MercoPress. South Atlantic News Agency

Brazil's Finance Minister proposes trade with Argentina in yuan

It will be good news if Argentina agrees, Haddad said

Brazil's Finance Minister Fernando Haddad said Wednesday in Johannesburg during the 15th BRICS Summit that Argentina might finance its foreign trade with his country by using Chinese yuan instead of US dollars, Agência Brasil reported.

“We have already sent the Argentine government a proposal to guarantee Brazilian exports in yuan. A guarantee with Banco do Brasil to make the exchange to the real. This is a good thing for Brazilian exporters. It will be good news if Argentina agrees,” Haddad said.

According to the Brazilian official, Argentina would pay for purchases of products from Brazil in yuan, and the Banco do Brasil branch in London would convert the Chinese currency into reals (R$) before sending the amounts to Brazilian exporters. During a trial phase, conversions would be limited to between US$ 100 million and US$ 140 million, it was also explained.

Haddad said the operation would increase the security of Brazilian exporters, who are afraid of being defaulted on by companies in the neighboring country. He also pointed out that the National Treasury and the Bank of Brazil have agreed to the proposed mechanism.

“For Brazilian exporters, it's a good thing, it will be good news if Argentina agrees. Because they can have some flow of sales of their products with a 100% guarantee [of receiving the money]. For Brazil, there are no problems, because the exchange rate will be made from the yuan to the real and this also reassures the National Treasury that there is no risk of default. It's a guarantee that the Treasury considered adequate and Banco do Brasil agreed to, according to what was presented,” said Haddad.

Trade between Brazil and Argentina is currently carried out in US dollars. In January, Presidents Luiz Inácio Lula da Silva and Alberto Fernández discussed the creation of a common currency for regional trade.

Another front of negotiation involves the inclusion of Argentina as a partner in the New Development Bank (NDB), also known as the BRICS Bank. Uruguay is currently negotiating to join the financial institution which finances infrastructure projects in developing countries.

It is not required to be a member of BRICS to be part of the bank, which, in addition to the five countries of the bloc (Brazil, Russia, India, China, and South Africa), includes Bangladesh, Egypt, and the United Arab Emirates. (Source: Agência Brasil)