Argentina’s Economic Minister Sergio Massa has traveled to Brazil to talk with the country’s extreme leftist President Luiz Inácio Lula da Silva about the details of a deal that would let Argentina facilitate the payment of Brazilian imports with Chinese yuan rather than U.S. dollars, according to the state-run Télam news agency.
Over the course of the year, both Argentina’s and Brazil’s communist governments have worked hard to break away from the U.S. currency and replace the currency with the Chinese yuan in their trade with China.
Argentina’s communist President Alberto Fernández is leaving office, and the country’s economy is in bad shape. Its U.S. dollar foreign savings are almost gone. In April, the country made a deal with the Chinese Communist Party to cease using dollars to buy things from China and begin to use the yuan in its place. As of June, Argentina also started paying its more than $40 billion loan to the International Monetary Fund (IMF) in yuan instead of dollars.
In March, Brazil made a similar deal with China to stop using the U.S. dollar in trade and start using the yuan instead.
Télam says that Massa, who is also a contender for president of the leftist government of Argentina in the forthcoming elections in October, will talk with Lula about the terms of the deal this week. Before he meets with Lula, Massa is also said to be going to meet Brazil’s Financial Affairs Minister, Fernando Haddad.
If signed, Argentina will have access to yuan acquired via a currency exchange line it established with China in order to pay for imports coming from Brazil. The swap was first set up in November. In June, it was extended for another three years and increased from $5 billion to $10 billion. The Brazilian Finance Minister, Haddad, said that the yuan will be directly changed into reals by Banco do Brasil, which is owned by the state and will cost up to $140 million.
Haddad stated last week, “Brazilian exporters can be sure that some of their products will be sold. There isn’t a problem for Brazil since the exchange rate will be based on the yuan for each Brazilian real. This gives the National Treasury peace of mind that there’s no chance of default.”
Even though China and the US are Brazil’s two biggest business partners, Argentina is the country that buys the most manufactured goods from Brazil. In 2022, 4.6 percent of Brazil’s total exports went to Argentina.