LA PAZ – Bolivia is now utilizing the yuan to pay for imports and exports, turning into the newest nation in South America to repeatedly use the Chinese language foreign money in a small however rising problem to the hegemony of the U.S. greenback for worldwide monetary transactions within the area.

Between Might and July of this yr, Bolivia performed monetary operations amounting to 278 million Chinese language yuan ($38.7 million), which accounts for 10% of its overseas commerce throughout that interval, Economic system Minister Marcelo Montenegro mentioned on Thursday.

“We’re already using the yuan. It’s a reality and a good start,” Montenegro mentioned throughout a information convention. “Banana, zinc, and wood manufacturing exporters are conducting transactions in yuan, as well as importers of vehicles and capital goods.” These digital transactions are carried out by way of the state-owned Banco Unión.

“The amount being used in yuan is still relatively small, but it will increase over time,” Montenegro mentioned.

With these transactions, Bolivia joins different international locations in South America, most notably Brazil and Argentina, that are utilizing the yuan. The three international locations are dominated by leftist or left-leaning governments.

In Latin America and the Caribbean, the usage of the yuan is rising particularly “in those countries that are looking to establish stronger ties with China, that view themselves as in some way politically aligned on this particular objective on decreasing their overall reliance on the dollar and on the U.S. in general,” mentioned Margaret Myers, director of the Asia & Latin America Program on the Washington-based Inter-American Dialogue.

The usage of the yuan comes at a time when China’s footprint within the area is rising with rising commerce and funding.

“There is a lot of anxiety in Washington about threats to the special role of the dollar in regions like Latin America,” Benjamin Gedan, director of the Latin America Program on the Washington-based Wilson Middle, mentioned. “China’s new role as a lender of last resort in Argentina, and the use of the yuan for international trade by Bolivia, are a sign of the times.”

Earlier this yr, Argentina’s authorities unveiled a plan to make use of the yuan to pay for imports from China as a solution to protect its dwindling overseas reserves and it has raised the potential for paying off money owed with the Worldwide Financial Fund utilizing the Chinese language foreign money. In Brazil, the yuan surpassed the euro because the second most necessary foreign money in its overseas reserves on the finish of 2022, when 5.37% of the central financial institution’s holdings had been within the Chinese language foreign money, in comparison with 4.74% for the euro.

In Bolivia, the yuan began for use after months of extreme greenback shortages which were impacting the nation’s economic system since February.

Some analysts and members of the opposition have questioned the transfer to make use of the yuan.

“It is not a long-term solution, and it seems more like an attempt to cover up economic problems,” mentioned José Gabriel Espinoza, an economics professor at Bolivia’s Catholic College.

The supervisor of the Chamber of Exporters of Bolivia, Marcelo Olguín, dismissed the criticism, characterizing the usage of the yuan as merely “an alternative to operate.”

Past political issues, in search of options to the U.S. greenback that has grow to be dearer amid rising rates of interest additionally makes financial sense, mentioned Rebecca Ray, senior tutorial researcher on the Boston College International Growth Coverage Middle.

“They’re all facing the same global macroeconomic conditions, and the most important part of that is the US dollar is really expensive and hard to get a hold of. So there’s basically a global dollar shortage among current central banks,” Ray mentioned. “Central banks everywhere are looking for alternatives.”

Bolivia’s President Luis Arce mentioned earlier this month the Andean nation was in search of options amid a “dollar liquidity crisis.”

Throughout a go to to China in April, Brazilian President Luis Inácio Lula da Silva questioned the omnipresence of the U.S. greenback in overseas commerce.

“Who was it that decided that the dollar was the currency after the disappearance of the gold standard?” he mentioned.

Beijing is welcoming this new dynamic after years of a concerted effort to push for the yuan for use extra broadly on the worldwide stage.

“China clearly wants to challenge the global dominance of the dollar, both for practical and symbolic purposes,” Gedan mentioned.

Now that’s beginning to be extra interesting to extra international locations.

“China has been wanting to internationalize (its currency) for many years. What is new is that other countries are receptive to the idea because the current situation isn’t sustainable,” Ray mentioned.

Specialists agree although that any large-scale shift to the yuan is unlikely within the close to future.

“I think there’s a sort of natural limit that most countries will hit,” Myers mentioned. “So many transactions still need to be done using the dollar.”

The “primary limitation here is the fact that the Chinese financial system is still relatively closed,” Myers added.

Gedan added that no less than “for now, there is generally more faith in the Fed than in China’s central bankers.”

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Politi reported from Buenos Aires, Argentina. Related Press author Mauricio Savarese contributed to this report from Sao Paulo, Brazil.

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