No More Dollar. Brazil and China to Trade in Real and Yuan from Now On

Brazilian Lula and Chinese Hu Jintao In order to promote trade, investments and cooperation Brazil and China signed Tuesday, May 19, in Beijing, 13 agreements. Moreover, Brazilian state-controlled oil and gas multinational Petrobras got itself a US$ 10 billion Chinese loan. Both countries also agreed that bilateral trade in the near future is to be done using the real and the yuan.

The accords were signed in the framework of Brazilian president Luiz Inácio Lula da Silva official three-day visit to China where he arrived with several ministers and a delegation of 240 businessmen with the purpose of consolidating the "strategic partnership" with Beijing.

Under the terms of the agreement China, the world's second-biggest energy consumer, will provide the loan to Petrobras, which will supply 150.000 barrels of crude a day this year and 200,000 barrels in 2010, said Petrobras CEO José Sérgio Gabrielli.

"This visit will create new opportunities for the development of bilateral relations between China and Brazil" said Chinese President Hu Jintao at the Great Hall of the People where the two nations signed 13 accords.

Petrobras needs to find alternative sources of financing after crude prices plunged about 60% from a record 147.27 USD a barrel last year. Petrobras plans to spend 174.4 billion USD to explore its so-called pre-salt fields over a five-year period.

Petrobras announced in November 2007 the discovery of the Tupi offshore field, which may hold up to 8 billion barrels of oil, making it the largest find in the Americas since Mexico's Cantarell. The corporation plans to pump 1.8 million barrels of oil a day from the fields by 2020, Gabrielli has said.

The Brazilian delegation is seeking to attract investment and open China's markets to Brazilian exports beyond oil, soy and iron to help overcome the country's sharpest economic contraction on record. China is securing energy resources to power its economy the world's third-largest, by offering loans to oil-producing countries including Russia, Venezuela and Kazakhstan.

"The systemic challenges facing the world economy underscores the growing responsibilities of emerging economies" President Lula da Silva wrote in an article published in the state-owned China Daily.

China became Brazil's leading trade partner this year after the global recession choked sales to the US. Brazil's economy, Latin America's largest, may contract by the most in 19 years as the global recession prompts domestic manufacturers to scale back output.

The two countries are also working to coordinate financial policy matters and research ways to conduct trade in their respective local currencies, the Yuan and Real, said Brazil's Foreign Minister Celso Amorim.

The discussions are the latest signal that developing nations are seeking to reduce their reliance on a weakening US dollar. Talks have been focused on improving financial service systems, Amorim said.

Brazil and China must build a "more just and fair international order," the Brazilian president wrote in a commentary published in the official China Daily on Tuesday. Brazil and China have a "shared responsibility to help bring about the fundamental reforms in global governance that the world so urgently needs," he wrote without mentioning the currency issue.

China PetroChemical Corp., the nation's largest refiner, will also explore for oil in two areas in Brazil, Zhang Goubao said the head of the National Energy Administration.

Mercopress

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