Bolivia is the latest South American nation to use Chinese yuan for trade

(Patria) - Bolivia is now using the yuan to pay for imports and exports, becoming the latest country in South America to regularly use the Chinese currency in a small but growing challenge to the hegemony of the American dollar in international financial transactions in the region, AP reports.

In the period from May to July this year, Bolivia carried out financial operations amounting to 278 million Chinese yuan (38.7 million dollars), which accounts for 10 percent of its foreign trade in that period, said Minister of Economy Marcelo Montenegro.

"We are already using the yuan. It is a reality and a good start," he told reporters. "Exporters of bananas, zinc, and wood conduct transactions in yuan, as do importers of vehicles and capital goods," he added. These electronic transactions are carried out through the state-owned Banco Unión. "The amount used in yuan is still relatively small, but it will increase over time," stated Montenegro.

With these transactions, Bolivia joins other countries in South America, primarily Brazil and Argentina, that use the yuan. These three countries are governed by leftist or left-leaning governments.

In Latin America and the Caribbean, the use of the yuan is growing, especially "in those countries that want to establish stronger ties with China, that consider themselves in some way politically aligned with this specific goal of reducing their overall reliance on the dollar and on the United States in general," said Margaret Myers, director of the Asia and Latin America program at the Inter-American Dialogue based in Washington.

The use of the yuan comes at a time when China's influence in the region is increasing with growing trade and investment.

"There is great concern in Washington about threats to the dollar's special role in regions like Latin America," said Benjamin Gedan, director of the Latin America Program at the Wilson Center in Washington. "China's new role as lender of last resort in Argentina and Bolivia's use of the yuan for international trade are signs of the times."

Earlier this year, the Argentine government introduced a plan to use the yuan to pay for imports from China as a way to preserve its dwindling foreign exchange reserves and increased the possibility of repaying debts to the International Monetary Fund with the Chinese currency. In Brazil, the yuan surpassed the euro as the second most important currency in its foreign exchange reserves at the end of 2022, when 5.37% of the central bank's assets were in the Chinese currency, compared to 4.74% for the euro.

In Bolivia, the yuan began to be used after months of a severe dollar shortage affecting the country's economy since February. Some analysts and opposition members have questioned the move to use the yuan. "It is not a long-term solution and looks more like an attempt to hide economic problems," said José Gabriel Espinoza, a professor of economics at the Bolivian Catholic University.

Bolivian President Luis Arce said earlier this month that the country is seeking alternatives amid a "dollar liquidity crisis."