Lula proposes reducing use of dollars in China trade

Brazil is planning to use mechanisms that reduce the use of the US dollar for trade with China.

"Why can't we do our trade using our currency? Who decided it was the US dollar? We need to have a currency that transforms countries into a slightly more peaceful situation, because currently a country needs to run after the dollar to export," President Luiz Inácio Lula da Silva said in a speech during the inauguration ceremony of Dilma Rousseff as head of the New Development Bank (NDB).

Lula is in China to strengthen cooperation and boost Brazil’s international clout. China became Brazil’s main trade partner in 2009, replacing the US. In 2022, China imported Brazilian products worth US$89.7bn, especially soybeans and iron ore, while it exported almost US$60.7bn to the country.

Lula’s announcement led to some skepticism, however.

“Trade with local currency would be much more favorable for China than for Brazil, because China intends to make its currency globally convertible. For Brazil, we already export various commodities to China and to other countries as well, using the US dollar. If we establish mechanisms to use Chinese currency, maybe we will be too dependent on China,” José Augusto de Castro, president of the foreign trade association AEB told BNamericas.

Lula also proposed to use a single currency within the BRICS group, comprising Brazil, Russia, India, China and South Africa, for trade. And during a recent visit to Argentina, he proposed to use a single currency for trade among Mercosur countries (Argentina, Brazil, Uruguay and Paraguay).

"The idea of using local currencies in trade with other countries is not new. There are mechanisms to trade products between Brazil and Argentina using local currencies, but in practice this is scarcely used, with companies preferring to use the US dollar," said De Castro.