Bolivia gets closer to China, but trading in Yuan 'doubtful'

Discussion are taking place regarding the opening of China-based banks in Bolivia but there are serious doubts and concerns about trading with China in Yuan currency.

The national government’s problem is a “structural denial of the crisis in Bolivia,” which is why “distractive measures are taken that are not aimed at solving the crisis,” according to opposition senator Cecilia Requena, , Voice of America (VOA) reported.

“The yuan lacks the conditions to be an internationally accepted currency because it has many exchange restrictions that are heavily influenced by politics in an opaque manner,” Requena noted.

Jose Gabriel Espinoza, an economist and former director of the Central Bank of Bolivia, told VOA that the yuan pronouncements are more politically motivated in order to lower the population’s expectations owing to a scarcity of dollars. “You have to understand that in Bolivia and probably in the region, a large part of the consumer goods come from contraband. They do not come from Chinese markets or intermediaries in that country but are bought from secondary markets. This means resale, and for this, the dollar is used,” Espinoza said.

However, the Chinese ambassador to Bolivia, Huang Yazhong, made the announcement earlier this month about the usage of yuan in Bolivia, VOA reported.

For a currency to be effective globally, it must have a very high degree of demand, said financial consultant, Jaime Dunn.

Ninety per cent of transactions are made in dollars, 60 per cent of the Swift system (which facilitates the movement of capital between countries) is in dollars and the yuan is less than 2 per cent. One yuan is currently equivalent to 0.14 dollars and 0.98 bolivianos.

(With inputs from ANI)

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