Sistema de Pagamentos em Moeda Local
Sistema de Pagamentos em Moeda Local (Portuguese) or Sistema de Pagos en Monedas Locales (Spanish; both SML for short - literally translated: payment method via local currency ) is a payment system that was tested by Brazil and Argentina for the first time on October 3rd, 2008 . This payment method makes it possible to pay for the import and export of goods (or receive payments) in their own local currency without having to convert the total price into American dollars in between. Theoretically, this saves costs, as fees are often charged for the exchange.
Argentina is Brazil's largest trading partner in Latin America . And after the success of the payment system, the Brazilian central bank is now considering whether it can expand this project to other countries as well. Among other things, the accession of Paraguay and Uruguay is currently being examined. Countries like India , Russia and China have also expressed interest in the bilateral trading system with Brazil .
How does SML work?
The big advantage of the new system is that both the importer and the exporter are settled in their own local currency. This is a huge relief, especially for small and medium-sized companies that often have no experience in global trade. For example, local hammock retailers can now easily export their product to Argentina without the need to convert the price of the product into US dollars .
Both parties, buyer and seller, agree on a price. The Argentine importer forwards the price (in Brazilian Reais ) and all necessary data to his Argentine bank . The conversion and registration of the transaction is then carried out by the Argentine bank. Since the final price is fixed in Brazilian reais , the Brazilian exporter always knows exactly what amount he will get without having to accept a conversion into US dollars or currency fluctuations.
Brazil , as the economically strongest country in South America, is hoping for increasing bilateral trade between the countries. The payment system with Argentina has proven itself in the past, and its popularity continues to grow. Small and medium-sized companies in particular use the payment system, also because they often have no experience in global trade and the ability to set the price in their own currency makes the transaction easier.
Individual evidence
- ↑ http://g1.globo.com/Noticias/Economia_Negocios/0,,MUL1253389-9356,00-PARA+MEIRELLES+BRASIL+JA+SAIU+DA+RECESSAO.html