Brazil and Argentina Sign Agreement to Eliminate US Dollar

Argentina and Brazil signed in BrasÀ­lia a protocol for a bilateral trade payments system in local currencies which gradually eliminates the US dollar helping to reduce goods and services transactions costs.

"It’s a great step towards a more solid economic block because it facilitates bilateral transactions and allows smaller exporters to join the growing foreign trade," said Brazil’s Finance minister Guido Mantega on making the joint announcement next to his Argentine counterparts.

According to Argentine Central Bank estimates abandoning the US dollar could mean savings of up to 2.5% in exchange rates and spreads.

Furthermore 78% of all export-import transactions are below the US$ 60,000 mark, which should mean an additional incentive for "this level of operations".

The idea is to be test piloted for several months in specific areas and if it proves successful, in a near future the idea is to make it extensive to the other three full members of Mercosur, Uruguay, Paraguay and Venezuela.

"The goal is to create a trade system which can make possible transactions in Mercosur country members’ currencies", said Brazil’s Central Bank president Henrique Meirelles.

The long awaited announcement is a proposal that has been in the air for years but was finally tackled by the governments of Presidents Luiz Inácio Lula da Silva and Nestor Kirchner.

Present at the ceremony were Argentina’s Economy minister Felisa Miceli and the presidents from the two Central Banks, Argentina’s Martí­n Redrado and Brazil’s Henrique Meirelles.

The four officials next to their counterparts from Paraguay, Uruguay and Venezuela and representatives from Bolivia and Ecuador met in Brasí­lia as part of the preparations for the Mercosur presidential summit scheduled for next January 18/19 in Rio do Janeiro.

And to please Mercosur junior members that are increasingly complaining about the group becoming a "club of two", a fund to promote infrastructure integration projects was also officially launched.

Focem created in 2005 with US$ 100 million is targeted "to promote social cohesion and support institutional strengthening, particularly of the lesser economies".

"Focem will help Mercosur to be seen also as a space where the economic problems of our peoples are solved," said Argentina’s Miceli, who revealed that several interesting projects, particularly from Paraguay, "are in the pipeline".

The fund is expected to begin operating next year and will among other projects finance a foot and mouth disease eradication program for Mercosur full and associate members.

"Focem is a step forward to help the people of Mercosur feel better integrated to Mercosur", said Bergen Schmidt from the Brazilian delegation.

Ministers and Central Banks officials also reviewed data from the Macroeconomic Monitoring Group whose objective is to help harmonize macroeconomic statistics of the group’s members.

"Our long range model is the European Union which managed an only currency and an only Central Bank, but we still have a long way to go", said Brazil’s Mantega.

Mercopress – www.mercopress.com

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