Leaders of the twelve South American nations signed a treaty May 23 agreeing to join together and create the Union of South American Nations (UNASUR). Many envision UNASUR as functioning similarly to the European Union by helping to coordinate defense across the continent and creating a common South American currency.
UNASUR aims “to build, in a participatory and consensual manner, an integration and union among its peoples in the cultural, social, economic and political fields, prioritizing political dialogue, social policies, education, energy, infrastructure, financing and the environment, among others, with a view to eliminating socioeconomic inequality, in order to achieve social inclusion and participation of civil society, to strengthen democracy and reduce asymmetries within the framework of strengthening the sovereignty and independence of the States,” according to the South American Union of Nations Constitutive Treaty.
A secretary general will be appointed by a council of heads of state for a two-year term which can be renewed once. Two people of the same nationality cannot serve as consecutive secretary generals. Rodrigo Borja was UNASUR’s first secretary general, but he resigned before the group even formally met after some leaders disapproved of his desire to put other regional trade blocs such as Mercosur and the Andean Community under UNASUR, according to the Associated Press.
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As the largest country in the union, Brazil has taken on a leadership position in the proceedings. It is pushing to establish a regional defense council to formulate joint policies and settle disputes, according to Forbes. Colombia, however, has resisted this because it claims that the 40-year civil conflict it continues to face makes it impossible for the country to contribute militarily to the union, according to the AP.
As part of the creation of UNASUR, South America is considering creating a central bank and implementing a common currency, as was done in the European Union. Luiz Inacio Lula, the president of Brazil, said in a radio broadcast that the adjustment to a common currency will be “a process” that will happen gradually. Lula said it was especially important to help the less economically stable countries in the union.
“We have to help them because the stronger the countries in South America economically are the more tranquility, peace, democracy, trade, companies, jobs, incomes and development,” he said.
The implementation of a common currency in South America could prove to be beneficial for some of the member countries, but there could be down sides as well. In the European Union, some countries have run into difficulties now that they are unable to adjust their interest rates to boost or slow their economies. See our previous article, One Interest Rate, 13 Economies, for more information on the effect a common currency can have.