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Page added on March 28, 2013

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China And Brazil Ditch US Dollar In Trade Deal


China and Brazil agreed to trade in each other’s currencies just hours ahead of the BRICS summit in South Africa.

The deal, which extends over a three-year period and amounts to an exchange of about $30 billion in trade per year, marks the latest effort among two of the world’s largest emerging economies to shift the dynamics of international trade that have long favored the U.S. dollar.

“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,” Brazilian Central Bank Governor Alexandre Tombini said, Reuters reported.

By shifting some trade away from the U.S. dollar, the world’s primary reserve currency, the two countries aim to buffer their commercial ties against another financial crisis like the one that resulted from the collapse of the U.S. housing market bubble in 2008.

“Trade ties between China and Brazil are of great importance to the two countries’ economies amid global woes and the member states’ economic stability is vital for the BRICS mechanism,” said Zhou Zhiwei, a researcher with the Chinese Academy of Social Sciences, Xinhua reported.

Trade between China and Brazil has exploded in recent years from $6.68 billion in 2003 to over $75 billion in 2012, and in 2009, China replaced the U.S. as Brazil’s main trading partner.

The trade deal comes before a summit of the BRICS nations (Brazil, Russia, India, China and South Africa) in Durban, where the group of five is expected to discuss the establishment of an international development bank.

“BRICS Development Bank will make the global financial sector more democratic,” said Brazil’s Minister for Development, Industry and Foreign Trade Fernando Pimentel, according to Xinhua.

China and has touted the proposed bank as an alternative to international financial institutions like the World Bank, which funds infrastructure and development projects in emerging economies around the world.

With a combined GDP of over $14 trillion, the BRICS is looking to expand its economic influence throughout African countries in particular.

“We are creating new axis of global development,” Anand Sharma, India’s Minister of Commerce, Industry and Textiles, Xinhua reported. “The global economic order created several decades ago is now undergoing change and we believe for the better to make it more representative.”

International Business Tribune

4 Comments on "China And Brazil Ditch US Dollar In Trade Deal"

  1. Arthur on Thu, 28th Mar 2013 1:30 pm 

    If this trend continues, at some point the US will become a normal country, currency-wise. The trouble though is that when nobody accepts the dollar anymore, then all the dollars of the world will unite in the only place where it cannot be refused as legal tender: the US itself, leading to hyperinflation.

    We are not there yet, not in a long shot.

  2. LT on Thu, 28th Mar 2013 2:48 pm 

    If this is true, China is crossing the rubicon.

  3. BillT on Thu, 28th Mar 2013 3:51 pm 

    The days of the petro dollar are numbered. The Empire may have been able to stop Saddam and Gadaffi from creating new currency trading, but they are now up against real foes like Iran, China, Russia, etc. It’s only a matter of time until…

  4. GregT on Thu, 28th Mar 2013 6:01 pm 

    Not so easy to impose sanctions on China or Brazil, is it?

    It is now a confidence game, as long as the Fed can keep pumping up the Dow, the game will continue on for a bit longer.

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