Tags: brazil | china | dollars

Brazil, China Look to End Use of Dollars for Trade

By Gene J. Koprowski   |   Wednesday, 20 May 2009 09:36 AM

Brazil and China are talking about dumping the dollar for international commerce, instead relying on their own currencies to conduct trade.

A report in The Financial Times cites sources in the central bank of Brazil and aides to Luiz Inácio Lula da Silva, Brazil’s president.

Lula is visiting Beijing this week. Reportedly, Hu Jintao, China’s president, and Lula first discussed the idea of replacing the dollar with the yuan (known also as renminbi) and the real as trade currencies when they met at the G20 summit in London recently.

The talks are at an early stage. The leaders are not discussing a currency swap of the kind China recently agreed with Argentina and which the U.S. had agreed with several countries, including Brazil.

“Currency swaps are not necessarily trade related,” an official told the FT. “The funds can be drawn down for any use. What we are talking about now is Brazil paying for Chinese goods with reals and China paying for Brazilian goods with renminbi.”

Barron's indicates there have been proposals over the years to use currencies other than the dollar for trade, notably by the Organization of Petroleum Exporting Countries.

Nothing has ever come of those threats, however. Even with the introduction of the euro as the first, real potential rival, world trade continues to be conducted overwhelmingly in dollars, Barron's notes.

"The global use of dollars has been an enormous advantage to the U.S., affording the nation the ability to spend and borrow nearly without limit," writes columnist Randall Forsythe in Barron's.

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Brazil and China are talking about dumping the dollar for international commerce, instead relying on their own currencies to conduct trade. A report in The Financial Times cites sources in the central bank of Brazil and aides to Luiz Inácio Lula da Silva, Brazil’s...
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