The two biggest economies in South America are starting talks to create a common currency. Analysts are skeptical.\r\nBrazil\u2019s President Luiz Inacio \u201cLula\u201d da Silva and Argentina\u2019s President Alberto Fern\u00e1ndez wrote in a\u00a0joint piece published in Argentinian paper Perfil Sunday\u00a0that they wanted to foster greater integration between the two neighbors.\r\nThe pair said they had \u201cdecided to move forward with discussions about a common South American currency that could be used for financial and commercial flows, reducing operating costs and our external vulnerability.\u201d\r\nThe announcement came as Lula visits Argentina for his first trip abroad since taking office at the start of the month. At a press conference in Buenos Aires, he said establishing a common currency for trade would reduce reliance on the US dollar, whose sharp ascent last year was painful for countries around the world.\r\n\u201cIf it depended on me, we would have external commerce always in the same currency of the other countries so we wouldn\u2019t have to depend on the dollar,\u201d Lula said.\r\nBrazil\u2019s finance minister, Fernando Haddad, downplayed the scope of the idea in talks with reporters, according to Reuters. He stressed that Argentina\u2019s shortfall of US dollars was weighing on trade between the two countries and that government leaders were exploring possible solutions, but that didn\u2019t mean the Brazilian real was on its way out.\r\n\u201cTrade is really bad and the problem is precisely the foreign currency, right? So we are trying to find a solution, something in common that could make commerce grow,\u201d Haddad said.\r\n\u2018A bridge too far\u2019\r\nThe two countries are both part of the Mercosur trade bloc, which also includes Paraguay and Uruguay. Talk of creating a common currency has periodically cropped up since its founding in 1991.\r\nWin Thin, global head of market strategy at Brown Brothers Harriman, said conversations were reemerging now because the leftist Lula is more politically aligned with Fern\u00e1ndez than his predecessor, Jair Bolsonaro.\r\nEmerging markets have also been hit hard by the strong US dollar, drawing complaints about its dominance in the global financial system. The greenback rallied nearly 8% against a basket of major currencies in 2022, making imports of food and energy more expensive and raising the cost of servicing debt denominated in dollars.\r\nStill, investors are doubtful efforts to create a common currency in the region will gain much traction.\r\n\u201cI really don\u2019t think it\u2019s going to go anywhere,\u201d Thin said. \u201cFor Brazil and Argentina, it really does seem a bridge too far.\u201d\r\nBrazil \u2014 dealing with a sharp run-up in interest rates \u2014 faces with a steep slowdown in growth this year. The World Bank estimates its economy will expand by just 0.8% in 2023, down from 3% growth in 2022.\r\nBut Brazil\u2019s economic position has been much sturdier than Argentina\u2019s over the past two decades, Thin said.\r\n\u201cThe credibility of the central banks and institutions in Brazil is much stronger,\u201d he said.\r\nArgentina, which defaulted on its sovereign debt for the ninth time in 2020, continues to be battered by crippling inflation. Consumer prices in the country rose 95% in the 12 months to December. Efforts to get the situation under control have forced the country to draw down its stash of foreign reserves and put a lid on business investment.\r\nHasnain Malik, head of equity research at Tellimer, said in a research note that the divergence in economic circumstances would make it extremely difficult for the two countries to get on the same page.\r\n\u201cBrazil and Argentina are a long way away from the convergence in economic policy and performance required to launch [a] monetary union,\u201d he said.