Brazil and Argentina eliminate commercial transaction in US dollars
updated 2:49 a.m. ET Oct. 3, 2008
BUENOS AIRES, Argentina - Argentine President Cristina Fernandez announced Thursday that Brazil and Argentina will no longer require bilateral trade to be in U.S. dollars, saying trade in their national currencies will increase regional integration and boost economic growth.
The change, which takes affect Monday, will eliminate bank fees associated with converting local currencies to dollars and boost profit margins for companies in South America's two largest economies, especially for small- and medium-sized businesses, she said.
Trade between the two countries is forecast to exceed $30 billion this year.
Fernandez and Brazilian President Luiz Inacio Lula da Silva signed the agreement in September to end decades of mandated trade in dollars.
It will be up to businesses to decide if they want to stop using U.S. currency.
While Fernandez said the measure offers "clear and concrete advantages," some exporters say the benefits are so marginal, it may not be worth it to bid the dollar goodbye.
"Very few exporters are going to choose the new system," said Elvio Baldinelli, vice president of the Argentine Exporters' Chamber.
In fact, companies may view trade in local currencies as more risky.
The dollar is still more stable than the real and peso, despite the U.S. being at the epicenter of the current global financial crisis, said Mariano Lamothe, chief economist for the Buenos Aires-based economic Web site abeceb.com.
Many Argentines save in dollars, still spooked by the effects of an economic meltdown of 2001 that saw the peso plummet to roughly a third its value.
While the new system may do more to strengthen political ties between Brazil and Argentina, it won't affect trade, Lamothe said.
"It's more of a political than a technical thing," he said.
BUENOS AIRES, Argentina - Argentine President Cristina Fernandez announced Thursday that Brazil and Argentina will no longer require bilateral trade to be in U.S. dollars, saying trade in their national currencies will increase regional integration and boost economic growth.
The change, which takes affect Monday, will eliminate bank fees associated with converting local currencies to dollars and boost profit margins for companies in South America's two largest economies, especially for small- and medium-sized businesses, she said.
Trade between the two countries is forecast to exceed $30 billion this year.
Fernandez and Brazilian President Luiz Inacio Lula da Silva signed the agreement in September to end decades of mandated trade in dollars.
It will be up to businesses to decide if they want to stop using U.S. currency.
While Fernandez said the measure offers "clear and concrete advantages," some exporters say the benefits are so marginal, it may not be worth it to bid the dollar goodbye.
"Very few exporters are going to choose the new system," said Elvio Baldinelli, vice president of the Argentine Exporters' Chamber.
In fact, companies may view trade in local currencies as more risky.
The dollar is still more stable than the real and peso, despite the U.S. being at the epicenter of the current global financial crisis, said Mariano Lamothe, chief economist for the Buenos Aires-based economic Web site abeceb.com.
Many Argentines save in dollars, still spooked by the effects of an economic meltdown of 2001 that saw the peso plummet to roughly a third its value.
While the new system may do more to strengthen political ties between Brazil and Argentina, it won't affect trade, Lamothe said.
"It's more of a political than a technical thing," he said.
