The presidents of Brazil and Argentina are considering creating a common Latin American currency to rival the US dollar.

Brazil and Argentina are starting preparatory work on creating a common Latin American currency. Presidents Lula Ignacio de Silva of Brazil and Alberto Fernandez of Argentina announced the discussions for a common currency at the Community of Latin American and Caribbean States (CELAC) conference this week in Buenos Aires, Financial Times reported. 

Presidents Lula and Fernandez said that their countries are exploring options to create a common currency called the 'Sur' (south in Spanish). The common currency is meant to encourage financial and commercial transactions between both countries. Argentina's economic minister Sergio Massa added that Brazil and Argentina would also invite other countries in Latin America to join in creating the common currency.

The currency would at first run in parallel with the Brazilian real and Argentine peso. 

“There will be . . . a decision to 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,” Argentina’s economy minister Sergio Massa said.

“It would be a study of mechanisms for trade integration,” he added. “I don’t want to create any false expectations . . . it’s the first step on a long road which Latin America must travel.” 

Initially, a bilateral project, the initiative for a common currency would also be offered to other nations in Latin America, Yahoo News reported.

“It is Argentina and Brazil inviting the rest of the region,” the Argentine minister said. 

A currency union that covers all of Latin America would represent about 5 percent of the global GDP. Meanwhile, the world’s largest currency union, the euro, encompasses about 14 percent of global GDP when measured in dollar terms.

However, the formation of a joint currency is a tedious process. Initial negotiations for the European Union’s unified currency took over a decade, and, when the euro was finally launched in 1999, it was considered an invisible currency for the first three years. It was only used for accounting purposes and electronic payments until 2009 when the Lisbon Treaty formed the Eurogroup, the official governing body of the currency.