Brazil - Lula wants to create a SUR coin for Latin America integration
Two economists advising Lula want to build a Latin American central bank.
They call it SUR coin. On 14 May, two economists close to presidential candidate Ignacio Lula da Silva wrote a column arguing the case for a South American digital currency with the idea of integrating Latin America’s economies.
Fernando Haddad and Gabriel Galípolo think that a common digital currency could foster integration and give their progressive constituents what they’ve always wanted: sovereignty from the political machinations of non-Latin American nations and the economic pressures that come with those trade relationships.
SUR coin is actually a new answer to an old problem that Latin American leaders have bickered and argued about for decades: how to integrate Latin America’s economies? Mercosur - the 1991 trade bloc built out of Brazil and Argentina trade issues - was one stab at integration. Later, Venezuela’s Hugo Chavez tried to build a socialist trade bloc amongst like-minded governments by establishing ALBA in 2004. In 2012, a group of free trading Pacific rim countries (Mexico, Colombia, Peru and Chile) formed the Pacific Alliance.
What Galípolo and Haddad are effectively proposing is a new Central Bank for South America. It would be capitalized by member countries’ reserves and allow for the more efficient flow of commerce and financial transactions in between member countries.
The SUR digital currency would also allow governments to issue SUR-denominated debt on international markets without having to resort to USD-denominated debt. Basically, Galípolo and Haddad want to get Brazil out from under the currency hierarchy that puts Latin American currencies below the USD and the EUR.
Is this likely to actually materialize? Nope, probably not. First, Lula will actually need to win the presidential race against Jair Bolsonaro. Then, he would need to lobby across the continent and gain consensus for a new Central Bank that defies existing Latin American Central Banks and somehow integrates with the international monetary system.
There’s another obvious problem here. The attempts at Latin American economic integration have usually been more colored by political agendas than real-deal complimentary trade integration. Lula is perhaps the most dividing politico on the continent right now with actual power and weight. If he’s elected, the battle lines will likely be drawn along his policies. In other words, it seems unlikely that a conservative candidate, like Federico Gutierrez in Colombia, would join Lula and push for the Brazilian president’s SUR policy in Bogotá. And it would be even more surprising to see a pro-Bitcoin candidate, like Argentina’s Javier Milei, join hands with Lula on SUR. Probably not going to happen.
All of this considered, it’s possible that Brazil could lead the initiative with only some Latin American nation states participating. And it’s probable that’s the way Lula goes if he’s troubled by debt metrics and needs a new source of public financing. With an electoral win for Petro in Colombia this year and Kirchnerista continuity in Argentina next year, there would be a period of time in which Lula might see his government aligned with like-minded partners in Mexico, Venezuela, Colombia, Peru, Chile and Argentina. That’s important as well.
Lastly, the formation of a new digital central bank for Latin America’s debt-ridden economies not only means a break from traditional finance but also the US Dollar. Indeed, a break from the dollar would be an extraordinary political inflection point. And Lula da Silva is no stranger to doing extraordinary things.