Argentina, Brazil mulling de-dollarization in bilateral trade

Argentine President Alberto Fernández and his Brazilian counterpart, Luiz Inácio Lula da Silva have vowed to devise a mechanism to use their local currencies in bilateral trade amid a growing trend of dumping the US dollar in trade deals by many countries.

The left-leaning leaders of the two main Mercosur Southern Common Market partners met on Tuesday in the Brazilian capital to explore ways to boost trade and dump the US dollar.

“The meeting was long, difficult and we will carry out many more meetings,” Lula said alongside Fernández spoke to the press.

“I made a commitment to my friend Alberto Fernández that I will do every and any sacrifice so we can help Argentina in this difficult moment.”

“They’ve made the decision to help make sure that Brazilian companies continue exporting to Argentina and they had asked us to do some homework, which we have already done, and have to do with the necessary guarantees,” Fernández said.

The proposed plan involves a line of credit to finance Brazilian companies that export to Argentina with the intention of avoiding use of the dollar, said Brazil’s Deputy Minister of Economy Gabriel Galipolo.

Galipolo declared that his government proposed the creation of a special line of financing for Brazilian companies exporting to Argentina using local currencies and thus maintain the flow of bilateral trade between the two Latin American economic heavyweights.

The official further explained in an interview with the local GloboNews network that the use of the US dollar for trade had caused the country to lose billions.

“In the last five years, due to Brazil’s lack of mechanisms to finance its exports and Argentine imports, we have lost approximately $6 billion of space in the trade balance with Argentina to China, which has been providing financing mechanisms in alternative means of payment, such as swaps, or giving credit to the exporter,” Galípolo underlined.

The deal with Brazil, which is Argentina’s largest trade partner, comes as Buenos Aires’s economy looks fragile after a sharp devaluation of the local currency late last month and a drain of US dollars from central bank reserves.

Under the new agreement, Argentina and Brazil intend to exclude the dollar as their payment currency and use a mechanism similar to the swaps with China for foreign trade.

Argentine importers will thus be able to pay for their purchases in pesos and the Brazilian government will convert the payment for their trade deals into reais.

The development comes amid efforts by a growing number of countries across the globe to ditch the US dollar in favor of local currencies of trading partners.

Argentina to pay for Chinese imports in yuan instead of dollars

Argentina will pay for Chinese imports in yuan instead of US dollars in order to preserve its dwindling foreign reserves, Economy Minister Sergio Massa said on Wednesday.

The global trend to substitute the US dollar with local currencies in trade transactions continues to accelerate as more nations have taken steps to ditch the greenback.

Argentina announced last week that it will pay for Chinese imports in yuan instead of dollars to preserve its international reserves.

In a meeting in Buenos Aires with China's ambassador Zou Xiaoli, Argentine Economy Minister Sergio Massa said his country will be able to "program a volume of imports in yuan worth (the equivalent of) more than $1 billion from next month."

Massa added the South American country will program a volume of imports in yuan worth more than one billion dollars from next month, which will replace the use of the US dollar.

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