The plan will require a change in law in the two countries before it can be implemented, although senior managements at the central banks hope that it should be in place by mid-2007.
The proposal will allow importers and exporters to trade directly in their respective local currencies. So, for example, an Argentine importer will be able to pay in pesos, and the Brazilian exporter will receive its payment in reais. These payments are then processed via the central banks, which set the exchange rates each day.
Currently, all trade between Argentine and Brazilian businesses is conducted in dollars, as required by the law in both countries. However, that leads to inefficiencies, high transaction costs and liquidity issues because of the multiple currency exchanges that are needed for trades to be executed.
“This [new] model will not replace the current payments method – it will just offer an alternative,” says Cristina Pasin, principal manager of the project at the Banco Central de la República Argentina (BCRA). “We aim to develop a system that will offer an attractive option for players and so in time a local market, in a local currency, will develop for the private sector to eventually exploit.”