Argentina’s Sergio Massa travels to Brazil to discuss import payments using Chinese yuan. The Minister of Economy and presidential candidate for the Union for the Homeland (UP) is set to discuss an agreement enabling payments for imports using yuan from the swap deal with China.
A couple of days ago, Finance Minister Fernando Haddad announced that Brazil has approached Argentina with a proposal to settle Brazilian exports in the Chinese currency.
The discussions will involve Brazilian President Luiz Inácio Lula da Silva, Fernando Haddad, and Foreign Minister Mauro Vieira.
The proposed mechanism offers dual benefits: maintaining the inflow of crucial Brazilian supplies and optimizing the Central Bank’s dollar resources.
Massa alluded to finalizing this agreement after announcing a US$7.5 billion disbursement from the International Monetary Fund (IMF).
The mechanism entails directly converting yuan to real by the state-owned Banco do Brasil, up to US$140 million, ensuring the National Treasury faces no default risk.
Haddad confirmed this during a BRICS summit conference.
This agreement is vital as Argentina, a significant buyer of Brazil’s industrial exports, maintained its trade flow with China through the swap agreement.
The agreement will be formalized as Argentina joins the BRICS economic group of Brazil, Russia, India, China, and South Africa.
This inclusion is crucial as BRICS represents a substantial portion of global GDP, exports, and imports.
Presidents Alberto Fernández and Lula da Silva discussed financing Brazilian exports in May. However, Brazil sought more guarantees due to Argentina’s dollar shortage.
The influential Federation of Industries of the State of São Paulo urged the government to find mechanisms to avoid market losses due to the current foreign currency shortage to compensate for external sales.
Argentina managed to maintain its trade flow with China through the swap agreement, which Brazil seeks for its main industrial exports to Argentina.
Formalizing the agreement as Argentina joins BRICS is a significant step in strengthening economic ties and optimizing resources amidst global economic challenges.