The Chinese currency, referred to as the yuan, surpassed the euro and became the second most important currency of Brazil’s foreign reserves in 2022, according to a report published this Friday by the Central Bank of the South American country.
Until 2019, the yuan was virtually absent from Brazil’s foreign exchange reserves. However, by the end of 2022, the Chinese currency came to represent 5.37% of the holdings of the Brazilian Central Bank, surpassing the 4.74% share of the euro. In 2021 the share of the yuan constituted 4.99% and that of the euro 5.04%.
Meanwhile, the US dollar continues to dominate, holding 80.42% of total foreign exchange reserves in Brazil’s Central Bank, which is currently being questioned by President Luiz Inácio Lula da Silva.
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Earlier this week, the Brazilian Export and Investment Promotion Agency (Apex) announced that China and Brazil have taken another step to advance trade and investment negotiations between the two countries, which will be carried out directly in their national currencies. Two initial agreements were signed this Wednesday in Beijing, during the Brazil-China Business Forum.
The first agreement establishes that the Brazilian bank, BBM, controlled by the Chinese Bank of Communications (BOCOM), will join the China Interbank Payment System (CIPS), an alternative to the international Swift system in the Asian country.
“The expectation is to reduce the costs of commercial transactions with the direct exchange between the Brazilian real and the Chinese yuan. The bank will be the first direct participant of this system in South America,” read a statement issued by the agency.
Analysts point out that the conflict in Ukraine and sanctions against Russia have fueled the rise of de-dollarization, a process in which currencies such as the yuan play an important role, in order to avoid the risks posed by the US currency.
According to Ju Jiandong, head professor at the School of Finance at Tsinghua University in Beijing, he believes that turning the yuan into an international currency is “a necessary condition for maintaining peace in the world.”
Translation: Orinoco Tribune
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