Brazil and Argentina to discuss common currency

"We intend to overcome the barriers to our exchanges, simplify and modernize the rules and encourage the use of local currencies," says the text published on the Argentine website Perfil.

"We also decided to advance discussions on a common South American currency that can be used for both financial and commercial flows, reducing costs operations and our external vulnerability," the article said.

The idea of a common currency was raised originally in an article written last year by Fernando Haddad and Gabriel Galipolo, now Brazil's finance minister and his executive secretary, respectively, and was mentioned by Lula during the campaign.

Lula chose Argentina for his inaugural international trip since taking office, keeping with the tradition of first visiting Brazil's largest trading partner in the region. That follows four years of tense relations during the government of former Brazilian right-wing President Jair Bolsonaro.

Lula's trip to neighboring Argentina also marks the return of Brazil to the Community of Latin American and Caribbean States (CELAC), which Brazil left in 2019 under order from Bolsonaro, who refused to participate in the regional group due to the presence of Cuba and Venezuela.

Both presidents emphasized the need for a good relationship between Argentina and Brazil to strengthen regional integration, according to the article.

The leaders also emphasized strengthening the Mercosur trade bloc, which includes Argentina, Brazil, Paraguay and Uruguay, and which Brazilian Finance Minister Haddad recently lamented has been abandoned in recent years.

"Together with our partners, we want Mercosur to constitute a platform for our effective integration into the world, through the joint negotiation of balanced trade agreements that respond to our strategic development objectives," both presidents said.

Earlier in the day, the Financial Times reported the neighboring nations will announce this week they are starting preparatory work on a common currency.

The plan, set to be discussed at a summit in Buenos Aires this week, will focus on how a new currency which Brazil suggests calling the "sur" (south) could boost regional trade and reduce reliance on the U.S. dollar, FT reported citing officials.

Politicians from both countries have discussed the idea already in 2019, but met with pushback from Brazil's central bank at the time.

Initially starting as a bilateral project, the initiative would later be extended to invite other Latin American nations, the report said, adding an official announcement was expected during Lula's visit to Argentina that starts on Sunday night.