* Agreement to trade in own currencies up to $30 bln a year
* Two BRICS members move to change global trade flows
* BRICS summit expected to boost development bank plan
* Leaders of BRICS will also focus on ties with Africa
(Updates with new lead)
By Agnieszka Flak and Marina Lopes
DURBAN, South Africa, March 26 (Reuters) - China and Brazil
agreed on Tuesday to swap up to the equivalent of $30 billion in
each other's currencies if need be so that their fast-growing
commercial ties will not suffer if a new banking crisis causes
dollar trade finance to dry up.
The three-year agreement, signed before the start of a BRICS
nations summit in Durban, South Africa, marked a step by the two
largest economies in the emerging powers group to change global
trade flows long dominated by the United States and Europe.
Brazil, Russia, India, China and South Africa represent
together a fifth of global GDP but have struggled to convert
their economic weight into political clout in the international
"Our interest is not to establish new relations with China,
but to expand relations to be used in the case of turbulence in
financial markets," Brazilian Central Bank Governor Alexandre
Tombini told reporters after the signing.
Brazilian Economy Minister Guido Mantega described the deal,
called a bilateral currency swap accord, as "a sort of umbrella
agreement" but he did not spell out what specific areas or
categories of trade would be affected.
Brazil's vast mineral resources and agricultural products
have helped fuel China's industrial growth and feed its people
while the returns have helped bring a new era of prosperity to
the Latin American giant.
Bilateral trade totalled around $75 billion last year. Of
Brazil's $41.2 billion exports to China, iron ore accounted for
34 percent, while soy and soy products made up 29 percent and
crude oil 12 percent.
Electronics, machinery and manufactured goods figured
heavily in Brazil's $34.2 billion of imports from China.
Brazilian officials have said they hope to have the trade
and currency deal operating in the second half of 2013.
Mantega said it would act as a buffer against turbulence in
international financial markets dominated by the U.S. dollar.
"If there were shocks to the global financial market, with
credit running short, we'd have credit from our biggest
international partner, so there would be no interruption of
trade," he said.
Chinese officials at the signing made no comments but the
People's Bank of China said on its website the currency swap
agreement was worth 190 billion yuan ($30.6 billion) and would
facilitate trade and investment.
"SOME PROGRESS" ON BRICS BANK
At the Durban summit, the group's fifth since 2009, the
heads of state of Brazil, Russia, India, China and South Africa
are expected to endorse plans to create a joint foreign exchange
reserves pool and an infrastructure bank.
These objectives reflect frustration among emerging market
nations at having to rely on the World Bank and International
Monetary Fund, which they see as still reflecting the interests
of the United States and other rich nations.
The reserves pool of central bank money would be available
to emerging economies facing balance of payments difficulties or
could be tapped to stabilise economies during periods of global
financial crises, according to documents outlining the plan that
were obtained by Reuters.
Officials say the BRICS are considering injecting an initial
$50 billion into the new infrastructure bank. But the specifics
of the scale, location and structure of the institution were
still being thrashed out.
"It's a huge job with a lot of difficult issues to be agreed
on. In principle, there is some progress," Russian Deputy
Finance Minister Sergey Anatolyevich Storchak told Reuters.
The bank would support the ever-growing financing needs in
emerging and developing nations for roads, modern ports, and
reliable power and rail services.
The BRICS leaders were also due to discuss trade and
investment relations with Africa, at a time when many on the
economically buoyant continent are seeking more balance and a
different focus in trade and investment, especially from the
giant of the group, China.
South African President Jacob Zuma on Tuesday welcomed new
Chinese President Xi Jinping, who is making his first visit as
head of state to Africa.
In Tanzania on Monday, Xi told Africans he wanted a
relationship of equals that would help the continent develop,
responding to concerns that Beijing is only interested in
exploiting its abundant raw materials.
($1 = 6.2107 Chinese yuan)
($1 = 9.2946 South African rand)
(Additional reporting by Peter Murphy in Sao Paulo; Writing by
Pascal Fletcher; Editing by Jon Herskovitz and Angus MacSwan)
© 2022 Thomson/Reuters. All rights reserved.