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Lula floats shared 'trading currency' during Argentina trip

Currencies Jan 23, 2023 05:38PM ET
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© 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 shared unit of value for bilateral trade to reduce reliance on the U.S. dollar, Brazilian President Luiz Inacio Lula da Silva said on Monday, though the move is not aimed at replacing existing currencies.

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

The discussions surfaced as part of an agreement to boost bilateral trade with more Brazilian export financing backed by Argentina's international collateral.

Argentina's economy is suffering from a series of challenges, including a lack of dollars, with the government battling to replenish foreign currency reserves while also grappling with an inflation rate of nearly 100% last year.

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

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

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

Brazil's development bank BNDES may finance the building 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 alongside 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 grains exporter, would have to provide collateral via hard assets like grains, gas or oil.

Under the plan, the Brazilian real and Argentine peso would continue to exist, with the new tender targeted narrowly at trade.

Brazil's Finance Minister Fernando Haddad said the presidents of both countries requested the creation of a clearing house with a common currency to settle accounts.

The currency has no name or deadline and would not seek euro-style monetary unification, he added.

Lula floats shared 'trading currency' during Argentina trip
 

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Comments (3)
Steve Bucher
Steve Bucher Jan 23, 2023 12:54PM ET
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It looks like Silva is trying to bankrupt the Brazilian currency also. I feel bad for the people of Brazil because if this happens then Brazil's inflation will increase dramatically. The US is not Brazil or Venezuela's problem, socialism is. There is no free ride.
Jean Cruz
Jean Cruz Jan 23, 2023 12:45PM ET
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In Brazil they are not leaders, they are criminals , beleive it or not all of Lulas ministers are convicted of corruption https://www.nytimes.com/2023/01/22/world/americas/brazil-alexandre-de-moraes.html?searchResultPosition=4&login=smartlock&auth=login-smartlock
Jurgen Daub
Jurgen Daub Jan 23, 2023 8:42AM ET
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With the new government Brasil's economy will detoriate in stages. first to level with Argentina and then drop further to Venezuela level. thereafter? who knows.
Connecticut Yankee
A_Jaundiced_Eye Jan 23, 2023 8:42AM ET
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Socialism is on the march throughout the world.  There is, however, an answer that will counter the lack of discipline socialism brings.  The answer is spelled G-O-L-D.
 
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