Brazil announces direct local currency settlement with China

Brazil Announces Direct Local Currency Settlement with China
According to Fox Business on the evening of March 29th, Brazil has reached an agreement with China to no longer use the US dollar as the intermediate currency and instead trade in its own currency.
The report states that this agreement allows China and Brazil to directly engage in large-scale trade and financial transactions, exchanging the Chinese yuan for the real and vice versa, rather than through the US dollar.
It is expected to reduce costs while promoting greater bilateral trade and facilitating investment, “said Brazil’s Trade and Investment Promotion Agency (ApexBrasil).
China is Brazil’s largest trading partner, accounting for over one-fifth of Brazil’s total imports, followed by the United States. China is also Brazil’s largest export market, accounting for over one-third of Brazil’s total exports.
On the 30th, former Minister of Trade of Brazil and former President of the World Association of Investment Promotion Agencies, Teixeira, stated that this agreement is conducive to business transactions between the two countries, especially bringing great convenience to small and medium-sized enterprises in both countries. Due to their limited scale, some small and medium-sized enterprises do not even have international bank accounts (which means it is not convenient for them to exchange US dollars), but these enterprises need international supply chains and international markets.Therefore, using local currency settlement between Brazil and China is an important step.
Mao Ning, spokesman of the Ministry of Foreign Affairs of China, said at a regular press conference on the 30th that China and Brazil signed a memorandum of cooperation on the establishment of RMB clearing arrangements in Brazil at the beginning of this year.This is beneficial for enterprises and financial institutions in China and Brazil to use RMB for cross-border transactions, promote bilateral trade and investment facilitation.
According to the Beijing Daily client, Zhou Mi, Deputy Director of the Institute of America and Oceania at the Research Institute of the Ministry of Commerce, stated that local currency settlement is beneficial for reducing the impact of financial fluctuations, providing a stable trade environment and market expectations for both parties, and also indicating that the overseas influence of the RMB is increasing.
Zhou Mi stated that a large portion of China Brazil’s trade is in commodities, and pricing in US dollars has formed a historical trading model. This trading model is an uncontrollable external factor for both parties. Especially in the recent period, the US dollar has been continuously appreciating, causing a relatively negative impact on Brazil’s export revenue. In addition, many trade transactions are not settled in the current period, and based on expectations for the future, it may lead to a further decrease in future earnings.
In addition, Zhou Mi emphasized that local currency transactions are gradually becoming a trend, and more countries are considering not relying solely on the US dollar in international trade, but increasing opportunities to choose other currencies based on their own needs and development. At the same time, it also indicates to some extent that the overseas influence and acceptance of the RMB are increasing.