Brazil, China to ink deal on currency swap, another weakening of U.S. Dollar hegemony

by Lady Michelle-Jennifer Santos, Chief Visionary Founder & Owner

March 23, 2013 (TSR) - China’s Foreign Ministry spokesman Hong Lei said Friday that the People’s Bank of China (PBC) and Brazil’s Central Bank are expected to sign a currency swap accord soon.

The series of accords aims to expand reciprocal investments between the two countries. China is Brazil’s largest trading partner.

The final accord of setting up local currency swaps will allow each country to tap the other’s central bank for the equivalent of up to $30 billion in credits. The deal will work for the two countries like a credit line.

“The two banks have reached an agreement on the bilateral currency swap accord, which is worth about 190 billion yuan (60 billion Brazilian reals)”, according to Hong.

On the night of January 6, Brazilian Central Bank President Alexandre Tombini and People’s Bank of China Governor Zhou Xiaochuan met in Basel to set final details of the accord. Sources said details such as maturities and interest rates were being defined.

In June 2012, Brazil and China signed a preliminary agreement to set up local currency swaps as part of a wide-ranging bilateral trade deal between the two emerging-market powers. The deal was announced at the United Nations Conference on Sustainable Development, or Rio+20.

The foreign minister said that the establishment of a China-Brazil currency swap mechanism will enhance bilateral financial cooperation, facilitate trade and safeguard financial stability.

Hong made the remarks when asked to comment on remarks made on Thursday by Brazilian Trade and Industry Minister Fernando Pimentel.

Pimentel said Brazil hopes to sign a bilateral accord with China at next week’s BRICS summit to promote trade in their national currencies.

The fifth summit for the leaders of BRICS (Brazil, Russia, India, China and South Africa) countries is scheduled for March 26 and 27 in Durban, South Africa.