Brazil - Gabriel Galipolo’s SUR idea gets a Lula. Will it get a blockchain too?
SUR is still just a policy idea in a Brazilian economist’s head. But if there is a time and a place for it to come to fruition, it is probably Lula’s presidential term.
On 30 October, Brazilians elected Luiz Ignacio Lula da Silva to the presidency, ousting Jair Bolsonaro. A young economist named Gabriel Galipolo was one of Lula’s main economic advisors during his campaign. His policy idea for building a Latin America Central Bank could become influential during Lula’s term.
Galipolo and former mayor of Sao Paulo Fernando Haddad in May of this year published an article arguing for a regional digital currency called SUR that could be part of a broader Latin America integration initiative. SUR would be issued by a newly formed Central Bank of Latin America. It would be a policy initiative aimed at strengthening regional integration.
The geopolitical timing is right. Galipolo knows that currencies in Latin America face inflationary conditions and many nations have significant amounts of USD-denominated debt. The US & Europe, Russia and China are all developing CBDCs and new financial architecture. Meanwhile, Latin America’s left has long been hungry for a way to integrate regionally and trade independently of greater world powers. The region, for the first time since the early 2000s, leans almost uniformly to the left. Lula, as Latin America’s de facto leader of left-wing political parties, is the man for the job.
But practically speaking, SUR needs to be built on the back of something, or at least interface with existing CBDC and payment rails. That would likely mean the Banco do Brasil’s CBDC, the Digital Real, and PIX, a payments system developed by the Central Bank that allows for fast, low-cost payments across Brazilian banks. If SUR can’t do what the Digital Real and PIX already can do for them, then Brazilian banks would massively resist the SUR initiative.
And the thing is, the Digital Real and PIX are not Lula’s terrain. These are Roberto Campos Neto’s pet policy initiatives at the Central Bank and the Central Bank enjoys independence from the executive. Meddling would be political suicide for Lula. Campos Neto is at his post until 2024. Until 2024, Brazil’s Lula can’t do much about Galipolo’s SUR policy idea at the moment other than talk about it, even if he does quietly want to build a Latin American Central Bank. In the meantime, his administration might at least consider choosing the blockchain they want to build it on.