Brazil and China announced a deal to carry out trade and financial transactions directly, exchanging yuan for reais, rather than first converting their currencies to the US dollar. This move is expected to reduce costs, promote greater bilateral trade, and facilitate investment.

Strengthening Ties

China is Brazil’s largest trading partner, accounting for over a fifth of all imports and more than a third of all exports. Brazil is also the largest recipient of Chinese investment in Latin America, with spending focused on electricity transmission lines and oil extraction.

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Shifting Relations

The deal between Brazil and China follows a period of rocky relations under Brazil’s previous president, Jair Bolsonaro. The current president, Luiz da Silva, has sought to strengthen ties with Beijing since taking office. Despite having to cancel a recent trip to Beijing due to illness, a delegation of ministers, lawmakers, and business people are expected to accompany Lula on his first state visit.

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