South America and a new financial architecture

Abstract

The new monetary and financial architecture in South America rests on two important premises: a financial argument built around the creation of a new development bank, the Banco del Sur, and a monetary argument, founded on the notion of monetary regional integration, independent of the use of the U.S. dollar. This architecture contrasts with the main model of regional monetary integration that consists of two possible solutions: full monetary union or dollarization. The second model of regional monetary integration, however, is more consistent with Keynes and Post Keynesians. It rests on the creation of a common currency—or a unit of account—that does not supersede the existence of national currencies. This currency would be used solely for settling interregional payments, much like Keynes's bancor.