Sucre

34 Regional Monetary Cooperation and Growth-enhancing Policies: The New Challenges for Latin America and the Caribbean

C. lessons from past and present experiences

This section describes the experiences of four the schemes in intraregional trade transactions in
regional trade-related payment systems, including a comparison with regional trade conducted outside
comparison of those systems (table 3.1), in order to each scheme, depending on available data.
gain a better understanding of the instruments and
potential outcomes of the SUCRE initiative. The
four examples selected, in chronological order, are: 1. The European Payments Union
the European Payments Union (EPU), the Agreement
on Reciprocal Payments and Credits of the Latin The European Payments Union (EPU), which
American Integration Association (CPCR-LAIA/ was created in 1950 and was replaced by the European
ALADI), the Asian Clearing Union (ACU), and Monetary Agreement in 1958, is held up as a role
the System of Payment in Local Currency (SML) model for fostering regional trade. It performed the
between Argentina and Brazil. full range of functions of regional payment systems as
shown in table 3.1, including reduction of transaction
A comparative analysis of these schemes shows costs in regional trade by enabling trade payments to
that, beyond their specific context, due to regional be settled in domestic currency (item 1 in table 3.1):
differences and varying conditions, they represent where foreign exchange requirements were limited to
different degrees of sophistication in their objectives the minimum amount necessary through multilateral
and related instruments. To compare these schemes, clearing with a short-term liquidity provision (2a),
we use (as also used by some of these arrangements) during the settlement period of one month, (2b)
the “Keynes Plan” for a global payment system as a and where credit provision exceeded the payment
reference.3 However, it is important to state that the system’s internal clearance periods (2c). In addition,
Keynes Plan did not focus primarily on the reduction it had strong trade adjustment incentives through gold
of transaction costs, but rather on the establishment of quotas (3) and a regional unit of account that was used
an international lender of last resort. It envisaged an for accounting purposes only (4a). Though explicitly
arrangement that would be equipped with powerful not designed to provide a common European
weapons to force not only deficit countries but also currency, this unit of account can be regarded as the
surplus countries into adjustment, with the aim of first stage of what 30 years later became the European
avoiding large trade imbalances that may trigger Currency Unit (ECU) in 1981 (4b).
economic crises or provoke protectionist measures.
In contrast, regional (as opposed to global) payment Although it is widely believed that regional
systems need to take into account extraregional trade payment systems modelled on the EPU would solve
and financial conditions. problems of regional trade creation in a similar
way, it should be pointed out that the design of the
Depending on whether their objective is to EPU was strongly linked to the unique conditions
reduce transaction costs in intraregional trade or and historical context prevailing at the time of its
whether their long-term vision is some form of foundation, when the Bretton Woods system provided
deeper regional monetary cooperation, the regional very stable international monetary conditions. It is
arrangements analysed here differ widely in terms of therefore probably the only regional payment system
their purpose with reference to the comprehensive that did not need to create adjustment mechanisms
Keynes Plan. for extraregional exchange rate adjustments. It
was set up in a world of fixed exchange rates, non-
In the following sections, these schemes are convertibility of all currencies other than the dollar
presented based on table 3.1. Each analysis also and strictly limited private capital flows. In addition,
includes a brief empirical assessment of the use of it is important to note that EPU was not established

Regional Payment Systems and the SUCRE Initiative 35

Table 3.1
CoMpaRison of objeCtives of seleCted Regional payMent systeMs and the Keynes plan

Keynes Plan for
a global payment CPCR-
Objectives system EPU LAIA ACU SML SUCRE

1. Reduction of transaction costs
(use of domestic currency at firm level) X X X X X X
2. Saving of foreign reserves by:
(a) Temporary liquidity (clearance period) X X X X - X
(b) Final settlement in national currencies X partially - optional - optional
(c) Credit lines beyond clearance X X - X - planned
3. Coordinated adjustment among deficit
and surplus countries X X - - - planned
4. Unit of account
(a) For accounting purposes X X - X - X
(b) Instrument of exchange rate
coordination X - - - - -

Source: UNCTAD.

without difficulties: negotiations to reach agreement The EPU’s accounts were held at the Bank
on the incentive structure to reduce intraregional trade for International Settlement (BIS), which acted
imbalances took a long time, and the EPU underwent as its financial agent and also its clearing house.
a series of modifications during its existence.4 Each country had to hold only one account with the
clearing house, denominated in the unit of account.
The European Payments Union (EPU) was The settlement period was one month, after which the
founded in 1950. An important incentive for its participating countries reported their balances with
creation was pressure from the United States for trade each of the other countries to the BIS. Remaining
liberalization in Europe, aimed at rapidly restoring balances were merged to represent balances of the
Europe’s economic strength after the Second World EPU as a whole, so that it made no difference what
War. In this context, the EPU’s objectives were to: balance was held by each member country.
develop convertibility of the European currencies at
the regional level, liberalize intra-European trade, and The EPU had a limited mechanism to balance
multilateralize existing bilateral trade arrangements. trade.5 Following its inception, each country received
The founding members were: Austria, Belgium, a quota of 15 per cent of its total trade with the EPU.
Denmark, France, Germany, Greece, Iceland, Ireland, As long as a country’s net debt was less than 20
Italy, Luxembourg, the Netherlands, Norway, Portugal, per cent of its quota, it was financed by credit, so
Spain, Sweden, Switzerland, Turkey and the United that the country did not need to pay. If a country’s
Kingdom. debt reached 20 per cent of the quota, that country
had to settle 20 per cent of the quota in gold. Debts
The main benefit of the EPU was that it ended amounting to 40, 60 and 80 per cent of quota were
bilateralism in intraregional trade by introducing required to settle in an equal percentage of shares in
a multilateral clearing system: a regional unit of gold or dollars. If a country exceeded its entire quota,
account was set up at par to 1/35 ounces of gold it was required to make its payments entirely in gold.6
(equal to the gold conversion rate of the dollar but Cumulative surpluses were settled in a similar way
independent of it). The EPU’s unit of account was as deficits but at different percentage shares. Until
used only for multilateral clearance of regional its quota was exceeded, a surplus country would
transactions, and each country set a parity of its own receive gold, but amounting to only a maximum of
currency with this unit of account. 50 per cent of its cumulative net surplus position. In


addition, claims were converted into commodities or to $23 billion in 1959, while imports from North
hard currency only partially and with a delay. America grew more slowly, from $4 billion to
$6 billion. At the same time, credit expansion under
Despite inherent incentives to avoid excessively the EPU fuelled intraregional trade by reducing
large surpluses, countries with a net export surplus specific trade-related transaction costs through the
to the region benefited from the EPU in three use of extraregional currencies in intraregional trade
ways (Eichengreen and de Macedo). First, surplus (ibid.): “Participating countries had $46 billion of
countries had access to gold, rather than having to use surpluses and deficits against one another during the
internationally unconvertible neighbour countries’ EPU years. Nearly half ($20 billion) was cancelled
currencies in return for their exports. Creditors were multilaterally. Another quarter ($12.6 billion) was
given more gold than debtor countries from a pool cancelled inter-temporally, as countries ran deficits in
of $350 million, which was initially financed by one month, financing them wholly or partially with
the Marshall Plan. Second, financial assistance was credit, and ran offsetting surpluses in subsequent
provided, conditional upon economic adjustment months, cancelling their previous position. Settlement
by the debtor countries, thus limiting any potential in gold and dollars was limited to most of the
misuse of the system. Third, trade liberalization remaining quarter ($10.7 billion). Thus, EPU reduced
was a requirement for EPU membership. Reducing settlement in gold and dollars by more than 75 per
trade barriers by up to 75 per cent was required over cent compared to what would have been required
the course of EPU’s existence, which resulted in under strict bilateralism.”
trade gains, particularly for the internationally more
competitive surplus countries. Apart from increasing intra-European trade,
the EPU contributed significantly to improving
The strong orientation towards trade liberaliza- Europe’s terms of trade. It functioned like a common
tion within Europe was a crucial additional element of external tariff scheme: demand for extra-regional
the EPU’s success in increasing trade, as it prevented goods declined as the prices of intra-European goods
the countries from reverting to trade-related beggar- became more favourable due to the intraregional
thy-neighbour policies in order to enhance economic convertibility scheme and the credits provided.
growth. The importance of the quest for intraregional While this rapid expansion of intra-European trade
trade liberalization came into sharp focus when EPU fuelled productivity and rising income levels, it was
found itself on the edge of collapse in its initial years crucial for the economic development of Europe to
of existence (for details, see Bührer, 1997: 206; and be able to build on several elements for economic
Eichengreen, 2007: 83). Germany’s quick shift to a growth. At the national level, the EPU counted on
net trade surplus in 1951 would not have been pos- a strong commitment to an agreement on income
sible without the existence of the EPU. Despite a distribution. Labour and management in the member
surge in demand for German industrial goods due countries bargained real wages below or at the level
to the Korean war in 1950, German import demand of productivity increases in return for productive
exceeded its export production so that its current- reinvestment of profits (Eichengreen, 1993: 121). At
account deficit increased and it exceeded its EPU the regional level, the EPU was built upon trust in
quota. To prevent a return to trade restrictions by members’ commitments to contribute to the mutually
Germany, the EPU made an exception and granted agreed rules.
it a credit.7
Ultimately, the EPU’s exit barriers were too high
The volume of European trade increased to not commit strongly to the intra-European payment
considerably during the existence of the EPU, system. However, it is important to note that during
partly as a result of trade liberalization agreements. its existence, the EPU had to contend with a number
According to Eichengreen and de Macedo, 2001, of challenging crisis periods, which was only possible
“Although both intra-European trade and trade with due to its highly favourable incentive structure.
the rest of the world expanded more quickly than “What helped to overcome these was the fact that
European production in the EPU years, the spurt in the EPU proved to be very useful to its members as
European trade was coincident with the inauguration it not only provided credits for importing but in this
of the EPU.” This is evident from the fact that intra- way also allowed members to export.” (Dickmann,
European trade increased from $10 billion in 1950 1997: 195).


2. The Agreement on Reciprocal the mid-1990s. Second, there has been a significant
Payments and Credits (CPCR-LAIA) increase in pre-payments (i.e. voluntary settlement
of claims before the maturity date of four months).
The Agreement on Reciprocal Payments and These operations rose from less than 10 per cent of
Credits (CPCR – Convenio de Pagos y Créditos the total at the end of the 1980s to more than 90 per
Recíprocos), which was established in 1966, was cent in the mid-1990s, with only a short reduction in
the first mechanism of its kind in Latin America. It the period 2001–2004.
was the result of a long process of negotiations and
studies, at least since the 1950s, under the aegis of As a consequence of these developments, the
the Economic Commission for Latin America and CPCR’s usefulness and its contribution to intrar-
Caribbean (ECLAC).8 This agreement, under the aus- egional trade creation, has continuously declined.
pices of the Latin American Integration Association Based on the LAIA’s calculations11 of the benefits
(LAIA/ALADI – Asociación Latinoamericana de derived from CPCR (i.e. the percentage difference
Integración),9 has 12 of LAIA’s 13 member countries between the total value of operations channelled in
as signatories: Argentina, the Bolivarian Republic each year and the amount of dollars effectively dis-
of Venezuela, Bolivia, Brazil, Chile, Colombia, the bursed), the high values of the 1980s (of 70–80 per
Dominican Republic, Ecuador, Mexico, Paraguay, cent) fell to around 25 per cent in 2003. Since 2006,
Peru and Uruguay.10 this share has been lower than 5 per cent.

This payment system serves to reduce transac- Other underlying reasons for the declining use
tion costs (item 1 in table 3.1) and provides temporary of the CPCR relate to some specific problems with
liquidity during a clearance period of four months the system that should be taken into account in the
(2a). The central banks agree on the amounts and design of a new payment system in Latin America.
conditions of the temporarily provided credit lines,
register the operations and assume the risks of de- The first reason explaining the decline in CPCR
layed payments during the clearance period (see utilization involves the possibilities and conditions
below). At the end of that period, the net amount for choosing the mechanism to channel payments.
of all credits is settled multilaterally in dollars. The During the 1980s, faced with severe balance-of-
CPCR does not provide credit mechanisms beyond payments problems, the majority of CPCR-member
this period, maintains the hard currency for final central banks made it mandatory to channel payments
clearing among central banks, and does not include for intraregional trade transactions through the
a common unit of account. CPCR, until 1992. Since then, however, while still in
accordance with the general rules of the Agreement,
Even without replacing the dollar as the curren- the countries started to bypass the CPCR through
cy for final clearance (2b), the CPCR mechanism has their own domestic regulations.
been able to reduce transaction costs in intraregional
trade. In particular, it was able to help overcome the Among the reasons for this increasingly cau-
obstacles to trade expansion resulting from the high tious stance, was the reluctance of the central banks
costs of financing in dollars during the so-called debt to assume risks associated with intraregional trade
crisis in Latin America in the 1980s. transactions arising from the set of guarantees as-
sumed under the Agreement by the central banks
However, since the 1990s the use and effective- for convertibility, transferability and reimbursement
ness of the CPCR has declined significantly, for two for transactions provided by the system.12 As the
main reasons. First, the CPCR has not been able to LAIA secretariat itself has stated: “… the fact that
keep up with the expansion of intraregional trade the Central Banks assume the credit risks involved
since the mid-1990s as a result of MERCOSUR. in intra-regional trade transactions by granting a
Since then, the value of operations channelled reimbursement guarantee to each transaction greatly
through the CPCR has steadily declined, reaching stimulated the use of the system by exporters and
its lowest level in 2003, at $700 million. While by commercial banks since its initiation in 1968.
the share of intraregional trade channelled through From the 1990s onwards, institutional changes
this mechanism amounted to an average of almost with respect to objectives and aims of the mem-
90 per cent of total regional trade transactions in bers’ central banks turned out to be ‘problematic’
the 1980s, it has remained below 10 per cent since for the majority of the Central Banks, due to their


Figure 3.1
agReeMent on ReCipRoCal payMents and CRedits: Key opeRational Results, 1980–2008

100 160

90
140

Number of transactions (thousands)
80
120
70
100
60
Per cent

50 80

40
60
30
40
20
20
10

0 0
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

Forex exchange saving Intraregional imports (right scale)
Transactions channelled/Intraregional trade Transactions channelled through CPCR (right scale)

Source: LAIA, at : http://www.aladi.org/nsfaladi/convenio.nsf/Pcompensacionsaldos.

duty to provide reimbursement guarantees” (LAIA, America once again became an increasingly attractive
2009: 11). destination for private capital inflows (figure 3.1).
Later, between 1999 and 2003, when external financing
Another reason was that the increase in pre- conditions deteriorated once more, the percentage of
payments caused a steady decline in the comparative pre-payments fell slightly, but increased again with
advantage of the CPCR in the settlement of intra- the resurgence of capital flows during the global boom
regional trade transactions in terms of its providing period. These trends suggest a correlation between the
temporary liquidity by central banks. A claim is settled attractiveness of payments through the CPCR and the
in advance only if there are no better alternatives absence of private external financing.
available for one or both sides of the contract. The
interest rate on the bilateral credits of the agreement Beyond this, the incentives to use the CPCR
is fixed as the average of the four-month daily values developed asymmetrically among the members, since
of the London inter-bank offer rate (LIBOR) plus one increasingly diverging creditor and debtor positions
percentage point during the first three months and half developed between the largest member countries.
a percentage point for each compensation period. If The bulk of the operations have involved Venezuelan
this rate is lower than what a creditor country may imports and Brazilian exports of engineering services
earn in alternative investments of its foreign exchange associated with big infrastructure projects, thus
reserves, it is interested in receiving payment in involving only a small number of transactions. This
advance, thus creating a potential disincentive for net too has had the effect of diminishing the CPCR’s
exporting countries. If, at the same time, this interest role in reducing transactions costs, beyond unequal
rate is higher than that offered by other financing distribution of its use by members. Thus there seems
sources, it too provides a greater incentive for pre- to be room to improve the incentive mechanisms and
payment by a debtor country. institutional arrangement within this LAIA payment
system. Certainly a payment system better suited to
Thus advance payments within the CPCR started the regional context could have helped the expansion
to increase at the beginning of the 1990s, when Latin of intraregional trade since the 1990s.13


3. The Asian Clearing Union ACU. The settlement period is two months, after
which interest payments and debtor and creditor
The Asian Clearing Union (ACU), founded in positions are netted out. Within that period, trade
1974, offers a clearance period with provision of short- between ACU member countries does not require
term liquidity (table 3.1, item 2a) and the provision of any payment and there are no restrictions on vol-
swap lines for deficit countries beyond clearance (2c). umes, or kinds of goods and services traded. The
It also provides a unit of account for the factoring of basis of the ACU operating mechanism is the ACU
transactions channelled through the system (3a). dollar and ACU euro accounts of the participating
countries’ banks with the correspondent banks in
ACU was the outcome of an initiative of the other participating countries (ACU, 2009: 6). Out
United Nations Economic and Social Commission of these accounts, only the net surpluses and defi-
for Asia and the Pacific (ESCAP) in order to cits are required to be settled by the central banks
foster regional cooperation between the countries in the countries concerned. Authorized banks settle
concerned, namely Bangladesh, Bhutan (since 1999), commercial and other eligible transactions similar
India, the Islamic Republic of Iran, Maldives (since to usual foreign exchange transactions; they are
2009), Myanmar, Nepal, Pakistan and Sri Lanka. responsible for maintaining their AMU-related ac-
ACU itself describes its objectives as follows: “To counts commensurate with the requirements of their
facilitate settlement, on a multilateral basis, of foreign exchange business. The participating central
payments for current international transactions; to banks commit to making their payments within four
promote the use of participants’ currencies in current working days of notification, either in international
transactions; to promote monetary cooperation reserve assets or in the debtor countries’ currency,
among the participants and closer relations among the as specified by their boards of directors. In case of
banking systems so as to expand trade and economic payments in other currencies than dollars or euros,
activity among the countries of the ESCAP region; the settling member countries have to agree on the
and to provide for currency swap arrangement among appropriate exchange rate.
the participants.”14 Use of the ACU clearing facility
by member countries is optional. The mechanism for inducing timely payments
is through penalty fees or the threat of possible
A regional unit of account, the Asian Monetary expulsion from the ACU. Delayed payments are
Unit (AMU), has been created for the settlement of subject to fines amounting to the higher of either
ACU transactions. For many years market partici- the interest of 1 per cent per annum above the rate
pants invoiced and settled intraregional payments in for the relevant settlement period(s) or 1 per cent
local currencies, but since the beginning of 1996, per annum over the rate applicable on the day of
ACU is implemented as a multi-currency settlement default. In case a participant fails to pay within
system through which participants may also settle 15 days upon notification and no agreement can be
their accounts in dollars or euros, and AMU is re- reached between the partners involved in the pending
ferred to as ACU dollar or ACU euro. As the main transaction within seven days, the respective country
purpose of the ACU is to provide a common unit of is expelled from ACU until payments have been
account, the term ACU dollar is specifically used made. According to the ACU, no partner country
to identify the use of ACU transactions as distinct has ever defaulted so far, probably due to its strong
from transactions in dollars. Otherwise there is no enforcement mechanism.
distinction value-wise between the ACU dollar and
the dollar. The same applies to the ACU euro. AMU The ACU contains a swap facility for debtor
is kept equivalent to one dollar and one euro respec- countries beyond the clearing period: any participant
tively. Intraregional exchange rates with the ACU in net deficit at the end of a settlement period is eligible
dollar/ACU euro are calculated based on daily SDR for this swap facility. An eligible participant is entitled
cross rates as published by the IMF. The Board of to the swap facility from every other participant up to
Directors may change the denomination and/or the 20 per cent of the average gross payments made by
value of the AMU at any time by a unanimous vote it through ACU to other participants during the three
of the Board of Directors.15 previous calendar years. The interest rate charged on
drawing on the swap facility is derived from the dollar
Provision of liquidity by mutual central bank or euro two-month LIBOR declared by the British
credits during the settlement period is realized in Bankers’ Association.


Figure 3.2 international trade operations. Use of the SML is
tRansaCtions CleaRed/settled thRough voluntary by both member countries.
the aCu MeChanisM duRing 1998–2008
An explicit goal of the mechanism is to develop
1998
the foreign exchange market between these two
1999 countries. Thus, the exchange rate between the
2000 Argentinean peso and the Brazilian real is determined
on a daily basis. This is triangulated through the
respective dollar exchange rates.17 Based on this daily
2001
2002
2003 rate, the values of export and import transactions
2004 in the two countries are converted into national
2005 currencies, to be paid by importers to their central
2006 banks and received by exporters from their central
2007 banks. These payments are made like any other
2008 international transactions, by local banks previously
0 3,000 6,000 9,000 12,000 15,000 18,000 21,000
authorized to transfer the operations,18 which means
Millions of US$
that credits can be granted in local currencies. Each
Cleared in the system Settled in hard currency
operation between the central banks via the SML is
cleared through the international banking system in
Source: ACU, Annual Report of 2008. Available at: http://www. New York. The maximum period for this clearing is
asianclearing union.org/Portals/0/Annual-Report/ three days, but it usually takes just 24 hours. Thus
ACU%20Annual%20Report%202008.pdf.
there is no clearing period which would enable a
saving of foreign exchange reserves by accumulating
and final clearing of net positions between the central
According to ACU, the regional payment and banks.
clearing system has contributed to a rapid expansion
of trade, particularly in recent years: In 2007, trans- As the mechanism has been established only
actions amounted to $15,830.5 million, 31.4 per recently, an evaluation of its use and effectiveness
cent more than the preceding year (figure 3.2). On can only be very preliminary. The mechanism started
a monthly basis, the average transactions stood at operating with a limited number of operations and
$1,319.2 million compared to $1,004.2 million in the trade volume. In the 16 months until January 2010,
preceding year. India, the Islamic Republic of Iran, Sri a total of 1,510 transactions were channelled through
Lanka, Bangladesh and Pakistan account for the bulk the SML, of which 94 per cent were Brazilian exports.
of transactions (export+import+interest).16 Although The amount channelled was equivalent to 1.63 per
comparable data on total net intraregional trade cent of bilateral trade: 538 million real (of which
volumes are not available, approximate measures 99 per cent were Brazilian sales). This is equal to
suggest that payment of a large share of intraregional 3 per cent of total shipments from Brazil to Argentina
trade is being channelled through the ACU. and less than 0.05 per cent of transactions in the
opposite direction.19 However, the SML is being
used more and more, with a continuous increase in
4. The system of payment in local the number of operations and share in bilateral trade
currencies (even if concentrated on one side of the balance). In
January 2010, already 7 per cent of the total trade
The System of Payment in Local Currencies between the two countries was channelled through
(SML – Sistema de Pagos en Moneda Local) between the SML (figure 3.3). In addition, satisfaction with
Argentina and Brazil began operations in October the use of the system seems to be high: 65 per cent
2008. With reference to table 3.1, this is a simple of companies have used it more than once, and the
payment system that uses the national currency number of complaints seems to be low.20
for trade factorizing and clearing of bilateral trade
operations between an importer, and exporter and Another explicit goal of the SML is related to
commercial banks (item 1 in table 3.1). It is designed the kind of enterprises using the mechanism. Being
to overcome only one of the problems presented in voluntary, by definition should offer advantages
table 3.1, namely transactions costs associated with over traditional payment settlement in international


Figure 3.3
systeM of payMent in loCal CuRRenCy: evolution of use and shaRes of bilateRal tRade,
oCtobeR 2008–januaRy 2010

7 250

6
200
5

Number of operations
150
4
Per cent

3
100

2
50
1

0 0
Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June July Aug. Sep. Oct. Nov. Dec. Jan.
2008 2008 2008 2009 2009 2009 2009 2009 2009 2009 2009 2009 2009 2009 2009 2010

Share of bilateral trade Operations channelled through SML (right scale)

Source: Central Bank of Brazil (http://www.bcb.gov.br/?SMLESTAT); and Brazilian Ministry for Development, Industry and International
Trade (http://www.desenvolvimento.gov.br/sitio/interna/index.php?area=5).

transactions. The SML is specially designed to cater of initial implementation between Argentina and
to the specific needs of small and medium-sized Brazil are overcome, extending the SML to other
enterprises (SMEs), for which access to the foreign economies should become easier.
exchange market is restricted due to high transactions
costs relative to their small size. Unlike the larger In terms of lessons in the design of payment
companies in both countries, for these smaller firms systems, probably the main contribution of this new
the option to pay and receive in local currency initiative is its effectiveness in addressing specific
represents significant cost reductions. transaction costs in foreign exchange for smaller
firms. The system has a simple and transparent
At the same time, the SML could gain importance structure with a clear set of rules and incentives. In
by expanding regionally, especially to include its short period of implementation, SML has shown
other members of MERCOSUR. Indeed, Uruguay that a step-by-step approach may be beneficial as
is expected to enter into a test phase with the long as it is continuously and transparently adapted
mechanism, at least for bilateral trade operations with to international financial conditions and addresses
Brazil in 2010. Regarding Paraguay, some technical specific problems linked to the transaction costs
challenges persist, mainly involving computerization inherent to accessing non-domestic currency for
of the domestic payment system. Once the difficulties intraregional trade.

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