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The FTAA After The Emergence Of the Euro

Schettino, Francesco (2004): The FTAA After The Emergence Of the Euro.


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The aim of this paper is to inquire into the possible relation between the FTAA (Free Trade Area of Americas) and the progressive interna- tionalization of the Euro. We will sustain that the actual productive situation (globalization) makes impossible to think of an FTAA with- out a kind of dollarisation of the Latin American countries (LAC). In fact we argue, helped by empirical analysis, that an economic area can use a sound currency if, and only if, it has a strong link with its issuing country. That is why we analyze, with the principal component anal- ysis, the economic situation of the LAC focusing on their dependence on the U.S. and E.U. economies. We obtain that the LAC, candi- dates for FTAA, are much more dependent from E.U. rather than U.S.; moreover, the future evolution of the banking assets, in relation to external and internal debt, could strengthen this dependence. For these reasons we conclude that the FTAA process could meet some difficulties in the next years, because the LAC economies could prefer to use the Euro as the reference currency for international trade.

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