UPDATE 1-Brazil simplifies system for local currency transactions with neighbors

(Adds more details, context) BRASILIA, April 20 (Reuters) - Brazil's government, seeking to increase competition and reduce costs in transactions in local currency, decided on Thursday to simplify procedures of the local currency payment system (SML), an infrastructure that brings together the central banks of Brazil, Argentina, Paraguay and Uruguay. In a statement, Brazil's central bank said the resolution approved by the National Monetary Council, the country's top economic policy body, expands the list of institutions eligible to operate in the SML "in order to make it an additional product for clients of institutions authorized to operate in foreign exchange by the central bank." The measure comes after President Luiz Inacio Lula da Silva recently stressed that developing countries should depend less on the U.S. dollar, aiming for increased trade in local currencies.

"We need a currency that gives countries more calm, because today a country needs to run after the dollar to be able to export, when it could export in its own currency," he said last week.

The move also follows the

freefall of Argentina's peso currency, which hit a record low against the U.S. dollar as concerns grew about the country's economy, with 104% inflation, reserves dwindling and drought hitting exports.

According to the central bank, the changes also involve simplification and standardization of operational procedures in the system, which enables one of the counterparties, typically the exporter, to establish the cost of their goods or services in their native currency. This eliminates exposure to exchange rate fluctuations.

The SML system is established by agreement between central banks. Since 2008, the systems in which the Brazilian central bank participates have moved around 50 billion reais ($9.9 billion), said the central bank.

($1 = 5.0486 reais) (Reporting by Marcela Ayres; Editing by Leslie Adler and David Gregorio)

Reuters

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UPDATE 1-Brazil simplifies system for local currency transactions with neighbors

By Reuters

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