On Saturday, October 17, 2009, ALBA (Alternativa Bolivariana para las Américas) announced the creation of a new intra-regional currency, named the Sucre, which will be rolled out starting in 2010 in non-paper format. The currency is named after Jose Antonio de Sucre, who helped Venezuela fight for independence from Spain two hundred years ago.
Agence-France Presse reports that the “move echoes the European Union’s introduction of the euro precursor, the ECU, an account unit designed to tie down stable exchange rates between member states before the national currencies were scraped.” The Sucre will replace the US dollar for intra-regional trade between ALBA’s 10 member states.
ALBA’s members include: Bolivia; Venezuela; Cuba; Ecuador; Nicaragua; Honduras; Dominicana; Saint Vincent and Antigua and Barbuda.
What The Sucre Means For Oil Trade and The US Dollar
Considering the fact that Venezuela is one of the top 5 sources of the United States’ oil imports, for Venezuela to drop the US dollar in intra-regional trade of oil must have some significant consequences.
True, it does not look like this means Venezuela will ever be using the Sucre with the US – such a feat seems unthinkable – but the move will no doubt cause a symbolic impact on countries such as Iran who have also been pushing for freedom from the US dollar for oil trade purposes.
More broadly, Latin America’s move to hedge themselves from the effects of a declining dollar echoes recent sentiment shown largely by China, now the largest foreign holder of US debt, regarding the viability of the US dollar as a significant world reserve currency. China and other central banks around the world have been actively diversifying their reserves most notably by larger and more frequent purchases of gold. Central banks are now net purchasers rather than sellers of gold worldwide.
World Reserve Currency Updates
What Is The World’s Reserve Currency?
Zhou Xiaochuan’s Proposal For World Reserve Currency is Accepted by UN (March 29, 2009)
U.S. Dollar Up For Debate At G8 Meeting (July 5, 2009)
Supracurrency Coin Proposed As New World Reserve Currency (July 12, 2009)
U.S. Dollar Must Be Replaced As The World Reserve Currency (Sept. 8, 2009)
World Bank: Don’t Take US Dollar Reserve Status For Granted (Sept 27, 2009)
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