China and Brazil sign on new currency swap agreement

http://www.bbc.co.uk/news/business-21949615

China and Brazil have signed on a currency pact that will allow their central banks to swap local currencies worth up to $30bn dollars, which would ensure smooth bilateral trade, safeguarded against future global financial crisis. With the new pact, in the case of a credit shortage in the financial market, Brazil would be able to still have credit from its trading partner and consequently no interruption of trade.

China´s increasing demand for Brazil´s resources, such as iron ore and soy products, and Brazil having become a key export market for Chinese goods played an important role in increasing volume of trades and diplomatic relationship, so there is obviously an interest in safeguarding a trade relationship that has been beneficial for both parties. The pact allows for $30bn that would normalize trade relations for up to 8 months in the case of a global crisis.

Nevertheless, there are still some political interests behind the push for this trade agreement, as Chinese leadership has been pushing for a more internationalization of the Yuan as an alternative to US dollar as a global reserve currency, which would allow firms to settle trade in local currencies rather than the US dollar. The new pact comes after another series of propositions for currency swap to countries like England, Australia, Hong Kong and Japan.