Brazil - Brazzil Mag - In Brazil-Argentina Trade It's Goodbye Dollar, Hello Peso and Real

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Trade transactions between Brazil and Argentina may be made in Brazilian reais or Argentinean pesos, eliminating the need for use of the dollar, starting next month. The measure was announced this Monday, September 8, in Brazilian capital Brasília by the minister of Finance of Brazil, Guido Mantega.

The agreement between the Central Banks of Brazil and Argentina for use of local currencies in trade transactions should be enacted on October 6, in a test phase. The accord was signed by Brazilian president Luiz Inácio Lula da Silva and his counterpart from Argentina, president Cristina Kirchner.

According to the minister, transactions in local currencies should make it possible for smaller companies to participate in bilateral trade.

"This agreement is going to add value to the local currencies, as, up to now, it was necessary to use an intermediary currency (the dollar); this is no longer necessary. In the long run, this is heading towards the establishment of a single currency in the Mercosur. It is a first step," he explained.

Mantega believes that the agreement may be extended to the other countries in the bloc: Uruguay, Paraguay and Venezuela, as soon as Venezuelan are also admitted to the Mercosur. "Once this first step is taken, it will be possible to do the same with other countries," he said.

According to the minister of Finance, trade between Brazil and Argentina has a turnover of US$ 25 billion, and the neighboring country is the third main trade partner of Brazil, behind the United States and China.

Somewhat Funnyyyyyy !!!!
written by CH.C.., September 09, 2008

You said exactly the same around TWO years ago !!!!!!!

Thus the "trade transactions should be enacted on October 6, in a test phase." is more than laughable !

In the meantime goobye Argentina...again only a few years away from a NEW bankruprtcy !
No for the bankruptcy ? Hmmmmm !
http://bloomberg.com/apps/news?pid=20601086&sid=amDnedeh7TUY&refer=latin_america
Guess what happened the day following this article :
Fernandez the Bimbo suddenly agreed to use Argentina foreign currency reserves to pay back debts to the Paris Club.
Enough for a Non bankruptcy ? Of course not. It may be simply delayed somewhat !
Cheaters always cheat until they corner themselves.
And guess the name of the country with the most historical national bankruptcies : Argentina !!!!!!!
Hmmmmm !
No one is predicting the timing of this event, but the event will become reality sooner or later.

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furthermore........
written by CH.C.., September 09, 2008

cheaters cheat so much that they manipulate their inflation rate by understating it for several years.
Argentina has an official inflation of around 8 % but a real inflation above 20 % !

And what about your cousin Venezelua ? Well their targeted inflation rate is 19,5 % (no typing error) and they CANT be on target.
Yesss they exceed by a very very wide margin their already high target of 19,5 % !

Populism is fine. It increases wages by 20-30-40 per year....ending up with currencies that plummet more than their interests rate, regardless of how high their interestes rates are.
Cancers cant be cured with aspirins !

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Bad idea.
written by George, September 09, 2008

Exactly CH. C... This is just like two years ago. Inflation rate is going up right now faster than it was a year ago. This is not going to be a good sign for the Brazillian Reais. The Dollar is actually starting to flatten out. Hopefully soon there will be a change in the outcome of the dollar.

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Yesssss George but.......
written by CH.C.., September 09, 2008

from its April-July peaks, commodities are way down.
Therefore still up year over year, but going less and less up on a year over year. The break point for the year over year will be in a few months. If commodities dont go up again by then, the year over year will turn NEGATIVE !

On the Brazilian Reais I am not that much negative. It is falling against the US$ but so do all currencies from developed or emerging nations. Meaning the Reais remains strong when measured against the other currencies than the US$.

But but but........the Brazilian Real is artificially strong simply because Brazil has the World Second Highest Interests Rates...after inflation.
Seems good on paper, for idiots. Except that it penalize their own companies, and even individuals with their consumers borrowings rates which are further multiplied from the already high government rates.
Thus instead of increasing their SELIC rates, it would suffice to increase to Banks capital ratios to have less loans to consumers.
That would have a much higher effect than increasing the SELIC rate.
But the idiot Mantega already said they wont reduce the consumers loans, meaning they wont increase the existing capital ratios of banks.
The risk to all this is the snowball effect. Just like in the past in South America, borrowers will continue to borrow regardless of the rates they are charged. And when they can no longer afford....BINGO.....they go bankrupt ! And the problem in Brazil is the bankruptcy proceedings that takes years and years.
Exactly the same by the way for companies, states and the Government borrowings.
In 1995 most Brazilians states did not pay their wages for months and months. Including the wealthiest state : Sao Paulo Technically BANKRUPT ! So that the Federal Government had to take over all the debts of all the Brazilians states.
Somewhat funny, in appearance, that it came right after the currency peg to the US$ in 1994.
But totally normal. Most of these states had made borrowings in US$ the preceeding years- when the Reais was devalued between 1992 and 1994 due to the Brazilian inflation, they in fact owed a LOT MORE Reais !!!!!!!! smiles. And after the peg they still owed FAR MORE...but could not borrow anymore to fill the losses waiting for a change in trend ! Laugh...laugh.... !

You see idiots at the end always cheat...themselves ! This is what I call AUTO GOALS !!!!!
One never knows when shooting in their own goals will end, but you are sure they do daily butg it doesnt really count until it is too late.
For the time being I dont see this happening specifically in Brazil. But when their is fears, foreign investors and speculators either reduce partially or totally, but speculators may as well go short ! But again only idiots speculators will go short the currency paying the second highest rates aftger inflation. Many other countries will be their target such as Argentina and some countries in Middle East, Asia or Africa and even Australia. And why not the Euro or better yet...the British Pound...the weakest of all currencies in Europe ? The British Pound IS already the target for quite some time ! Smiles.

TIME WILL TELL !!!!

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continued......
written by CH.C.., September 09, 2008

As to the USA, as I said more than once, they became again the world best emerging nation !
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But contrary to Joao who corrected by saying the best RE-emerging country, I disagree. On a secular basis ALL emerging nations
had their currencies collapsed against the US$ even when it was at its several years low only a few months ago.

the USA is the best emerging nation for Swiss investors because on a secular basis, the US$ HAS BEEN WEAK against the Swiss Franc. And all past bull markets were only A BEAR MARKET RALLY lasting a few years only...before returning to its secular bear market. Quite a difference from emerging nations who had their currencies lost anything between 90 % MINIMUM and up to 99,9999999 % against the US$ over several decades !!!!!

And no one should guess the currency who lost the most against the "apparently weak " US$ : BRAZIL IS THE WORST OF THE WORST ! Another Special Platinum Medal for them !
FROM 1980 up to 2007, their AVERAGE ANNUAL INFLATION RATE is still......400 % !!!!
I repeat.....AVERAGE..... ANNUAL INFLATION RATE !!!!!
And as high as 4922 % in ONE year.....1994 !
And then they feel free to criticize the USA, World Bank and IMF who saved them more than once.
Because in the early 1980s there were similar inflationary years. And it was the World Bank and the IMF who tried to save them.
NOT ENOUGH ! the USA GUARANTEED part of the borrowings made in US$ by the Brazilian Government !

If the USA are addicted to oil, South America and Brazil in particular are totally addicted to.....foreign currencies and inflation.
And also totally addicted to corruption.
And then they spit against those who saved them more than once. Typically South America and in particular Brazilian style.
They even pretend or try to pretend that these loans should not be repaid back !!!!

Cheaters and liars always do the same. They beg for help and then spit on those who helped them. That is in their genes.
They will never ever change. They cant or they wont !

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Addiction to corruption, foreign currencies and inflation - INDEED!
written by AUGUSTUS, September 10, 2008

The key component of Brazil’s typical, customary Boom-Bust economic cycles, which have been temporarily misleadingly assuaged and apparently contained by the unrealistically high interest rates and an extremely hungry Chinese economy, lie the ever present endemic corruption of Brazilian society, its obsession to foreign currencies, and vicious bursts of inflation.

Unfortunately, ch.c is 100% correct. If you recall a few weeks ago when the interest rates were at a record low (still excessive compared to healthy economies) of about 12.75% (or 12.5% I do not recall the exact figure), the inflationary genie started to find his way out of the Central Bank’s bottle, driving economists in Brasilia and Sao Paulo pulling their heads through corporate and governmental buildings, yelling at some “contact” or another requiring immediate action… Sooner rather later, the rate increases re-emerging in fast gallops, and I doubt there would ever be conditions in the conceivable future when they may go back down gain, without endangering the light balancing thread by which the delicate Brazilian economy hangs…

Slightly moving into a more amusing portion of ch-c’s colorful descriptions, I must note “Fernandes the Bimbo” – That was simply fabulous! (It’s my turn to “Laugh Laugh Laugh” joining the Swiss Python). Indeed, whenever I see her picture, I cannot help but conjure up the image of a bimbo in a house of “ill-repute”, particularly in light of so much make up… I wish I could see films of her behavior during meetings in Brasilia and Sao Paulo (evern more I would like to witness her direct interaction with Hugo Chavez- that I would pay admittance fee to watch); they are surely not available in the US media, which is currently OBSESSED with nothing BUT this never ending electoral analysis. In fact, now we have our OWN Alaskan “Palin the Bimbo” entering the discourse of American Politics. I can only wonder a scenario where the “Mathaleusean”, aging McCain is elected, and dies in office, thus leaving us with the Alaskan Barracuda (that’s how Palin is called in her state) as the president. Just imagine “the Alaskan – Argentine” meeting during a state visit, either in Washington or Buenos Aires - would generate a Bimbo Pillow fight in a cat-walk…

Regarding the elimination of the US dollars… We shall see if it remains in place for another two years…
I would not be surprised!

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