Brazil, Argentina to drop the US$ for internal trade
This has been a good week for the Argentinian Economics Minister Felisa Miceli 54 , trained economist and the country's first female Economics Minister - in a country where macho has a special meaning. Argentina is undergoing a massive influx of US dollars spurred by strong international prices for the country’s export commodities, tourism and the issuing of severeign bonds.
Argentina’s international reserves reached a record US$40 Bn. this week according to the latest release from the Central Bank . The Brazilian real has risen 9.1 % this year against the US dollar , making it the best performer among the 16 most-actively traded currencies that Bloomberg tracks.
The government also reported on Tuesday that Argentina`s unemployment remained below double-digits in the first quarter, falling to 9.8% from 11.4% in the same period a year ago.
Felisa Miceli has taken this opportunity to announce that Argentina and Brazil, the 2 major economies in Mercosur , will drop the U.S. dollar in favor of a regional currency in their bilateral trade starting in October 2007 - which is when President Kirchner, 57, or his wife Cristina Fernandez de Kirchner, 54, both leaders of the ruling Peronist party, will face former Economy Minister Roberto Lavagna (who Kirchner fired) in October's presidential election.
Paradoxically Argentina's economy (2nd largest in South America) has grown more than 8.5% annually in the past 4 years after a $95 billion debt default in late 2001 and subsequent currency devaluation. Lavagna, a former Ambassador to the European Union, headed the restructuring effort. Miseli worked in Lavagna's consultantcy Ecolatina, in the beginning of the 1990s. In May 2002, she became part of Lavagna's team as a representative of the Ministry of Economy before the Central Bank during the presidency of Eduardo Duhalde and at the height of the Argentine economic crisis.
Miseli is generally seen as a follower of Lavagna, and his policies which have broadly been followed by her.
Since its foundation in 1991,South American continent's major trade alliance Mercosur has had the stated primary objective to remove obstacles to internal trade.
The transition to a (as yet unnamed) new currency, is part of a pilot project of Mercosur - whose Finance Ministers met in Paraguy this week - she said the new currency should eventually spread throughout the bloc, which also includes Paraguay, Uruguay, and Venezuela.
Bolivia, Chile, Colombia, Ecuador and Peru have associate member status of Mercosur.
Meanwhile Chavez has said Venezuela is withdrawing from the IMF as he rides the petrodollar wave - don't bet the mortgage on that as the bond market will collapse if he does exits the Washington-based organization as by "gaining economic sovereignty.'' he would trigger a so- called technical default. A clause inserted in most bonds in emerging markets stipulates that there is a default if Venezuela ``ceases to be a member of the IMF or ceases to be eligible to use the general resources of the IMF.''
Mind you he has enough in the piggy bank to pay them off if needed.
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