Brazilian President Luiz Inacio Lula da Silva has endorsed the idea of a BRICS-based currency to replace the U.S. dollar in foreign trade, Bloomberg reports.
His remarks came during a visit to the New Development Bank (NDB) in Shanghai, a financial institution established by BRICS nations: Brazil, Russia, India, China, and South Africa.
The visit precedes Lula’s scheduled bilateral meeting with Chinese President Xi Jinping.
Lula questioned the dollar’s preeminence in international trade, asking, “Why can’t an institution like the BRICS bank have a currency to finance trade relations between Brazil and China, between Brazil and all the other BRICS countries?”
He went on to challenge the historical basis for the dollar’s dominance, inquiring, “Who decided that the dollar was the (trade) currency after the end of gold parity?”
Brazil’s support for an alternative currency comes as China intensifies its efforts to expand the use of the yuan in global trade.
Last month, Brazil and China introduced measures to streamline foreign trade operations between the two countries by allowing transactions in either yuan or reais, Bloomberg notes.
Brazil’s Finance Minister Fernando Haddad accompanied Lula on his trip to China.
Haddad explained the objective of using local currencies in bilateral trade is “to expand mechanisms that allow trade operations to be settled without the intermediation of a third currency.”
The finance minister went on to elaborate on the advantages of this approach, stating, “The advantage is to avoid the straitjacket imposed by necessarily having trade operations settled in a currency of a country not involved in the transaction.”
This statement echoes Lula’s call for a new trade currency that could potentially shift global economic dynamics and challenge the long-standing dominance of the U.S. dollar.
