Monetary Union in South America Lessons from EMU

The integration process of 'The Common Market of the South' (MERCOSUR) has been characterized by serious economic turbulence, including the devaluation of the Brazilian currency and the severe Argentinean monetary crisis. As a response to these difficulties, the adoption of monetary union has emerged as one possible solution to the financial uncertainty which has plagued this region.

Whereas some believe MERCOSUR should become a free trade area, others are convinced that nothing less than full monetary union can bring stability to the region and ease the financial fragility of the member countries. This book discusses the future of MERCOSUR, focusing on monetary union and macroeconomic policy co-ordination, and addresses a number of important questions including:

• is it possible, or even desirable, to achieve monetary integration?
• what would the pre-conditions be for establishing such a union?
• what would the convergence criteria be for joining the monetary union?
• what are the expected economic consequences for the member countries?

These questions are all addressed with particular reference to the experience of EMU and the lessons which can be learnt by MERCOSUR countries, in terms of the difficult transitions they may have to face.

The book brings together a host of distinguished British, Argentinean and Brazilian economists to elucidate the critical policy issues surrounding the merits of monetary union in South America. Financial economists, international monetary economists, international relations experts, academics and practitioners interested in the issues surrounding economic and monetary union will all value the perceptive insights found in this volume.

Edited by Philip Arestis, University Director of Research, Cambridge Centre for Economic and Public Policy, Department of Land Economy, University of Cambridge and Fellow, Wolfson College, UK and Luiz Fernando de Paula, Professor of Economics, Institute of Economics, Federal University of Rio de Janeiro, Brazil