China likes the idea of reducing its dependence on the dollar. Not all Brazilians seem to agree with the new project
The Buenos Aires Summit of Latin American and Caribbean countries, marked by the new hegemony of the populist left, reaffirms the goal of emancipation from the United States. In this regard, the joint currency project between Brazil and Argentina has been revived: it will be restarted to reduce dependence on the dollar. But the new master of the continent is now China. And the threats to democracy are not just coming from the Bolsonarian right: the case of Mexico (whose president is absent from the summit) is emblematic of the authoritarian impulses common to left-wing populism.
The Buenos Aires Summit brings together the countries of CELAC, which stands for Comunidad de Estados Latinoamericanos y Caraibenos. There are 33 Member States, but conspicuous absences are reported. Venezuelan Maduro canceled the trip at the last moment, denouncing “the risk of fascist aggression”: in reality, he seems to fear that he could be arrested on arrival by order of the Argentine judiciary. Even a heavyweight like Andrés Manuel Lòpez Obrador (Amlo for short), the Mexican President, has stayed at home: Beyond the official reasons, it is known that Amlo abhors foreign policy, he is a blatant case of “left-wing sovereignty”.
Mexico is the second largest Latin American economy in terms of GDP behind Brazil, while Argentina ranks third. If we instead look at GDP per capita, which measures the wealth of the inhabitants, then the ranking of this trio changes: first is Argentina (with only 43 million inhabitants, less than Colombia), second is Mexico (with 122 million inhabitants), third is Brazil (which splits its GDP among a population of 204 million). The other two economic heavyweights of the region therefore dominated the image of the Celac summit: Brazil by Lula da Silva and Argentina by Alberto Fernandez. The idea of the single currency was presented as an experiment to be initiated by two, to then finally be proposed as the currency of the entire Mercosur, the economic community of South American countries.
The reasons for this project – not new – are reminiscent of those that inspired the euro: to facilitate trade between neighboring and similar countries; Reduce costs; finally and above all to eliminate dependence on a third currency such as the dollar. As this new currency would initially not replace the Brazilian real and the Argentine peso, but complement them, the project evokes the euro’s ancestor, the ECU, the European “shield” that preceded the real currency and made it unique. The criticism came mainly from the Brazilian side. Of the two economies, Argentina has traditionally been the more unstable, more prone to sovereign defaults and hyperinflation, even more so than Brazil. Fabio Ostermann, a centrist politician close to the Brazilian business community, called the project “nonsensical, the equivalent of opening a joint bank account with an unemployed friend who is indebted to everyone”.
The precedents of other failed monetary unions like the “Andean peso” are not helpful. Moreover, Mercosur itself is struggling to keep its promise to create a single market. At the very least, the single currency project can be seen as a red herring. It does not address the roots of an economic turmoil that has nothing to do with US influence or the dollar. Argentina’s 95 percent inflation, for example, stems from Peronist-inspired populist policies: simple public spending, welfare payments, funded by a central bank that prints money. The euro, at least, was born by drawing the weaker countries towards a Germanic model of currency rules and stability. Between Lula and Fernandez, the model is the opposite.
Moreover, across Latin America there is a growing hegemony of a left-wing populism that rehabilitates state spending and nationalization, recipes that have been tried extensively in the past with lackluster results. The recent election rounds have brought to power a very large majority of left leaders, sometimes very radically: Lula’s return to power has sealed that “pink or red wave” that had already appeared in the first decade of this century and confirmed the unexciting economic one balance sheet left. The dominant role of the United States is also a thing of the past: with the exception of Mexico (a member of the North American single market with the US and Canada), the major Latin American economies now have China as their own major trading partner, and it is Beijing that is creating new forms of dependency has developed.
The “miracle” of the first Lula presidency – which later proved fleeting – was fueled by Chinese demand for commodities. The idea of reducing dependence on the dollar is very attractive to Beijing – which is seeking “de-dollarization” in trade with Russia, for example – and in that sense the Lula Fernandez project suits the interests of the new dominant superpower that part of the world World. Lula doesn’t seem entirely convinced of the validity of the new currency project, which would have more ardent supporters in Buenos Aires. But Lula wanted to return triumphantly to the Celac community of which he had been a founding father and which his predecessor Bolsonaro had abandoned and boycotted.
Lula presents himself today as the savior of Latin America’s largest democracy, having survived his January 8 attack on the institutional buildings in Brasilia. However, the subsequent reckoning against the Bolsonarists exposes other weaknesses in the democratic system: for example, the excessive power of a highly politicized constitutional court with little respect for the rights of the opposition or freedom of the press. The prevailing attention to the threat of right-wing authoritarianism – Bolsonaro – has caused us to lose sight of the specular and symmetrical phenomenon. In Latin America, the dominant trend is that of left-wing populists, many of whom respect democracy only to the extent that it leads to victory. The case of Mexico is one of the most worrying: the socialist Amlo governs by decree, ignores constitutional borders, widens the militarization of the economy (244 economic activities have fallen into the hands of the army). More journalists have been killed in Mexico in recent years than in civil war countries. Peru is another tragic case: it ended in a bloodbath due to the fratricidal clash between two opposing left factions.
Jan 24, 2023 (Modified Jan 24, 2023 | 5:34pm)
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