Look for more bilateral agreements like this in the near future. This is a logical thing to do so long as neither country is abusing their currency too badly and the countries have a balance in their trade with one another. Their currencies will quickly find their way back home.
I expect these bilateral agreements to evolve into multilateral agreements that use the credit clearing process to net out accounts amongst the central banks.
The surprising thing here is that the central banks of Brazil and Argentina seem to be taking a course that is independent of the global banking fraternity. Read the article here. — t.h.g
Brazil, Argentina abandon US dollar
Brazil and Argentina have launched a new payment system in their bilateral trade, doing away with the US dollar as a medium of exchange.
The two Latin American nations started the Payment System on Local Currency (SML) on Monday following a last month agreement inked by their presidents to use local currencies in a bid to end transaction in dollars.
On Thursday, Argentine Central Bank President Martin Redrado and his Brazilian counterpart Henrique de Campos Meirelles signed the enforcement of the agreement for the SML, under which exports and imports between the two countries will take place with the Brazilian real (BRL) and the Argentine peso (ARS).