China and Brazil signed an agreement to do billions of dollars of trade in their local currencies, as the five-nation BRICS forum of emerging market powers work to lessen dependence on the US dollar and Euro.
Finance ministers Lou Jiwei of China and Guido Mantega of Brazil signed the agreement ahead of the official opening of the summit of leaders from Brazil, Russia, India, China and South Africa. It is Chinese President Xi Jinping’s first official trip to Africa, and the first BRICS summit since Vladimir Putin was returned to the Kremlin as president of Russia.
The first four countries established the forum in 2009, amid the economic meltdown in the West, saying they were uniting to work toward a more equitable world economic order and one that makes them less dependent on the volatility of the US dollar and the Euro. South Africa joined the forum two years ago.
As the Euro crisis continues and the West shows little signs of growth, the World Bank says that global economic growth is increasingly dependent on the BRICS countries, which account for 27% of global purchasing-power and 45% of the world’s workforce.
China already has become Africa’s biggest trading partner, overtaking traditional colonial partners from Europe, and BRICS countries aim to continue increasing trade among themselves. Intra-BRICS trade flows have ballooned to 282 billion dollars last year from 27 billion in 2002.
The summit comes as some ask whether Africa is sliding into a neo-colonial relationship with China, which is basically buying the continent’s raw minerals and oil while exporting it manufactured goods, following a pattern set when Africa was colonized by European nations.
Brazil confronts the same challenge, according to its foreign trade minister Fernando Pimentel.
Under the agreement Brazil will be trading with China using local currencies for up to 30 billion dollars which is half the country’s bilateral trade with Beijing (75bn). Mantega says Brazil hopes to promote such arrangements with other countries.