18 Points to Restart Global Multilateralism Strengthening Regional Integration: the Case for Economic and Monetary Integration in Latina America

Alfonso Iozzo and Fabio Masini 
Alfonso Iozzo is President of Centro Studi sul Federalismo; Vice-President, Robert Triffin International
Fabio Masini is Professor of Theories and History of International Political Economy, Roma Tre University;
Jean Monnet Chair European Economic Governance; Secretary General Robert Triffin International; Managing Editor, Euractiv Italia

1. Since the end of the Bretton Woods regime in 1971 the dollar, that ceased being de jure the pivotal currency in the International Monetary System (IMS), acquired a de facto hegemony in international payments and reserves.
2. After the financial crisis triggered by the subprime mortgage bubble in the USA a revision of the global financial regulatory framework was gathering momentum, and a call for a Bretton Woods 2 conference was largely put forward to revise the IMS. The UN Stiglitz Commission in 2009 made some interesting suggestions that aimed at a more equitable, regulated, and multilateral governance of the IMS.
3. Before the weaponization of the dollar after the Russian invasion of Ukraine in February 2022, an increasing trend towards multilateralism in the IMS was manifest. The issue of €650bn SDRs, as a multicurrency reserve asset, in August 2021 was a testimony of this.
4. The world is called to tackle common challenges that require the provision of global public goods; thus, it cannot surrender to the logic of bilateral confrontation between East and West, with again a marginalization of the role of other regions, such as Africa and Latina America.
5. A renewed effort towards multilateralism and a new global system constructed upon regional integrations is urgent. 
6. The strengthening of the regional integration processes in areas where this is lagging behind is crucial for the sustainability of the global economy and the emergence of global collective choices.
7. Multilateralism is also crucial to stabilize the international economy, which relies only on US deficits to provide the liquidity required to support trade, development, and catch-up processes, thus making the IMS inherently unstable.
8. Latina America is the continent where the regional integration processes are most promising, assisted also by some embryonic common institutions.
9. The proposal for a common, parallel currency – the sur – to be adopted first between Argentina and Brazil, open to other regional currencies, goes in the right direction and should be further encouraged.
10. The experience of the European Monetary System might provide guidance to avoid mistakes and profit from successes that that experience showed.
11. Country-specific macroeconomic performances are relevant in designing regional integration, but any such process is eminently political and requires being supported by a strong political commitment.
12. In turn, such political commitment cannot simply rest on solemn declarations, but must be assisted by institutions and rules for collective choice and by a strong interest of private actors.
13. Political commitment requires binding norms and institutions that allow a systematic dialogue and macroeconomic convergence, to avoid stress on regional exchange rates and allow for a smooth reduction of inflation gaps; and to provide some legitimacy to collective decisions.
14. The revitalizing and further strengthening of the UNASUR system might provide a venue for further steps in this direction.
15. Once political commitment is ensured, market agents must be enabled to show their preferences and a private market for sur should be established, thanks to issues of sur-denominated bonds, by both private and public institutions.
16. The anchor problem for regional monetary integration cannot be solved in Latin America with the use of any national currency, as there is no manifestly hegemonic economy in the region. A solution might be therefore explored to anchor the sur to the SDR, as a very stable multicurrency reserve asset under the IMF management, instead of making it a regional basket currency.
17. The Bank for International Settlements may be entitled to help build and monitor the infrastructure required for regional clearing and financial transactions among the members.
18. Imported credibility and macroeconomic stabilization are the most evident pros of regional monetary integration, accompanied by costs related to the loss of freedom on exchange rate policy. This might pose problems of international competitiveness that require costly industrial conversion and greater systemic efficiency. Although such costs are country-specific and should be borne by each country, a regional financial institution (such as an existing or ad-hoc created Multilateral Development Bank or Fund), might assist such a process with issues of sur-denominated bonds on the international financial markets.