Colombia and Ecuador have joined the push by Argentina and Brazil for an alternative to the dollar in regional trade transactions.
Finance ministers from Colombia and Ecuador told Emerging Markets they would be interested to work on a scheme that would limit the use of the US currency, as part of an effort to consolidate regional financial integration.
Oscar Zuluaga, the Colombian finance minister, said: “This is a positive idea and we hope that we can move in this direction. It would be important for trade with a country like Brazil to have a method in which payment could be made in local currencies instead of dollars.”
Ecuadorean finance minister Maria Elsa Viteri said: “We are really in favour of this. It is a path that needs to be considered, especially in this type of crisis. Regional institutions are important.”
Pedro Delgado, an Ecuadorean central bank official, said: “We favour a system of compensation similar to that used by Argentina and Brazil. It should be possible for us to apply this throughout the region.”
Brazil and Argentina last year became the first Latin American countries to set up a compensation scheme between their respective central banks, to allow the use of local currencies in their bilateral trade. The two central banks settle the difference in the trade balance in dollars on a daily basis.
But in practice the implementation of the system has been slow, Brazilian officials say. The Brazilian association of foreign trade has reported that the new scheme has been barely used by exporters so far.
Zuluaga said Colombia recognizes that expanding the scheme “would not be an easy task”.
The extension of the scheme, which would be based on a basket of Latin American currencies, was discussed during a meeting between president Luiz Inacio Lula da Silva of Brazil and his Colombian counterpart Alvaro Uribe.
Delgado said: “Ecuador is in favour of a basket of currencies. This is something we have been talking about with other countries. It is a way to avoid the flow of hard currency out of our country.”
The initiative may eventually ease rising protectionist tensions in the regions, following the increase of tariff and non-tariff barriers by Ecuador and Argentina in recent weeks.