With tight dollar reserves and low collection rates due to a drought, the South American nation has activated a FX swap for a bilateral exchange. Author: Horsefly Economist
BUENOS AIRES, 27 April. — De-dollarization continues against the background of the global economic and financial crisis, which also marks the fall of the dollar.
Argentina joined the decision, signed in Beijing by Brazilian President Luiz Inacio Lula da Silva, on the use of the respective national currencies in bilateral trade transactions.
That country’s economy minister, Sergio Massa, announced on Wednesday a similar agreement with China that would allow him to pay for imports to that country in yuan.
Faced with a shortage of dollar reserves and low collection rates due to drought, the South American country has activated change coins for bilateral exchange, published in the newspaper Página 12.
Argentina will pay the equivalent of $1.040 million in April and $790 million in Chinese currency for imports, the official said.
According to Massa, after an agreement with various companies, the government has reprogrammed the payment instrument for these imports from China, which “ceases pressure on the outflow” of dollars and “becomes part of the outflow of yuan.” The agreement was signed at the Hacienda Palace in Buenos Aires in the presence of the Chinese ambassador to Argentina, Zou Xiaoli, as well as bankers and businessmen from the Asian giant.
“This improves the prospect of net reserves for Argentina,” the minister also said, referring to the maneuvering room this measure gives the country in the face of an escalation in the so-called parallel dollar.
Going deeper, Página 12 recalled that Argentina and Brazil, partners in the Common Market of South America (MERCOSUR), are also talking these days about the possibility of creating a common currency with the aim of “facilitating trade and integration into the world without losing ‘their’ sovereignty and economic freedom.
De-dollarization, he noted, was also initiated by Bolivia after Evo Morales came to power in 2006, with the help of which this country got rid of the prerogatives of various international credit organizations.
This remark holds true for Argentina, a country that was refinanced by former President Mauricio Macri in the largest loan ever made by the International Monetary Fund, and whose economic development depends on a rescheduling of payments with the IMF, which puts it on schedule, and not everyone applauded in country. A severe drought has now been added to its devastating effects.
Source: Juventud Rebelde