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China and Brazil sign agreement to trade in their local currencies

Thursday, March 28th 2013 - 09:19 UTC
Full article 9 comments
Guido Mantega and  Lou Jiwei of China signed the ambitious agreement Guido Mantega and Lou Jiwei of China signed the ambitious agreement

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.

Top Comments

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  • GeoffWard2

    So, Fernando Pimental, Brasil's Foreign Trade Minister, says that Brasil - like Africa - is becoming a neo-colony of China.
    Pimental is right, China is buying up raw materials including metallics and oil, and selling (often 'dumping') clothing, domestic goods and technological products. The worrying part is that China - through 'front' companies - is buying up LAND as well as land products of timber, arable and livestock.
    Trade is good - indeed, trade is great! but the overwhelming economic power of the greater party puts even this huge BRIC at great risk.
    But what does it risk?
    It risks that the low price of Chinese-made goods stops Brasilian domestic development. Brasilian high-tech that is competitive on the world markets is as rare as hen's teeth. There is no future for Brasil unless it protects and develops its own high-tech industries, and without this, Brasil will forever be a big, but just another, over-exploited South American nation.

    Mar 28th, 2013 - 01:08 pm 0
  • Condorito

    ...and China will be forever a big but just another over-exploited South Asian sweat shop dependent on South American resources.

    Who is more exploited, a Brazilian miner or a Chinese factory worker?

    “Brasilian high-tech that is competitive on the world markets is as rare as hen's teeth.”

    Brazil has the 4th largest aerospace industry in the world, ahead of both China and India. China would love to have an Embraer.

    Brazil is the 7th largest car maker in the world.

    Stop worrying about the Chinese, they are the best thing that has happened to Brazil in years.

    Mar 28th, 2013 - 02:01 pm 0
  • GeoffWard2

    Hi Condor ... same old argument!

    Superficially, you are right. But look where the monies to raise the new 'middle class' out of poverty comes from - in Brasil: from 'Robin Hood' redistributions from the richer to the poorer, in China: from the trillions of 'dollars' transferred from the rest of the world to China.

    Both are moving in the same direction; Brasil very slowly, China substantially faster. The vast numbers of the underclasses in China - and in Brasil - means that it will take decades if not centuries for their new systems to erradicate exploitation and corruption.

    Embraer is the beacon of hope, but 'Brasil is the 7th largest car maker'!? ..perhaps it should be re-phrased to 'Brasil is where the big foreign countries have located much of their assembly and production'. Does Brasil have a vehicle industry?

    I understand what you are telling me,
    but in the Brave New BRIC World, some animals are most definitely more equal than others ... and the Chinese are *definitely* the pigs.
    On the Farm they have taken over the house and they run the farm fields
    .. their population demographic demands that they expand out into whatever countries they can buy up, and South America is just as much at risk as is Africa.

    Mar 28th, 2013 - 03:43 pm 0
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