According to Brazilian President Luiz Inacio Lula da Silva, developing countries should abandon the US dollar in favor of their own currencies to challenge American hegemony over the world financial system.
On Thursday, while on an official visit to China, Lula suggested in Shanghai that the BRICS nations—Brazil, Russia, India, China, and South Africa—should explore for a trading currency other than the dollar.
“I ponder why all nations are required to base their trade on the dollar every night. Why can’t we conduct business using our own money, he questioned. Who made the decision that the dollar will replace the gold standard as the dominant currency?
After lamenting that “everyone depends on just one currency,” the leftist leader suggested “a currency to finance trade relations between Brazil and China, between Brazil and other countries.” The leftist leader was alluding to the dollar.
The former Brazilian president Dilma Rousseff was appointed to lead the New Development Bank, also known as the “BRICS bank,” on the first day of Lula’s visit to China. Lula claimed that this appointment could free emerging economies “from submission to traditional financial institutions, which want to govern us.”
Along with the president, the finance minister of Brazil, Fernando Haddad, visited China. While there, he made a statement to the media in which he stated that Brazil would work to develop trade systems that would allow developing nations to avoid using the dollar.
The benefit, according to him, is to avoid the constraint caused by having trade transactions resolved in the currency of a nation that is not a party to the transaction.
Beijing is actively promoting the use of its own currency, the yuan, to settle foreign transactions during the time of Lula’s visit. In the midst of a significant sanctions campaign related to the conflict in Ukraine, Russia announced last month that it has accepted the yuan as one of its principal reserve currencies, underscoring a progressive break from the Western financial system by certain big powers.
Over the past ten years, trade between China and Brazil has increased significantly; more than $150 billion in trade was recorded in 2017. Chinese companies have made significant investments in Brazilian infrastructure as well as large-scale mining and agricultural purchases in the South American nation.
The Brazilian president will stay in China until April 15 after traveling there on Wednesday night. Lula left Shanghai after giving his speech and traveled to Beijing, where he will meet President Xi Jinping on Friday. According to the Financial Times, the two presidents are anticipated to concentrate on matters of trade and foreign policy, such as China’s Belt and Road Initiative, which aims to build roads, highways, and other infrastructure in foreign nations.