China and Brazil yesterday agreed to swap up to the equivalent of $30 billion in each other’s currencies if need be so that their fast-growing commercial ties will not suffer if a new banking crisis causes dollar trade finance to dry up.

The three-year agreement marked a step to change global trade flows

The three-year agreement, signed before the start of a BRICS nations summit in Durban, South Africa, marked a step by the two largest economies in the emerging powers group to change global trade flows long dominated by the US and Europe.

Brazil, Russia, India, China and South Africa represent together a fifth of global GDP but have struggled to convert their economic weight into political clout in the international arena.

“Our interest is not to establish new relations with China, but to expand relations to be used in the case of turbulence in financial markets,” Brazilian Central Bank Governor Alexandre Tombini told reporters after the signing.

Brazilian Economy Minister Guido Mantega described the deal, called a bilateral currency swap accord, as “a sort of umbrella agreement” but he did not spell out what specific areas or categories of trade would be affected.

Brazil’s vast mineral resources and agricultural products have helped fuel China’s industrial growth and feed its people while the returns have helped bring a new era of prosperity to the Latin American giant.

Bilateral trade totalled around $75 billion last year. Of Brazil’s $41.2 billion exports to China, iron ore accounted for 34 per cent, while soy and soy products made up 29 per cent and crude oil 12 per cent.

Electronics, machinery and manufactured goods figured heavily in Brazil’s $34.2 billion of imports from China.

Brazilian officials have said they hope to have the trade and currency deal operating in the second half of 2013.

Mantega said it would act as a buffer against turbulence in international financial markets dominated by the US dollar.

“If there were shocks to the global financial market, with credit running short, we’d have credit from our biggest international partner, so there would be no interruption of trade,” he said.

Chinese officials at the signing made no comments but the People’s Bank of China said on its website the currency swap agreement was worth 190 billion yuan ($30.6 billion) and would facilitate trade and investment.

At the Durban summit, the group’s fifth since 2009, the heads of state of Brazil, Russia, India, China and South Africa are expected to endorse plans to create a joint foreign exchange reserves pool and an infrastructure bank.

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