Lula: Let's trade in our own currencies

China and Brazil should ditch the US dollar in their bilateral trading and replace it with their own currencies, Brazilian President Luiz Inacio Lula da Silva said yesterday.

In September, Brazil and Argentina signed an agreement under which importers and exporters in both countries may make and receive payments in local currency, although they may also continue to use the US dollar if they prefer.

The move was an attempt to reduce costs by eliminating fees on currency exchange.

Lula said Brazil wanted to extend the arrangement to all South American countries.

But Shi Lei, an analyst in Beijing at the nation's largest foreign-currency exchange, said: "It may take a couple of years for China and Brazil to really start using the yuan in trades because the currency is of limited use outside China."

"We should first start yuan settlement with Hong Kong and build an offshore yuan center to expand channels for yuan use," Shi was quoted as saying by Bloomberg news.

China is seeking to promote the yuan as an international currency after signing 650 billion yuan ($95 billion) in agreements with Argentina, Indonesia, the Republic of Korea, Hong Kong, Malaysia and Belarus in recent months.

Lula said any issues that need to be thrashed out are technical ones, not political ones.

"I believe we will have success in this new undertaking," he added.

On Monday, the Brazilian president began his second state-visit to China since taking office in 2003.

China agreed on Tuesday to lend $10 billion to Brazil's state-owned oil giant in exchange for guaranteed oil supply for the coming decade.

In addition to selling resources and raw materials to Beijing, Lula said both countries "have to be cautious" about the trade balance problem.

Beijing for the first time displaced Washington as Brasilia's top trading partner in April.

Lula said both countries had exploited only 10 percent of their potential in trade because diplomatic ties were established only 35 years ago.

"We still need to build a lot of houses. We still need to buy more cars, fridges, TV-sets," Lula said, adding both countries have a lot to sell.

Questions:

1. What was the primary issue Brazilian President Lula da Silva mentioned yesterday?

2. In recent months China has signed trade agreements with several nations and regions worth how much in US$?

3. How many years have diplomatic ties existed between China and Brazil?

Answers:

1. That China and Brazil should ditch the US dollar in their bilateral trading and replace it with their own currencies.

2. $95 billion .

3. 35 years.