{"id":430,"date":"2009-10-02T08:09:07","date_gmt":"2009-10-02T12:09:07","guid":{"rendered":"http:\/\/www.eprup.com\/ica\/?p=430"},"modified":"2023-06-14T04:50:52","modified_gmt":"2023-06-14T08:50:52","slug":"a-new-currency-of-chindia-and-latin-america","status":"publish","type":"post","link":"https:\/\/www.icainstitute.org\/reports\/a-new-currency-of-chindia-and-latin-america\/","title":{"rendered":"A New Currency of Chindia and Latin America?"},"content":{"rendered":"

Conceptually, replacement of Dollar does not necessarily imply creation of a new currency. However, if the dominance of Dollar can be questioned, which other existing currency are we talking about? Perhaps, if the Dollar will be replaced at all; it will be by a brand new currency. But is it really going to happen?<\/p>\n

Long before the economic crisis spread its terror claws over the world (which has led to a sudden surge in talks about a new currency); experts in international business had started envisioning the possibilities of new currencies. The happening of Euro proved that such ideas are feasible. Later, some experts felt that even China and India could consider coming up with their own currency.<\/p>\n

The current public sentiments do not seem support the notion. The ICA Institute recently conducted an opinion poll among its newsletter subscribers soliciting their opinion on whether China and India will create a common currency of their own. Most respondents did not see a possibility. In fact, a majority of them out rightly rejected the idea.<\/p>\n

Dr. Jagdish Sheth, an authority on this subject (and the founder of India China America Institute) was among the earliest thought-leaders to envision the possibility of a new currency coming from these emerging economies. His prediction for a new currency is supported by reasoning: \u201cThe BRIC Nations and other emerging markets want their resource assets (industrial raw materials, oil, gas) de-linked from the dollar economy since they fluctuate by the monetary and fiscal policies of the U.S. and its trade balances,\u201d he says.<\/p>\n

The reason we conducted the poll qualifies to be discussed in the light of a series of recent financial developments. During latter months of 2008, talks were ripe among the BRIC nations about a new gold-backed global currency. Days before the G-20 London Summit (March 2009) Zhou Xiaochuan, the Chief of Chinese Central Bank came up with his historic proposal for a \u201cnew\u201d world reserve currency. In June, right before the historic BRIC Summit (Moscow) Russians, the hosts followed the suite by announcing that the idea of a \u201csupra-national currency\u201d could be on their agenda. The Russian proposal was to create a new global currency issued by an international financial institution. A few months later, in July, the Brazilian President Lula proposed the replacement of Dollar by another currency among BRIC nations. Earlier this month (Sep 2009), UNCTAD, an UN entity became the first multinational agency to come up with the idea of replacing Dollar as the world\u2019s reserve currency. More recently, news agencies reported that UN is backing the plan to create a new global currency.<\/p>\n

Conceptually, replacement of Dollar does not necessarily imply creation of a new currency. However, if the dominance of Dollar can be questioned, which other existing currency are we talking about? Perhaps, if the Dollar will be replaced at all; it will be by a brand new currency. But is it really going to happen? With this article, we try to answer this question. Signs of radical trade re-structuring manifest in the marriage of Chindia and Latin America. The new trade bloc that will thus form, as it seems at the first glance, may have all the capabilities, will and confidence to come up with their own currency.<\/p>\n

To dig deeper, we interviewed with experts in International Business at J Mack Robinson College of Business at Georgia State University-Atlanta. The panelists were Professors David Bruce and Pedro Carrillo (founders of the US-Latin America Trade Program at IIB-GSU). The discussion led to some interesting insights.<\/p>\n

\u201cI do not doubt that the (common) currency will happen sometime in future… but it has challenges and it will be an expensive idea\u201d, says Pedro. He also points out at a larger emerging world: \u201cThe list of emerging economies is large; and includes more nations than just BRICS: South Korea, Vietnam, Turkey, Ireland…\u201d<\/p><\/blockquote>\n

Certainly, Imagining a new world where all the new economies will collaborate may sound fascinating to the policy-makers of the emerging world. However, this calls for a comparable interest in each other from all the parties. That clearly does not seem to be the case; as Pedro points out , \u201cCompared to India, Chinese have been smarter and more open when it comes to foreign policies and Free trade agreements with Latin American nations; more Latin American nations are signing up with China\u201d.<\/p>\n

David\u2019s opinions are not much different: \u201cThe idea that China and India (and, maybe, Brazil) shall come up with their own common currency cannot be out rightly rejected. It is possible; but not in very near future\u201d. He describes the pros and cons of a new currency that we list below:<\/p>\n

Upsides of countries creating a common currency:<\/h3>\n