argentina, for one, has been grappling with a 96% inflation rate, and Brazil has experienced multiple recessions in the last decade.

But what exactly would a joint currency mean for drinks businesses?

“As Brazil is a very important market for Argentina, and especially for the wine business, every approach that brings together the countries or breaks down commercial barriers is good news,” Marcos Jofré, CEO of wine giant Trivento, told db exclusively.

“However, it is too early to draw conclusions. The announcement lacks of details or value information. We are waiting for further technical information to evaluate the pros and cons.”

Speaking from Mendoza, Mauricio Palacios, the newly appointed CEO of Doña Paula, said that the currency change is still under review and “may take several years to be implemented”.

If a common currency were to go ahead, Palacios added, “it would not replace the currency for individuals and domestic transactions, but apply to financial and commercial transactions between countries only.”

He further suggested that the change may be difficult to implement due to “significant asymmetries in the economy of both countries”.

When asked whether the switch would mean a great deal of administrative work for wine producers, Palacios added that “given the possible time scale before implementation, it is not something we are addressing at this moment.”