Brazil and Argentina planning common currency for the region

Brazil and Argentina are planning on a common currency for the region in a bid to distance themselves from the US dollar. Brazil and Argentina are the first and second largest economies in Latin America respectively. How the plan will be implemented remains to be seen, but the statement of intent is a very powerful move itself.

Washington has been using its currency as a weapon to advance its own hegemony around the world. As a result, many civilian populations have suffered from unilateral American sanctions imposed on countries that are independent or have taken the course toward independence.

President Lula, who has made Buenos Aires his first foreign trip since taking office, says that early talks are focused on developing a shared unit of value for bilateral trade to reduce reliance on US dollar.

Under the plan, the Brazilian currency (the real) as well as the Argentine currency (the peso), for example, would continue to exist, with the new tender aimed at trade transactions between different Latin American countries.

In a joint letter, the new Brazilian President Luiz Inacio Lula da Silva and Argentine leader Alberto Fernandez said they wanted to advance discussions on a common South American currency to be used for financial and trade flows.

South America’s two biggest economies will try to advance the plan during talks at a summit in Buenos Aires this week and will invite other Latin American nations to participate.

Not only Lula is reversing the policies of his predecessor, Jair Bolsonaro, by distancing Brazil from the United States he is also putting more focus on the region itself.

The idea of making trade transactions in local currencies as opposed to the US dollar is not limited to Brazil and Argentina, or Latin America for that matter.

Over the past decade, more countries have made or started similar initiatives to trade in their own currencies in a bid to ditch the US dollar.

Where the US cannot create instability through invasions, it wages wars through proxies or using other hybrid warfare mechanisms. It has also resorted to sanctions to fuel unrest in countries that don’t see eye to eye with Washington. The US goal is to destroy the economy of its adversaries with the hope of turning local populations against their governments.

Last year, the governor of the central Bank of China said Beijing will work with Asian countries to beef up the use of local currencies in trade and investment, as part of plans to strengthen regional economic resilience.

For the first time, Saudi Arabia and China have also discussed pricing oil deals in the Chinese yuan instead of US dollar.

Iran and Russia have already started trading in their national currencies after Tehran first decided to reduce use of dollar in its foreign trade.

India, among other countries, has also decided to allow rupee payments for imports and exports, which could also boost trade with other countries under American unilateral sanctions.

India's central bank has also unveiled a rupee settlement system for international trade; a move which many have said will reduce New Delhi’s demand for US dollars.

Tehran has been subjected to unprecedented unilateral sanctions by Washington. The measures, which include sanctions on Iran’s banking sector, have prevented the country from importing vital humanitarian supplies for cancer patients and children with rare diseases.

Likewise, the West has imposed unprecedented sanctions on Russia over the Ukraine war. Analysts have said that the US sanctions against Moscow could speed up the move by countries to reduce their reliance on the American currency.

The United States and its allies froze about US$300 billion belonging to Russia’s central bank’s foreign currency reserves and severely limited Russia’s access to the SWIFT payment system. Similar measures have been taken against other countries including Afghanistan, Iran, and Venezuela.

In a report, Bank of America analysts led by Michael Hartnett pointed out that US dollar debasement is the ultimate outcome as dollar weaponized in new era of sanctions.

As a result of Washington’s sanctions, countries have been seeking alternative monetary systems which have dealt a blow to the dollar itself. The role of the American currency has been declining over the past two decades, with reports indicating its share of reserve currencies have gone down to 60% from 70% over that period.

In the summer of 2021, the International Monetary Fund issued a report warning that the share of US dollar reserves held by central banks fell to 59% - its lowest level in 25 years - during the fourth quarter of 2020, according to the IMF’s Currency Composition of Official Foreign Exchange Reserves (COFER) survey.

Some analysts say this partly reflects the declining role of the US dollar in the global economy, in the face of competition from other currencies. 

Despite multiple warnings, the US has been pursuing illegal economic policies by weaponizing its currency.

A Washington-based think tank says the US has been extremely happy with its economic measures, and central banks may decide to diversify their foreign reserves instead of relying on the US dollar.

The co-director of the Institute for the Analysis of Global Security, Gal Luft has said that central banks are beginning to ask questions, and that they are wondering if their dependence on the dollar and putting all their eggs in one basket is an intelligent idea.

The removal of the US dollar as a dominant foreign currency will save more civilian lives around the world and help bring about global peace and security.

 

Russia and China Creating New Global Reserve Currency

Some analysts have been talking about the possibility of Russia and China challenging the US dollar’s global reserve status. Now, it’s happening. As often happens with consequential news in the United States and the West, no one seems to notice or even care.

It shouldn’t be any surprise to those paying attention that Russia and China are strengthening their economic ties amidst continued Western sanctions on Russia.

Russia and the BRICS countries, including Brazil, Russia, India, China, and South Africa, are officially working on their own “new global reserve currency,” RT reported in late June. Nobody even seemed to notice.

“The issue of creating an international reserve currency based on a basket of currencies of our countries is being worked out,” Vladimir Putin said at the BRICS business forum in June.

Russia has been cut off from the SWIFT system; it is also pairing with China and the BRIC nations to develop “reliable alternative mechanisms for international payments” in order to “cut reliance on the Western financial system.”

In the meantime, Russia is also taking other steps to strengthen the alliance between BRIC nations, including re-routing trade to China and India, according to CNN

President Vladimir Putin said last Wednesday that Russia is rerouting trade to "reliable international partners" such as Brazil, India, China and South Africa as the West attempts to sever economic ties.

"We are actively engaged in reorienting our trade flows and foreign economic contacts towards reliable international partners, primarily the BRICS countries," Putin said in his opening video address to the participants of the virtual BRICS Summit.

In fact, “trade between Russia and the BRICS countries increased by 38% and reached US$45 billion in the first three months of the year 2022”, the report says. Meanwhile, Russian crude sales to China have hit record numbers during spring of this year, edging out Saudi Arabia as China’s primary oil supplier.

Putin said last month, "Contacts between Russian business circles and the business community of the BRICS countries have intensified. For example, negotiations are underway to open Indian chain stores in Russia and to increase the share of Chinese cars, equipment and hardware on our market."

Putin accused the West of ignoring the basic principles of the market economy" such as free trade. "It undermines business interests on a global scale, negatively affecting the wellbeing of people, in effect, of all countries," he said.

President Xi echoed Putin’s sentiments, according to a June write up by Bloomberg:

“Politicizing, instrumentalizing and weaponizing the world economy using a dominant position in the global financial system to want only impose sanctions would only hurt others as well as hurting oneself, leaving people around the world suffering. Those who obsess with a position of strength, expand their military alliance, and seek their own security at the expense of others will only fall into a security conundrum.”

There is a coordinated global challenge taking place to the US dollar - and it would be the biggest news story in decades. Now, remember that both countries have been working on, and preparing for, this situation for years.

De-dollarization has been a priority for Russia and China since 2014, when they began expanding economic cooperation following Moscow's estrangement from the West over its annexation of Crimea. Replacing the dollar in trade settlements became a necessity to sidestep US sanctions against Russia.

It seems to that the BRIC nations understand exactly how precarious of a financial situation the US and US dollar - is in. Despite the dollar’s recent strengthening, these nations have been in the midst of a multi-decade-long plan to de-dollarize.

Even before the Ukraine conflict started, both China and Russia were stockpiling gold and working on denominating transactions outside of the US dollar. It was another “secret” that was out there in the open.

Since the BRIC conference, ties between Russia and China continue to tighten, with Japan even warning this week about the pair’s strengthening of military ties - at the same time China has closely scrutinized a planned trip by House Speaker Nancy Pelosi to Taiwan.

 “As a result of the current aggression, it is possible that Russia’s national power in the medium to long term may decline, and the military balance within the region and military cooperation with China may change.

In the vicinity of Japan, Russia has made moves to strengthen cooperation with China, such as through joint bomber flights and joint warship sails involving the Russian and Chinese militaries, as well as moves to portray such military cooperation as strategic coordination.”

Japan said this alignment between the two countries “must continue to be closely watched in the future.”

While the economic gears turn behind the scenes, China is also becoming increasingly cagey about Taiwan. The country has sent warplanes into Taiwan's self-declared air defense zone identification zone many times in recent months, according to CNN, and recently alluded to the idea of a no-fly zone over Taiwan ahead of a planned visit by Nancy Pelosi.

President Biden commented on Pelosi’s travel plans this week, stating, “The military thinks it’s not a good idea right now. But I don’t know what the status of it is.”

We’re sure Pelosi will wind up going anyway. Remember, this is the same woman who danced her way through Chinatown while Covid was spreading to the US, from China, to prove she wasn’t racist.

Iran ramps up neighborhood diplomacy

Iranian President Ayatollah Seyed Ebrahim Raisi gave a new boost to his administration’s policy of cementing ties with neighbors as part of new foreign policy agenda of the country. 

President Raisi had a busy weekend in terms of holding meetings with foreign leaders. He left Tehran on Wednesday for Ashgabat to attend an important regional summit held in Turkmenistan’s capital.

He met with a number of foreign leaders on the sidelines of the 6th summit of the Caspian Sea littoral states, which provided him with a unique opportunity to advance his “neighborhood policy”. It marked a new orientation in Iran’s foreign policy which is aimed at strengthening ties with neighbors. 

President Raisi visited Turkmenistan with a clear goal in mind to further advancing the neighborhood policy. In his meeting with the Chairman of the People's Council of Turkmenistan, Gurbanguly Berdimuhamedow, Raisi said his administration “has a special program in the field of foreign policy to develop neighborly relations, and Iran-Turkmenistan relations are expanding rapidly based on extensive cooperation and mutual trust.”

He reiterated this in his meeting with Turkmen President Serdar Berdimuhamedow, saying that his administration “attaches a special priority to develop relations and cooperation with neighbors”.
President Raisi pointed out that the relations between Tehran and Ashgabat are expanding rapidly based on the development of neighborly relations and on the basis of mutual trust and extensive cooperation.

Raisi also addressed the Caspian Sea summit, where he underlined Iran’s sincerity in its quest for building better relations with its neighbors. He described this as a strategy of Iran.

“The interaction of the Islamic Republic of Iran with its friends and neighbors is original, and this interaction and cooperation not only will lead to economic prosperity and increase the welfare of our nations, but also strengthen regional peace and stability and solve the problems of the Caspian Sea zone merely through its coastal countries. This major strategy of the Islamic Republic of Iran will continue, regardless of international developments,” Raisi said. 

This policy was initiated a year ago when President Raisi assumed office in August 2021. Back then he expressed his administration’s strong desire for fostering cooperation with neighboring countries. The Raisi administration has made great strides. In the early days of his administration, Raisi succeeded in ironing out Iran’s membership in the Shanghai Cooperation Organization (SCO). Interestingly, the SCO membership was achieved during a summit in Dushanbe, Tajikistan. 

Iran is now eyeing a similar membership in the BRICS group of emerging countries which includes Russia, China, Brazil, India, and South Africa. President Raisi was invited by China to address the recent BRICS summit. Russia and China have voiced support for Iran’s membership in the group. 

The Raisi administration is pursuing regional diplomacy simultaneously with its efforts to hammer out a deal with the West over reviving the 2015 nuclear deal. The latest round of talks in this regard was held in Doha, Qatar, on Tuesday and Wednesday. 

Heavy rains in Brazil disrupts iron ore production

According to a Reuters report, heavy rainfall in southeastern Brazil has prompted miners including Vale SA to suspend some operations after downpours caused deadly floods in the northeast. 

Rainfall is expected to remain heavy this week in most of top mining state Minas Gerais, after runoff closed roads and railways.

The rains may also have contributed to the dramatic collapse of a canyon rock face in the state on Saturday, killing 10 people visiting a waterfall on boats.

In the northeastern state of Bahia, flooding displaced about 50,000 families and killed some two dozen over the holidays.

Vale said on Monday it has partially suspended operations at its Southeastern and Southern iron ore systems due to the bad weather, but reaffirmed its 2022 production target as the Northern system was not affected.

Samarco, a joint venture between Vale and BHP also cut back operations in its Germano complex, producing at an estimated 50% of capacity until weather allows it to ramp up.

Brazilian steelmakers Usiminas and Companhia Siderurgica Nacional (CSN) also halted operations of their mining units.

Anglo American said its Minas-Rio system continued to operate as planned during the rainy season.

Over the weekend, France's Vallourec suspended production from its Pau Branco mine after heavy rainfall caused a dike to overflow.

"We see the news as potentially negative for the entire mining sector, as it could result in new regulations to suspend existing operations or delay new projects," analysts at XP Investimentos said in a research note.

BTG Pactual analysts said economic impacts could be muted if normal operations are restored quickly, but noted it all depends on how long the heavy rainfall will last.

"We estimate there could be more than 100 million tons of annualized iron ore supply at risk at this stage in Brazil, which is a relevant number ‑ roughly 7% of seaborne supply and about 30% of Brazilian supply ‑learly the stakes are high and we could see impacts on short-term iron ore movements," they said.

INTERRUPTED RAILWAYS, CLOSED HIGHWAYS

Vale said in a securities filing that train circulation at its Vitoria-Minas railway was partially interrupted by the rains, halting output at the Brucutu mine and the Mariana complex due to a lack of transportation.

Both mines are part of Vale's Southeastern system, along with the Itabira complex, where production was not affected.

In the Southern system, Vale said all of its complexes had to halt production because key highways BR-040 and MG-030 were closed.

Vale said its Northern System is still operating as planned, and maintained its 2022 iron ore production forecast at 320-335 million tons. It noted its production plan takes into account the seasonal rainfall impact.

The miner also said the rains had not changed the alert level for any of its tailing dams which are under constant, "real-time" monitoring.

"While Vale did not change its production guidance for 2022, we believe that the market could start to project volumes closer to the low end of the range," Itau BBA analysts said, noting that iron ore prices could be supported at their current high levels.

Vale's two halted operations accounted for about 31% of its output in the first nine months of 2021, the Itau BBA analysts said. A two-week halt in these operations could represent an impact of about 3 million tons for the company, according to their preliminary calculations.

Steelmaker Usiminas announced a stoppage at its mining subsidiary Mineracao Usiminas (MUSA) due to weather, but said it had enough inventory of raw material to avoid disruption.

The company also said its Barragem Central tailings dam, which has been inactive since 2014, reached alert level 1 - an initial warning that does not mean a safety breach was noted.

CSN and its steel mining subsidiary CSN Mineracao SA announced a halt to operations of the Casa de Pedra mine, but said they are expected to resume in coming days.

They said port operations at the Itaguai coal terminal, located in the neighboring state of Rio de Janeiro, were also suspended due to excessive rains.

Brazil's regulatory National Mining Agency (ANM) suspended operations at French steel pipe maker Vallourec's Pau Branco iron ore mine in the state after a dike overflowed, cutting off a federal highway. There were no reported injuries.

"After the dam incidents of the past, we welcome the zero tolerance approach that miners are taking in the country to minimize operational risks, which we consider the prudent approach," BTG Pactual said.

Need for further consolidating Pakistan-Brazil diplomatic and trade relations

Brazil can be rightly termed an emerging economic power in the world – 6th by GDP after US, China, Japan, Germany and France. Brazil has been expanding its presence in international financial and commodities markets and is one of a group of four emerging economies called the BRIC countries.

The relations between Pakistan-Brazil are friendly and face zero issues. Brazil considers Pakistan an important country, and wants to promote relations in areas of trade, agriculture, defense, tourism and education. Brazil has been granting scholarships to Pakistani students and this number has been increasing over the years.

Brazil is keen in boosting bilateral trade ties with Pakistan as both countries have great potential to enhance trade in diverse fields. Pakistan produces a number of products which are in high demand in Brazil. Pakistani exporters should make efforts to enhance their exports to Brazil.

It is worth noting that number of Pakistani products go to Europe and then sold to other countries, including Brazil at high prices. Pakistan has opportunity to focus on promoting direct exports to achieve better results.

Although, Brazil was among the 5 largest world producers in 2013, its textile industry is very little integrated into world trade.

Brazil has great expertise in producing renewable energy. The country has been producing around 65% of its energy from water and using ethanol along with bio-fuels instead of costly petroleum products.

Pakistan has enormous potential for hydropower generation while it is also one of the largest sugar producers in the world. Brazil could cooperate with Pakistan in energy production from renewable sources including hydro and ethanol sources.

Keeping in view that the China-Pakistan Economic Corridor (CPEC) project will open trade doors for Pakistan with other countries, Brazil can find new markets in Pakistan and adjoining countries.

Pakistani handicrafts, carpets, fresh dry fruit, sporting equipment and other products enjoy reputation in international markets and can also find buyers in Brazil.

It is on record that Brazil is keen in investing in Pakistan. Brazilian government understands the need of international investment in Pakistan, particularly Baluchistan.

In the mining sector, Brazil stands out distinguished in the extraction of iron ore (second largest world exporter), copper, gold, bauxite (one of the 5 largest producers in the world), manganese (one of the 5 largest producers in the world), tin (one of the largest producers in the world), niobium (concentrates 98% of reserves known to the world) and nickel.