Payments in the Brazilian real and Uruguayan peso started on Monday. The agreement was signed on November 2 by the head of Brazilian Central Bank Alexandro Tombini and his Uruguayan counterpart Alberto Grana.
Both countries believe such a move would strengthen trade across Latin America.
“The agreement was the result of long negotiations between the countries belonging to Mercosur [the common market of South American countries – Ed.], as well as the global strategies of BRICS,” RIA quotes Carlos Francisco Teixeira da Silva, Professor of International Relations at the Federal University of Rio de Janeiro.
Silva says the measure is a “step forward” in Latin American monetary independence, and “the best opportunity for the countries of South America to get rid of the old mechanisms of economic regulations dictated by the United States.”
If the new mechanism proves to be successful, it can be further expanded to countries such as Paraguay, Bolivia, or Venezuela.
Alex Luis Ferreira, a doctor of economic sciences from the University of Sao Paulo, says “the Brazilian real is likely to be used as an exchange and reserve medium.”
In November President Vladimir Putin said Russia plans to leave the “dollar dictatorship” of the market and increase the use of the ruble and the yuan in trading with China. Settlements in yuan between China and Russia have increased 800 percent in annual terms between January and September 2014.
Russia, China and Latin American countries are not the only ones interested in ditching the US dollar. The Eurasian Economic Union (EEU) which also includes Belarus and Kazakhstan is planning to create a single market for financial services by 2025 which will simplify switching to dollar-free trading. Earlier this week the Russian State Duma proposed the creation of a single area for payment in national currencies. Such measures are expected to minimize Western influence on the economy of the EEU.