MONETARY CIRCULATION IN LATIN AMERICA: PAST, PRESENT, AND FUTURE

Vitaly Krasnikov,
expert of the Committee on Economic Relations and Business of the World Forum “New Era—New Ways”

While Latin America boasts of natural treasures and a significant economic potential, the region’s currencies have been repeatedly re-named and changed by hyperinflation, devaluation, and the economies’ dependence on foreign influence. In the colonial era, monetary circulation in Latin America was inextricably linked to the Spanish and Portuguese monetary systems. Back in the day, the main currencies were the Spanish reais and Portuguese cruzados, actively used for trade and fiscal operations. Of note, the word “peso,” primarily associated with Latin American currencies, originally referred to a unit of weight for measuring gold, and later stuck to the Spanish coin worth 8 reais.

With the region’s rapid development, it became clear that there is a need in establishing local mints and shifting away from dependence on the metropolis, which con-strained the local financial system. Even the independence that states gained in the 19th century, often in bloody wars, could not fully resolve the issue of developing a financial system. Latin America faced numerous crises stemming from political turmoil and economic dependence on raw exports, which led to region-al currencies suffering hyperinflation and devaluation. The 20th century brought an understanding of the need for reforms aimed at stabilising monetary circulation. Countries embarked on their own journeys in search of the most appropriate options to stabilise the economy, providing a fundamental solution to economic challenges.

Among them are Simón Bolívar, who led Venezuela to freedom, and Francisco Hernández de Córdoba, the founder of Nicaragua. The portrait of Spanish conquistador Vasco Núñez de Balboa, dressed in his distinctive attire, graces many of Panama’s banknotes. The Cuban peso, which bears the portrait of the legendary Ernesto Che Guevara, is undoubtedly an eye-catcher. And lots and lots more famous names such as Miguel Hidalgo, Frida Kahlo, Juan Manuel de Rosas, Cecilia Meireles, José de San Martín, Ricardo Palma, Pablo Neruda, and Gabriela Mistral. The list of those who have made significant contributions and are commemorated on banknotes is simply inexhaustible.

The most effective measures, which allowed to resolve many issues triggered by hyperinflation, were introduced in 1992 and 1994 with the adoption of the of Argentine peso and the Brazilian real respectively. However, developments such as Argentina’s default in 2001 showed that the system still required major adjustments. The design of the region’s banknotes is commonly quite intriguing—usually featuring natural treasures, historical heritage, and personalities who have forever left an indel-ible mark on the history of various states.

Today, the most widely used Latin American currencies are the Brazilian real, and the Mexican, Argentine and Chilean peso. The Brazilian real and the Mexican peso are surely among the most stable regional currencies, owing to the diversified economies of the countries and their close ties with global markets. The Argentine peso, on the other hand, remains a relatively weak currency, despite multiple measures taken.

Some countries in the region deserve special attention, as they tried to introduce polymer banknotes, which are much brighter than paper ones and more long-lasting in the humid Latin American climate. Such banknotes have found their rightful place in Mexico, Chile, Costa Rica, Nicaragua, Guatemala, Honduras, Paraguay, and Brazil. In the current global volatile economic context, the development of Latin American monetary systems is to a large extent supported by integration processes, for example, within MERCOSUR and the Pacific Alliance.

Brazil’s fundamental involvement in BRICS and the accession of Cuba and Bolivia as partners are of great importance. On the other hand, the region is also seeking to introduce digital currencies—El Salvador’s bitcoin, for instance—as an official currency. Latin America’s monetary circulation overall remains a complex and multifaceted matter.

Strengthening national currencies calls for considerable efforts by the authorities to reduce the external impact on sovereign economies in the context of the emerging multipolar world. Latin America, indeed, is on the threshold of significant economic changes, which will certainly develop and improve the region’s monetary circulation.