Banco do Brasil has reportedly suspended letters of credit (L/Cs) for imports or exports coming or going to Argentina in yuan.Only L/Cs in US dollars are now being issued by the oldest bank in Brazil according to reports that suggest the move may be related to Argentina's decision on 1 January 2024 not to accept its invitation to join the BRICS group of nations.

Regime change

The invitation to admit Argentina to the bloc had not been widely anticipated when it was issued at last August's BRICS summit in Johannesberg.

It was accepted by the previous Argentine administration of Alberto Fernández, which has now been replaced by that of the country's new President Javier Milei, who has introduced sweeping economic reforms since he came to power in December 2023.

Yuan proposal

Last year Brazil presented a proposal to Argentina to use Chinese yuan guarantees for Brazilian exports to the neighbouring nation.

Under the proposal, state-lender Banco do Brasil would be responsible for overseeing the conversion of yuan into Brazilian real to pay exporters.

The guarantees would be particularly crucial in light of Argentina's US dollar shortage while Brazilian exporters would be unlikely to accept payment in Argentine peso.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.