Brazilian President Luiz Inacio Lula da Silva called for the abandonment of the dollar in international trade and the creation of alternatives to the American currency, in an interview on August 2, 2023.
De-dollarization has been a buzzword for the past few months, with various discussions surrounding the dominance and decline of the dollar. Several countries have recently become increasingly worried about their reliance on the US dollar.
Amid decreasing foreign reserves and the increasing cost of the US dollar due to rising interest rates, many central banks are looking for alternatives. Consequently, they actively explore other currencies to lessen their dependence on the dollar. This shift away from a single dominant global currency is called de-dollarization, which has started to cause ripples in the global economy.
Besides economic factors, there are many underlying political reasons for this change, including US policies and sanctions against many countries. If the trend continues, it could reshape the entire international trade and financial system. As Brazil's President Lula expressed in April this year, "Every night," he asks himself "why all countries have to base their trade on the dollar." Now, many countries and leaders are asking themselves the same question.
Many countries are looking for currencies other than the dollar for trade. As the trend of de-dollarization gains momentum worldwide, Bolivia has become the third South American nation to adopt the Chinese yuan for trade settlement.
In a report published in Time magazine, the Minister of Economy and Public Finance of Bolivia Marcelo Montenegro said in a news conference, "We're already using the yuan. It's a reality and a good start…Banana, zinc, and wood manufacturing exporters are conducting transactions in yuan, as well as importers of vehicles and capital goods."
It was also shared that between May and July of this year, Bolivia engaged in financial transactions totaling 278 million Chinese yuan (approximately $38.7 million), making up 10% of its foreign trade. Additionally, China has become Bolivia's second-largest trade partner and a primary source of imports, and the bilateral cooperation between the two countries spans various sectors, including infrastructure, aerospace, information technology, and oil and gas development.
Bolivia has now become part of a group of South American countries, including Brazil and Argentina, which have started using the yuan in their financial transactions. In Argentina, the government announced a plan earlier this year to use the yuan for paying imports from China. It has also considered the possibility of using the Chinese currency to repay debts owed to the International Monetary Fund (IMF).
This article was originally published is China Global Television Network（CGTN）and has been republished under a special agreement.
Liu Qing is a reporter from China Global Television Network CGTN)
