China, Brazil agree currency swap deal
Source: Agencies |
March 27, 2013, Wednesday
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Print Edition
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BRICS members China and Brazil yesterday agreed a deal allowing them to trade the equivalent of up to US$30 billion per year in their own currencies, moving to take almost half of their trade exchanges out of the US dollar zone.
The agreement, due to last three years and signed hours before the start of a BRICS summit in Durban, South Africa, marked a step by the two largest economies in the emerging powers group to make real changes to global trade flows long dominated by the United States and Europe.
"Our interest is not to establish new relations with China, but to expand relations to be used in the case of turbulence in financial markets," Alexandre Tombini, Brazil's central bank governor, told reporters.
Its economy minister, Guido Mantega, described the deal, called a bilateral currency swap accord, as "a sort of umbrella agreement" but he did not spell out what specific areas or categories of bilateral trade would be affected. He said Brazil hoped to promote such arrangements with other countries.
Trade between China and Brazil totalled around US$75 billion last year. Brazilian officials have said they hope to have the trade and currency deal operating in the second half of 2013.
Nearly half of Brazil's exports to China consist of iron ore and related products, while soy and soy products make up about a fifth. China's biggest exports to Brazil are electronics and machinery.
Mantega said the trade and currency agreement would act as a buffer against turbulence in international financial markets dominated by the US dollar.
"If there were shocks to the global financial market, with credit running short, we'd have credit from our biggest international partner, so there would be no interruption of trade," he added.
Tombini said the currency swap agreement would not affect Brazil's international reserves, as neither the Brazilian real nor the Chinese yuan were used for such reserves.
"This contract has a three-year life and can be renewed," he added.
The People's Bank of China announced the bilateral currency swap agreement on its website.
As the euro crisis continues and the West shows little signs of growth, the World Bank says global economic growth is increasingly dependent on the BRICS countries, which account for 27 percent of global purchasing power and 45 percent of the world's workforce.
At the summit in Durban, the fifth held by the group since 2009, Brazil, Russia, India, China and South Africa are widely expected to endorse plans to create a joint foreign exchange reserves pool and an infrastructure bank. They are also due to discuss trade and investment with Africa.
The agreement, due to last three years and signed hours before the start of a BRICS summit in Durban, South Africa, marked a step by the two largest economies in the emerging powers group to make real changes to global trade flows long dominated by the United States and Europe.
"Our interest is not to establish new relations with China, but to expand relations to be used in the case of turbulence in financial markets," Alexandre Tombini, Brazil's central bank governor, told reporters.
Its economy minister, Guido Mantega, described the deal, called a bilateral currency swap accord, as "a sort of umbrella agreement" but he did not spell out what specific areas or categories of bilateral trade would be affected. He said Brazil hoped to promote such arrangements with other countries.
Trade between China and Brazil totalled around US$75 billion last year. Brazilian officials have said they hope to have the trade and currency deal operating in the second half of 2013.
Nearly half of Brazil's exports to China consist of iron ore and related products, while soy and soy products make up about a fifth. China's biggest exports to Brazil are electronics and machinery.
Mantega said the trade and currency agreement would act as a buffer against turbulence in international financial markets dominated by the US dollar.
"If there were shocks to the global financial market, with credit running short, we'd have credit from our biggest international partner, so there would be no interruption of trade," he added.
Tombini said the currency swap agreement would not affect Brazil's international reserves, as neither the Brazilian real nor the Chinese yuan were used for such reserves.
"This contract has a three-year life and can be renewed," he added.
The People's Bank of China announced the bilateral currency swap agreement on its website.
As the euro crisis continues and the West shows little signs of growth, the World Bank says global economic growth is increasingly dependent on the BRICS countries, which account for 27 percent of global purchasing power and 45 percent of the world's workforce.
At the summit in Durban, the fifth held by the group since 2009, Brazil, Russia, India, China and South Africa are widely expected to endorse plans to create a joint foreign exchange reserves pool and an infrastructure bank. They are also due to discuss trade and investment with Africa.
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