BEIJING, May 19 – Brazil\’s president kicked off a day of meetings with Chinese leaders in Beijing Tuesday, during which analysts said he could broach a plan to ditch the US dollar in his nation\’s trade with China.
Luiz Inacio Lula da Silva was due to meet with his Chinese counterpart Hu Jintao and other leaders for talks focused on boosting business with China and promoting closer cooperation to fight the global financial crisis.
But all eyes were on whether China and Brazil would come to an agreement on ditching the US dollar in their bilateral trade and replacing it with their own currencies — the yuan and the real.
"It\’s absurd if two important trading nations such as ours continue to carry out our commerce in the currency of a third nation," Lula said in an interview published in the most recent issue of China\’s Caijing magazine.
Lula first discussed the idea with Hu at the April G20 summit in London and said he would raise the issue on his visit to China, in what would be another challenge to the US dollar\’s special status as the leading global currency.
Already in March, China\’s central bank governor Zhou Xiaochuan made waves when he suggested dumping the dollar as the global reserve currency and replacing it with a different standard run by the International Monetary Fund.
"Everybody has realised… that the currency and debt crises in many countries and the global economic crisis are linked to the dollar standard," said Zuo Xiaolei, a Beijing-based economist with Galaxy Securities.
Zhou and his Brazilian counterpart were due to meet soon to discuss the matter, the Financial Times reported Tuesday, citing an official at Brazil\’s central bank.
Andy Xie, an independent economist, said an initial agreement to conduct some trade in yuan and real could materialise after Lula\’s talks with Chinese leaders Tuesday.
Zuo was more cautious on the timing of an agreement, but said the plan was feasible.
"It\’s unlikely for them to change the global currency system overnight, so what they are trying to do now is something regional and defensive," she said.
China — an energy-hungry nation that is hugely interested in Brazil\’s natural resources — in March became the Latin American nation\’s biggest trading partner, ahead of the United States.
Brazilian exports to China — mainly iron ore and soya products — so far this year have grown 65 percent over the same period in 2008, a jump from 3.4 billion dollars to 5.6 billion dollars.
Lula, who in in China between visits to Saudi Arabia and Turkey, was also expected to stress political cooperation in an era that has seen a rise in the role of key emerging nations in fighting the global financial crisis.
He said in a comment piece in the official China Daily Tuesday that strengthening diplomatic and economic alliances with other key developing countries was a pillar of Brazil\’s foreign policy.
"The systemic challenges facing the world economy underscore the growing responsibilities of emerging economies," he wrote.
"Concerted efforts and dialogue will be required among developing countries for their voice to be increasingly heard on the global stage."
Xie said Lula was a keen proponent of an increased role for the BRIC countries — the key emerging nations of Brazil, Russia, India and China — on the international stage.
"The economic collapse has hit Brazil pretty hard, and there is a general sense of anger I\’ve noticed with him (Lula), indicating this is the fault of the developed rich countries," he said.