In a noteworthy move aimed at diversifying its foreign currency reserves and overcoming dollar scarcity, the Bolivian Central Bank has reportedly begun executing settlements using the Chinese Yuan in some of its international transactions.
Bolivia’s Dollar Scarcity Concerns
The shortage of US dollars has been a pressing concern for Bolivia, given its historical reliance on the dollar for international trade and foreign transactions. Economic factors, global currency dynamics, and fluctuations in commodity prices have contributed to the challenge of obtaining an adequate supply of US dollars in the country.
To alleviate the impact of this scarcity, Bolivia seeks alternatives, and one such solution is the utilization of the Chinese Yuan. This move comes after a law was approved in May, granting the government the authority to sell up to half of its gold reserves for dollars on international markets.
Yuan Integrated into Bolivian Transactions
The Bolivian Central Bank’s decision to utilize the Chinese Yuan in some of its international transactions marks a significant milestone in Bolivia’s monetary policy. Despite not having Chinese banks in Bolivia, the Central Bank has successfully implemented transactions using the Yuan. This indicates the currency’s growing prominence on the global stage.
While speaking at a press conference Bolivia’s Economy Minister Marcelo Montenegro, however, emphasized that the presence of a Chinese bank in Bolivia would expedite and streamline the adoption process of the currency in these transactions.
Efforts to Bring Chinese Banks to Bolivia
China’s Ambassador to Bolivia, Huang Yazhong revealed that both the Chinese and Bolivian governments are working together to bring Chinese banks to Bolivia. This collaborative effort demonstrates the importance of fostering economic ties between the two nations and can serve as a stepping stone for further cooperation in various sectors.
A Trend in Financial Diversification
It appears Bolivia is following in the footstep of its South American counterparts, Argentina, and Brazil in adopting the Chinese Yuan. In March, Brazil and China signed a significant agreement to conduct bilateral trade transactions using their respective national currencies.
Similarly, Argentina has also taken steps to integrate the Chinese Yuan into its financial system. The country now allows importers to settle transactions with China using the Yuan, offering an alternative to traditional US dollar settlements.
Meanwhile, Brian Armstrong the CEO of Coinbase crypto has indicated that Bitcoin is the right long-term option for a shared currency between Brazil and Argentina.