Brazil could extend a line of credit to debt-laden Argentina in mutual trade © Getty Images / svetikd

The presidents of Argentina and Brazil have announced plans to continue working on the development of a mechanism allowing them to avoid using the US dollar in bilateral trade.

Crisis-hit Argentina is seeking to rebuild its reserves to cover trade costs and future debt repayments as a key component of a major debt deal with international creditors.

Brazilian President Luiz Inacio Lula da Silva and his Argentinian counterpart Alberto Fernandez were expected this week to reveal the new mechanism allowing Argentine firms to continue trading with Brazil without draining dollars from the country’s reserves. However, the leaders announced following a meeting on Tuesday that the plan still needed to be fine-tuned.

“The meeting was long, difficult and we will carry out many more meetings,” Lula said alongside Fernandez, as quoted by the Associated Press. “I made a commitment to my friend Alberto Fernandez that I will do every and any sacrifice so we can help Argentina in this difficult moment.”

Argentina drops dollar in trade with China Argentina drops dollar in trade with China

The proposed scheme reportedly includes a line of credit to finance Brazilian businesses that export to Argentina, aimed at avoiding the use of US dollars in settlements.

According to Brazilian Finance Minister Fernando Haddad, the two nations are studying possible guarantees in order for Brazil’s government to provide financing.

“They’ve made the decision to help make sure that Brazilian companies continue exporting to Argentina and they had asked us to do some homework, which we have already done, and have to do with the necessary guarantees,” Fernandez said. He added that Economy Ministry officials will be meeting their Brazilian counterparts next week to discuss the details.

Earlier this year, Argentina sealed an agreement with China that allows companies in the debt-laden nation to pay for Chinese imports in yuan.

Buenos Aires owes $44 billion to the International Monetary Fund (IMF). The nation is currently renegotiating the agreement signed with the fund last year to restructure some of its loans.

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