Lula calls on Global South to ditch USD, trade in own currencies

By Al Mayadeen English
Source: Financial Times
13 Apr 2023 20:46
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Lula questions "who decided that currencies of developing currencies were weak and didn’t have value in other countries."

“Every night I ask myself why all countries have to base their trade on the dollar,” Lula said while in Shanghai, China on Thursday, April 13, 2023.

Brazilian President Luiz Inacio Lula da Silva called from China on countries of the Global South to work toward ditching the USD in their international trade and resort to their own currencies instead, the Financial Times reported on Thursday.

Lula is visiting China from April 12-15, where he is expected to meet with Chinese President Xi Jinping in Beijing on Friday.

The Brazilian leader also urged BRICS nations to establish a common currency as the basis of trade.

“Every night I ask myself why all countries have to base their trade on the dollar,” Lula said addressing an audience in the New Development Bank in Shanghai, known as the BRICS bank.

“Why can’t we do trade based on our own currencies?” he added, amid heavy rounds of applause by the attendees. “Who was it that decided that the dollar was the currency after the disappearance of the gold standard?”

Lula's visit to China follows a similar tour by France's Emmanuel Macron, who encouraged Europe to build more strategic autonomy, including independence from the US currency.

Lula's journey to China is part of the leader's attempt to resurrect Brazil's multilateralism heritage, which was largely abandoned under previous President Jair Bolsonaro.

His China trip further reflects his policy to establish balanced relations with other countries, where the Brazilian president also made a visit to the United States last month to meet with US President Joe Biden.

Lula also visited Huawei on Thursday, China's tech giant that came under US sanctions over Washington's fear of Beijing's increased trade with global countries, most notably Europe which has made an extended amount of deals to acquire the firm's 5G advanced telecom systems.

Attending the inauguration of former Brazilian President Dilma Rousseff as the new president of the New Development Bank in Shanghai, Lula reiterated his calls to adopt local currencies as an alternative to the USD in settling trades between BRICS nations. New Development Bank members, alongside BRICS countries, include Egypt, the UAE, Uruguay, and Bangladesh.

“Who decided that our currencies were weak, that they didn’t have value in other countries?” he said.

“Why can’t a bank like that of the BRICS have a currency to finance trade relations between Brazil and China, between Brazil and other countries? It’s difficult because we are unaccustomed [to the idea]. Everyone depends on just one currency,” he said in his speech.

South Africa announced last week that it has begun preparing to host all BRICS leaders, including Russian President Vladimir Putin, as part of their participation in the August summit.

On January 18, South African Foreign Minister Naledi Pandor said the BRICS club of emerging economies seeks to discover a way of bypassing the dollar to create a fairer payment system that would not be skewed toward wealthy countries.

"The systems currently in place tend to privilege very wealthy countries and tend to be really a challenge for countries, such as ourselves, which have to make payments in dollars which costs much more in terms of our various currencies," she said then.

More nails in Washington's hegemony coffin

More systems, such as BRICS, Shanghai Cooperation Organisation, and countries taking part in China's Belt and Road Initiative, are growing as alternative trade and monetary bodies to ones dominated and influenced directly by the United States, which exploited these international organizations to extend its hegemony and colonization in vast parts of the world.

Earlier in March, China and Brazil struck a deal to ditch the US dollar in their bilateral transactions, which is expected to reduce investment costs and develop economic ties between the two countries.

This week, Brazil's branch of the state-owned Industrial and Commercial Bank of China (ICBC) made its first local transaction directly in Chinese yuan, according to Chinese state media.

The agreement between the Asian superpower and Latin America's largest economy - the mutual top trading partners - was the latest of the ongoing financial and political strikes against the green banknotes.

In 2022, trade volume between the economic giants hit a historic record of over $150.5 billion in bilateral trade - as Beijing increased its purchase of Brazil's agricultural products and minerals and further expanded its investments in Latin America's largest market.

China's yuan has more than doubled to 4.5% in global trade, the SWIFT financial system said according to its data. Russian Central Bank announced earlier that the share of the Chinese Yuan on the Russian exchange market increased to 39% in March.

An economist at the American bank and financial giant Goldman Sachs considered that the Chinese yuan is expected to grow even more in global trade, citing financial structural reasons.

“In light of the renminbi’s comparatively small role in trade finance relative to China’s market share of around 15 per cent in global goods trade . . . it makes sense for the currency’s share of trade finance to continue rising,” Maggie Wei said according to the Financial Times.

However, the economist claimed that serious challenges face Brazil's aims to ditch the USD in the near future, as the dollar is crucial for the trade of global trade of commodities and their benchmarks.