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China and Brazil Agree Direct Currency Trade

According to Xinhua News Agency and RTÉ News, China and Brazil have agreed to trade their own currencies bilaterally. Evidently, this can be considered another "ditch of the US dollar".

According to this deal, the equivalent of "up to 30 billion dollars" per year will be traded in Brazilian real and Chinese yuan from now on. This is supposed to affect almost half of the two countries' exchanges, as they move this huge chunk out of the US dollar's zone.

China and Brazil are part of the BRIC and BRICS nations group. The BRICS nations represent roughly 20 % of global GDP.

Brazilian Central Bank Governor, Alexandre Tombini affirmed: "Our interest is not to establish new relations with China, but to expand relations to be used in the case of turbulence in financial markets" - after signing the 3 year agreement.

The Interests Behind the Bilateral Agreement

China is the World's number one producer and exporter, while Brazil is one of the largest commodity producers. The Brazil-China relations are vital for the long-term development and growth of both nations. China's industrial growth is strongly linked to Brazil's raw material and agricultural exports.

Brazil imports primarily machinery and electronics, while China imports raw materials and agricultural products.

The agreement will certainly negatively impact the US dollar's role as the reserve currency on the World.

The BRIC nations are ambitiously emerging markets - India and China have immense manpower and are rapidly developing industrially, while Brazil and Russia can provide the two with the necessary resources.

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