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  • musketeernumberone musketeernumberone Nov 28, 2008 9:31 AM Flag

    Argentina and Brazil Abolish Dollar in Bilateral Trade

    Was not aware of this -- despite living in Brazil... so thanks.

    Interesting indeed, but maybe not so bad for the dollar:

    [Both sides said that bilateral trade would save forex costs, especially for smaller businesses.] Very positive, though not necessarily for the dollar.

    [Brazil sees the move as a first step towards more monetary cooperation in the Mercosur area that other countries could join as well."We’re giving a crucial step for a future regional monetary integration” said Lula da Silva during the official reception. "We are going to abolish the dollar as a currency in our trade" he added.]

    This is the key to it all... future regional monetary integration. I am not an international economist, but I believe that consensus among them is that monetary Integration in Europe (the creation of the Euro) was a net positive development. Monetary integration in LatAm would probably be net positive, too.

    [Lula da Silva pointed out that he wanted Brazil and Argentina's trade balance to be more balanced. Argentina had a 2.7 billion US dollars trade deficit with its larger neighbor Brazil in the first half of the year.]

    Argentines would never admit it but, economically, they are are a province of Brazil.

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