Brazilian President supports trading currency for BRICS countries

Brazilian President Luiz Inacio Lula da Silva said on Wednesday he supported creating a currency for trading between BRICS countries, a group that includes his nation as well as Russia, India, China and South Africa. Speaking during a trip to Spain, Lula also said his government would not privatize any public company and once again called for an expansion of the U.N. Security Council’s permanent members.

Earlier this month, the Brazilian government gave up dollar as an intermediary and announced a deal to trade in local currency with China. After few days, President Luiz Inacio  Lula da Silva , who visited China, had called for the BRICS nations to give up US dollar and come up with their own alternative currency to settle cross-border trade.

He also called on developing countries to work towards replacing the US dollar with their own currencies in international trade.

The dollar, which has been ruling as the global reserve currency, is gradually losing its dominance, especially after the onset of the Russia-Ukraine war last year. The US currency saw a massive decline of 8 per cent in 2022 in one year, “equivalent to 10 times the average annual pace of erosion in the USD’s market share in the prior years.”

A report by Eurizon SLJ Asset Management said that the US dollar “suffered a stunning collapse in 2022 in its market share as a reserve currency, presumably due to its muscular use of sanctions” after the Russia-Ukraine conflict. The greenback’s share of global reserves has decreased from about two-thirds in 2003 to 55 per cent in 2021 and 47 per cent in 2022, said strategists Joana Freire and Stephen Jen based on their calculation. Iran has abandoned settling trade in dollar with China and Russia. Saudi Arabia said it will completely give up PetroDollar and begin accepting PetroYuan. Meanwhile, Russia has been largely using Chinese yuan in international trade. It is also mulling launching a joint BRICS currency.

With inputs from agencies.

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