Brazil and Argentina want to get rid of dependence of U. S. dollar
2023.01.23 14:38
Brazil and Argentina want to get rid of dependence of U. S. dollar
By Ray Johnson
Budrigannews.com – Brazilian President Luiz Inacio Lula da Silva said on Monday that Brazil and Argentina are in early talks to create a shared unit of value for bilateral trade to reduce reliance on the U.S. dollar. However, the move is not intended to replace existing currencies.
Lula made the remarks alongside Argentine President Alberto Fernandez, a leftist ally, who stated that little was decided about what would be involved in such a proposal. Lula was in Buenos Aires on his first international trip since taking office.
A source close to the Brazilian government said on Monday that the talks came up as part of an agreement to increase bilateral trade with additional Brazilian export financing backed by Argentina’s international collateral.
Brazil’s Finance Minister Fernando Haddad and other officials have downplayed talk of a full currency union at a summit that is taking place in the capital of Argentina.
Haddad told journalists that rather than spawning a shared currency circulating in both countries, the initial discussion was focused on how to assist Argentina in buying Brazilian exports without tapping its dollar reserves.
“Trade is extremely bad, and precisely the foreign currency is the issue, right? Following his arrival in Buenos Aires on Sunday night, Haddad stated, “We are therefore trying to find a solution, something in common that could make commerce grow.”
Haddad said that a “common unit of trade” could be made, but he didn’t think a unified currency that could be used by everyone was a good idea.
According to the source, Brazilian banks would provide credit to Argentine importers backed by a Brazil government fund to secure the loans under an agreement that was ready for signature in Buenos Aires. Brazil’s trade financing with international liquidity would be guaranteed by Argentina, which would in turn provide collateral.
The source stated, “It could be Chinese bonds, gas contracts, or wheat contracts.” something that has international liquidity that guarantees Brazil can access it to compensate the Argentine importer in the event of nonpayment.”
The source said that for now, operations would be done in Brazilian reais.
The source also said that the governments want to set up a working group to look into ideas like creating a new account to clear regional trade that would be backed by international reserves and have a common denomination. A new currency that is widely used would not be included in that proposed accounting measure.
Citing Argentina’s Economy Minister Sergio Massa, the Financial Times reported on Sunday that the neighboring nations would announce this week that they would begin preparatory work on a common currency.
The economy of Argentina is experiencing a number of difficulties, one of which is a lack of dollars. The government is having trouble replenishing its reserves of foreign currency and also has to deal with an inflation rate that was nearly 100 percent last year.
