Lula floats shared ‘trading currency’ during Argentina trip By Reuters


© Reuters. FILE PHOTO: Brazil’s new Economy Minister Fernando Haddad is seen at the Planalto Palace in Brasilia, Brazil, January 5, 2023. REUTERS/Adriano Machado/File Photo

By Lisandra Paraguassu

BUENOS AIRES (Reuters) – Brazil and Argentina are in early talks to establish a common unit of value for bilateral trade to reduce dependence on the U.S. dollar, Brazilian President Luiz Inacio Lula da Silva said on Monday, although the move is not intended to replace. existing currencies.

In Buenos Aires during his first international visit since taking office, Lula made the comments alongside Argentine President Alberto Fernandez, a leftist ally, who said little was decided about what would be involved in such a proposal.

The discussions emerged as part of an agreement to boost bilateral trade with more Brazilian export financing backed by Argentina’s international guarantee.

Argentina’s economy is suffering a series of challenges, including a shortage of dollars, and the government is fighting to replenish foreign currency reserves while also struggling with inflation of nearly 100% last year.

Leaders of both countries are meeting at a regional summit in the Argentine capital, where Lula has promised to resume a closer relationship after former Brazilian President Jair Bolsonaro distanced himself from Argentina.

“Our finance ministers, each with their own economic team, can make us a proposal for foreign trade and transactions between the two countries, which is done in a common currency,” Lula told reporters alongside Fernandez.

Fernandez said he and Lula also discussed the possibility of shipping gas from the Vaca Muerta shale formation to its neighbor.

The Brazilian development bank BNDES can finance the construction of a pipeline to deliver the gas, Lula said.

Brazil’s Finance Executive Secretary, Gabriel Galipolo, told Reuters that the currency or “regional unit of account” would come along with extra credit to support exports to Argentina through Brazilian banks that operate locally.

Brazil’s government would offer guarantees to banks that helped provide financing, while Argentina, a major grain exporter, would have to provide collateral with hard assets such as grains, gas or oil.

Under the plan, the Brazilian real and Argentine peso would continue to exist, with the new offering aimed narrowly at business.

Brazil’s finance minister Fernando Haddad said the presidents of both countries had requested the creation of a clearing house with a common currency to settle accounts.

The currency has no name or expiration date and would not seek a Euro-style monetary union, he added.



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