Source: RT – China and Brazil sign $30bn currency swap deal
A $30 billion currency swap deal between Brazil and China is expected to smooth trade between the two countries despite changing global financial conditions and future crises.
The agreement was signed on the sidelines of the BRICS summit in South Africa. Plans for the currency swap were first announced last year at the Rio+20 environmental summit. The idea is that the central banks of the two trading partners are to swap local currency worth up to 190 billion yuan or 60 billion reais ($30 billion) in case turmoil hits the global financial system.
“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,” said Guido Mantega, Brazil’s Economy Minister as quoted by BBC.
Over the past few years trade between China and Brazil has boosted significantly reaching $75 billion in 2012. China, the world’s second-largest economy, demonstrated stronger interest in Brazil’s supplies of soya, iron ore and other exports, while Brazil has become China’s key market for manufactured goods.
“We will have $30 billion available which would represent eight months of exports from Brazil to China and 10 months of imports to Brazil from China,” the president of Brazil’s central bank Alexandre Tombini said at a news conference at the BRICS summit. “This is sufficiently large to guarantee normal trade operations,” he explained.
This move is believed to contribute to China’s effort to make the yuan a more international currency and even an alternative to the US dollar as a global reserve currency. China has already signed a number of similar currency swap deals with such countries as Australia and Argentina. It is also reported to be seeking agreements with the UK, Hong Kong, and Japan.