Brazil's Central Bank (BCB) and the People's Bank of China (PBoC) have renewed a currency swap agreement valued at R$ 157 billion (approximately US$28 billion). This agreement, valid for five years, aims to provide liquidity to Brazil's financial market during periods of economic instability.
Under the terms, the PBoC will receive Brazilian reais and deposit an equivalent amount in U.S. dollars into a special account at the BCB. These funds can only be transferred according to the agreement's stipulations. The BCB will monitor exchange rates and sovereign bond premiums to maintain economic equilibrium.
The BCB has expressed interest in establishing similar agreements with other countries, noting the increasing popularity of currency swaps among central banks since the 2007 financial crisis. Brazil also has a Foreign and International Monetary Authorities (FIMA) agreement with the U.S. Federal Reserve. The signing occurred during BCB Governor Gabriel Galípolo's visit to China with President Lula da Silva.
This collaboration strengthens financial ties between Brazil and China and provides a stable financial environment for mutual investments. The agreement allows companies from both nations to conduct transactions in their local currencies, reducing reliance on the U.S. dollar and lowering transaction costs.
Date: May 22, 2025