World Economy

Brazil, Uruguay Switch to Local Currency

Brazil, Uruguay Switch to Local CurrencyBrazil, Uruguay Switch to Local Currency

Brazil and Uruguay have switched from the dollar to local currencies in bilateral trade operations, in accordance with an agreement the two countries signed in November.

On November 2, Brazilian Central Bank President Alexandre Tombini and his Uruguayan counterpart Alberto Grana signed an agreement on the use of local currencies – the Brazilian Real and the Uruguayan Peso — in bilateral trade. The sides expressed hope that the move will help strengthen their economic ties.

“The agreement is a result of long negotiations between the Mercosur member states and [part of the] BRICS’ global strategies,” professor of International Relations Department of Federal University of Rio de Janeiro Carlos Francisco Teixeira da Silva told RIA Novosti.

According to da Silva, the move is the “best opportunity for the countries of South America to get rid of old mechanisms of economic regulation imposed by the United States.” The practice may be adopted in Paraguay, Bolivia and Venezuela, should it turn out to be successful.

Founded in 1991, Mercosur is a sub-regional economic bloc that includes Argentina, Brazil, Paraguay, Uruguay and Venezuela. Its associate countries are Bolivia, Chile, Colombia, Ecuador and Peru. Mercosur is aimed at facilitating free trade and the free movement of goods, people and currency in the region.

On November 16, Russian President Vladimir Putin said the country plans to leave the “dollar dictatorship” of the market, increasing the use of the ruble and the Chinese yuan in trade operations.

 Brazil Deficit

Brazil on Dec. 1 posted a $2.35 billion trade deficit in November, the country’s worst monthly result in 20 years, and cementing its slide into the red for the year after a decade of surpluses.

The deficit for the year to date stands at $4.2 billion, the worst showing since 1998, the ministry of trade said, and November’s monthly deficit was 15 times worse than last year’s.

The country typically posts a surplus in December, but it is unlikely to be enough to bring the ledger back into black, the ministry said. The last year Brazil posted an end-of-year deficit was in 2000.

Total imports in November were just under $18 billion, outstripping exports of $15.6 billion, the ministry said. Export figures took a hit from dropping prices in raw materials and the economic crisis in neighboring Argentina, a major purchaser of Brazilian products.