Lula Wants Brazilians and Chinese to Eliminate Dollar for Trade Between Them

Chinese yuan Brazil and China will start conducting business with each other in their own currencies instead of the dollar, a publication quoted Brazil's president Luiz Inácio Lula da Silva as saying ahead of his trip to Beijing.

In an interview published Friday in Caijing, a respected Chinese business magazine, Lula said it was important that the two countries "establish a trade that is paid for in our own currencies."

"We don't need dollars." Lula was quoted as saying in the transcript posted on Caijing's Web site. "It's crazy that the dollar is the reference and that you give a single country the power to print that currency."

The Brazilian president has been urging the end of the use of the US dollar in South American trade, saying it will reduce transaction costs for both exporters and importers, especially those operating on a smaller scale.

Brazil and Argentina have already agreed to trade with each other using their own currencies and negotiations for a similar accord with Uruguay are advancing.

In recent years, China and Brazil have been forging stronger ties. In February, Lula met with Chinese Vice President Xi Jinping during Xi's visit to Brasilia. Talks yielded an agreement in which Brazil would supply up to 100 million barrels of crude oil a day to China in exchange for a loan of up to 10 billion US dollars.

Lula's trip to China with the 35th anniversary of relations between the two countries. China's Foreign Ministry had commented on the meeting between Lula  and President Hu Jintao during Lula's May 18-20 trip:

"They will have an extensive and in-depth exchange of views on deepening bilateral strategic partnership, expanding pragmatic cooperation in various fields as well as regional and international issues of common interest," ministry spokesman Ma Zhaoxu said this week.

In the Caijing interview, Lula da Silva said talks with the Chinese would focus on renewable fuels, the prevention of global protectionism and the ongoing economic crisis. He added he hoped to sign agreements in banking, ports, infrastructure projects and the fight against transnational crime.

Lula was expected to sign a "voluminous" financing agreement for government managed Petrobras. said Energy Minister Edison Lobão.

Lobão did not detail the amount of the loan, but separate reports said that the agenda during Lula's visit includes discussion of a US$ 10 billion US dollars financing package agreed under a memorandum of understanding signed in February by Petrobras and the China Development Bank.

Petrobras Chief Executive Officer Jose Sergio Gabrielli, who was expected to accompany Lula on the journey to China earlier this month, told state media that the corporation would soon finalize the agreement with China to finance sub-salt oil development offshore Brazil.

Petrobras is open to having Chinese state-owned oil companies take equity stakes in oil exploration and production in Brazil as part of a package deal involving the 10 billion in financing, according to a report by Dow Jones Chinese Financial Wire.

Apparently Petrobras is in talks with four Chinese companies about possible equity stakes and also on the volumes of crude oil Brazil would supply as part of a credit-for-oil deal they hope will be ready by early next week, when Lula da Silva visits China.

As part of the Brazil-China outline agreement in February, Petrobras is to sell China Petrochemical Corp. (Sinopec), 60.000-100.000 barrels per day of heavy crude oil as part of the credit deal. Other four Chinese companies could also be involved in the operation, PetroChina Co.'s Chinaoil, Sinopec's Unipec, Sinochem Corp., and Zhuhai Zhenrong.



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