Brazil’s Lula, Argentina’s Fernández look to eschew US dollar as peso’s value crumbles

Argentine President Alberto Fernández arrived at Brazil’s presidential residence to meet his counterpart Luiz Inácio Lula da Silva as officials from both countries study how to eschew the dollar in trade between the neighboring nations.

Argentina’s economy is looking particularly fragile after a run on the peso in the financial markets caused a sharp devaluation of the local currency late last month as well as a drain of U.S. dollars from central bank reserves.

Lula intends to propose a line of credit to finance Brazilian companies that export to Argentina with the intention of avoiding use of the dollar, said the finance ministry’s executive secretary, Gabriel Galípolo.

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On Tuesday morning, Finance Minster Fernando Haddad told reporters the two governments are studying possible guarantees in order for Brazil’s government to provide such financing.

Brazil is Argentina’s largest trade partner and the deal could afford Argentina some breathing room at a time when it is suffering from a shortage of dollars, and also seeking means to maintain trade.

Argentina struck a deal with China that allows its companies to pay for Chinese imports with yuan. Lula, for his part, hailed an agreement between Brazil and China to use the yuan in their bilateral commerce while in Shanghai last month, while also taking swipes at the dominance of the dollar in international trade and at the International Monetary Fund.

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Argentina’s Economy Minister Sergio Massa has said his country is renegotiating aspects of its agreement signed with the IMF in 2022 to restructure some $44 billion in debt taken on by the center-right government of Fernández’s predecessor, Mauricio Macri.

The economy ministry didn’t immediately respond to an AP request for comment regarding planned agreements to ditch the dollar for bilateral trade.

Fernández’s visit to Brazil comes weeks after he announced he will not seek reelection in the election this October. He is joined in Brasilia by Massa and Argentina’s ambassador to Brazil, Daniel Scioli, both of whom are considered possible contenders for the presidency.

In addition to economic issues, Fernández and Lula are also likely to discuss the possibility of restarting the Union of South American Nations as part of a broader agenda of South American integration.