Bolivia begins to use RMB for settlement, plans to set up Chinese banks

Following Brazil and Argentina, Bolivia has become the latest South American country to use RMB for import and export trade settlement.

On the 27th local time, Bolivia’s Minister of Economy and Finance Montenegro said at a press conference that from May to July this year, Bolivia’s RMB transaction volume reached 278 million yuan, accounting for 10% of the foreign trade volume during this period. will be further expanded.

Earlier, Montenegro also revealed at another event that these RMB transactions are currently realized through Bolivian state-owned banks, and the Bolivian government is working hard to promote the establishment of Chinese-funded banks in the country.

As early as the 25th, Bolivia’s Minister of Finance and Economics Montenegro announced that the country’s state-owned Union Bank of Bolivia has begun to use RMB for import and export trade settlement.

At the press conference held on Bolivia’s economic situation that day, he said that although there are no Chinese-funded banks in Bolivia, it will not affect Bolivia’s financial institutions to use RMB for transactions. At the same time, he emphasized that the Bolivian government is working hard to promote the establishment of Chinese-funded banks in the country as soon as possible.

On the 27th, Montenegro revealed more specific data at another press conference. He said that from May to July this year, Bolivia’s RMB transactions amounted to 278 million yuan, accounting for 10% of the foreign trade volume during that period.

“Manufacturing exporters of bananas, zinc and timber, and importers of cars and capital goods are all transacting in renminbi,” he added. “We are already using renminbi. It’s a fact and a good start.”

Montenegro emphasized that although the amount settled in RMB is relatively small at present, it will increase over time.

“Bolivia is the third country in South America to use RMB for settlement.” The Associated Press is worried about this. The US dollar’s hegemony in international financial transactions in the region is facing a small but growing challenge .

Prior to this, the other two major South American economies, Brazil and Argentina, had taken the lead in implementing RMB transactions.

In March, Brazil announced an agreement with China to no longer use the U.S. dollar as an intermediate currency, but to conduct trade in its own currency. At the same time, it took measures to reduce the difficulty of using RMB for cross-border transactions and promote the facilitation of bilateral trade and investment.

A month later, Argentina also announced that it would stop using U.S. dollars to pay for goods imported from China and switch to yuan for settlement. At the end of June, the country also decided to pay part of its debt to the IMF in yuan.

Bolivia, which is also facing insufficient liquidity of the US dollar and continuous decline in foreign exchange reserves, sees the advantages of RMB settlement in Brazil and Argentina. In May, its President Arce said that Bolivia intends to follow the example of the two countries and actively promote the use of RMB in foreign trade settlement.

Arce said at the time that the use of RMB for settlement in trade with China was becoming a trend in South America, and Bolivia could not choose to “stand idly by.” He is open to using the yuan for international trade, but did not disclose a specific timetable for completing the idea.

Shortly before Bolivia officially announced the use of RMB for transactions, at the 62nd summit meeting of the Southern Common Market (Mercosur) held in Argentina in early July, Arce also called on countries in the region to reduce their dependence on the US dollar in economic and trade activities and actively Use an alternative to the U.S. dollar to enhance local currency settlement of bilateral trade.

In Latin America and the Caribbean, the use of the yuan is increasing, said Margaret Myers, director of the Asia and Latin America program at the Inter-American Dialogue, a U.S. think tank.

“Particularly countries that want closer ties with China, countries that see themselves as somewhat of a political ally, agreeing on the specific goal of reducing reliance on the dollar and the United States in general,” she said.

Benjamin Gedan (Benjamin Gedan), director of the Latin America program at the US think tank “Wilson Center” (Wilson Center), believes that Bolivia and other South American countries use yuan for international trade as a “sign of the times”.

He also admitted that Washington is now “very anxious” about the US dollar’s special status in Latin America and other regions being shaken.

Since the beginning of this year, the currency field has attracted many “big events”, and the wave of global “de-dollarization” is accelerating.

From the “backyard of the United States” Latin America to the “energy base” Africa, the Middle East, and then to Europe and the Asia-Pacific, more and more countries are planning or have implemented the “de-dollarization” plan to strengthen local currency settlement in cross-border trade and investment . At the same time, due to the stable exchange rate, the risk-aversion attribute of the RMB as an international currency has become increasingly prominent, and the process of RMB internationalization is also accelerating.

According to data from May, more than 30 countries including Indonesia, Iran, Russia, and Germany are gradually switching to using RMB in trade settlement or investment, and the “puzzle” of RMB internationalization continues to unfold.

According to an earlier report by Bloomberg, in the first quarter of this year, under the bilateral local currency swap agreements signed with the People’s Bank of China, central banks around the world used RMB 109.085 billion in RMB balances, creating a new level of RMB-local currency swap lines for global monetary authorities. This record once again shows that the international status of the RMB is increasing day by day.

On July 25, the Nihon Keizai Shimbun quoted statistics from the State Administration of Foreign Exchange of China and reported that in the second quarter of 2023, RMB accounted for 49% of China’s bilateral settlements, surpassing the U.S. dollar for the first time. Among the major influencing factors are financial opening and the increase in Sino-Russian trade.

According to the report, although the proportion of RMB settlement in the world is less than 3%, “de-dollarization” has begun to make progress. The statistics this time do not include RMB settlement of trade and capital transactions between third countries that do not directly pass through China.

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