Sur instead of Dollar – Commodities could be the winners of the South American currency reform
“Whoever controls oil controls the states; whoever controls food controls the people; and whoever controls money controls the world!” With this statement, former U.S. Secretary of State Henry Kissinger illustrated the connection between currency and power. For decades, the dollar has served as the world’s reserve currency. This was due to its low inflation rate and high external stability. However, it is increasingly evident that the currency is not invulnerable. China and Saudi Arabia are accepting yuan and other payment methods for oil. And the South American nations of Argentina and Brazil are planning to introduce their own new currency.
“Sur” (meaning South) is to be the name of the South American dollar. According to the Financial Times, heads of government Luis da Silva and Alberto Fernandez aim to strengthen trade in the region and reduce dependence on the American dollar. The new currency would particularly benefit Argentina, which is currently struggling with 94% inflation. However, Brazil would also benefit, primarily because Argentina would once again have a currency with which to pay for its goods.
The goal is also to strengthen the South American economic organization Mercosur. The Financial Times estimates that a currency union of its member states would account for 5% of global GDP. This would place the alliance in third place, behind the Eurozone at 14.8% and the USA at 15%. Much like the Euro, the Sur could motivate other states to join the new currency union and benefit from it. Should this happen, a significantly larger gross domestic product could be expected.
In any case, both the dollar and the euro could be significantly weakened by this currency reform. A stable dollar has always been considered a guarantee for low commodity prices. Conversely, a weaker dollar stands for rising commodity prices. Regarding our technology metals and rare earths, we therefore anticipate stable price development. This represents a good opportunity for investors, not least because of tax-free purchasing and equally tax-free profits after a one-year holding period.