Bolivia Embraces Yuan in Trade Transactions, Challenging Dollar’s Hegemony
In a recent report by the Associated Press, it was revealed that Bolivia has started utilizing the yuan in its import and export transactions, thereby becoming the latest South American country to adopt the Chinese currency. This move is seen as a modest yet growing challenge to the dominance of the US dollar in financial transactions within Latin America.
Bolivia’s Economy Minister, Marcelo Montenegro, stated on July 27 that from May to July this year, the country conducted financial transactions totaling 278 million yuan, representing 10% of its foreign trade volume during the same period. Montenegro expressed satisfaction with the utilization of the yuan, describing it as a good start.
He further disclosed that exporters of bananas, zinc, and timber manufacturing have already begun trading in renminbi, while importers of cars and production materials are also using the Chinese currency. These electronic transactions are facilitated through Bolivia’s state-owned Union Bank. Montenegro believes that although the volume of yuan transactions is currently small, it will increase in the future.
With this development, Bolivia has joined Brazil and Argentina in implementing the use of renminbi as a means of diversifying their foreign exchange dealings. It is noteworthy that all three countries are currently under leftist or center-left governments.
According to Margaret Myers, director of the Asia and Latin America Program at the America-American Dialogue Research Center, the countries in Latin America that are embracing the renminbi are mainly those seeking to strengthen their ties with China. Additionally, they are consistently trying to reduce their reliance on the US dollar, thus diminishing their dependence on the United States overall.
The report also highlights China’s growing influence in Latin America, owing to the continuous increase in trade and investment between the two regions. Benjamin Gerdan, the director of the Latin American Program at the Woodrow Wilson Center in the United States, emphasized that the dollar’s special status in Latin America is being challenged, causing concern for Washington. He cited China’s emerging role as Argentina’s lender of last resort and Bolivia’s adoption of the yuan in international trade as indications of this shift.
Earlier this year, Argentina announced plans to use the yuan to purchase Chinese imports and potentially repay debts owed to the International Monetary Fund in renminbi. Furthermore, by the end of 2022, the renminbi is projected to surpass the euro and become the second-largest currency in Brazil’s foreign exchange reserves.
The report also mentions that prior to adopting the renminbi, Bolivia encountered a severe shortage of US dollars, which negatively impacted its national economy.
Rebecca Ray, a senior fellow at Boston University’s Center for Global Development Policy Research, believes that beyond political considerations, seeking alternatives to the US dollar also makes economic sense. This is due to the substantial fluctuations in the dollar’s exchange rate caused by the Federal Reserve’s increased interest rates.
In response to a “dollar liquidity crisis,” Bolivian President Luis Arce has expressed the country’s determination to find alternatives.
During a visit to China in April, former Brazilian President Luiz Inácio Lula da Silva raised questions about the ubiquitous use of the dollar in international trade, highlighting the need for alternative currencies.
As Bolivia joins other Latin American nations in embracing the yuan, the influence of the US dollar in the region faces new challenges.