Brazil proposes ensuring exports to Argentina in Chinese currency

Amidst a dollar shortage and a severe economic crisis in Argentina, Brazil’s Finance Minister Fernando Haddad announced on Wednesday (Aug. 23) that Argentina might settle payments for Brazilian products in yuan, the Chinese currency. This proposal was presented by the Brazilian government to its neighboring country during the Brics summit, and they now await a response.

Haddad stated, "We have already submitted a proposal to the Argentine government to secure Brazilian exports in yuan, backed by Banco do Brasil for currency conversion into the real. This could be a significant development for Brazilian exporters. If Argentina agrees, it would be positive news."

In this arrangement, Argentina would initially pay for Brazilian products in yuan, and Banco do Brasil's London branch would convert the Chinese currency into Brazilian reals before transferring the funds to Brazilian exporters. Initially, this mechanism will be tested with conversions limited to between $100 million and $140 million.

According to Haddad, this operation would enhance the security of Brazilian exporters who are concerned about possible defaults by Argentine companies. Both the National Treasury and Banco do Brasil have reportedly approved this proposed mechanism.

Currently, trade between Brazil and Argentina is conducted in dollars. In January, Presidents Luiz Inácio Lula da Silva and Alberto Fernández of Argentina discussed the potential creation of a shared currency between the two countries to facilitate regional trade.

Another aspect of negotiations involves Argentina's inclusion as a member of the New Development Bank (NDB), also known as the Brics Bank. Uruguay is currently in discussions to join this financial institution, which provides financing for infrastructure projects in developing nations.

It is worth noting that membership in the Brics is not a prerequisite for participation in the bank, which includes, in addition to the Brics nations (Brazil, Russia, India, China, and South Africa), countries like Bangladesh, Egypt, and the United Arab Emirates.