“American dominance in the Western Hemisphere will never be questioned again,” the US State Department declared this month promoting a five-minute video on the Monroe Doctrine.
It was more than bluster. The Doctrine is in full effect. Venezuela has been effectively governed by Marco Rubio via WhatsApp ever since the country’s president was kidnapped by Delta Force in the middle of the night. In Honduras, Donald Trump endorsed Nasry Asfura and threatened US support if he lost; Asfura prevailed by less than a percentage point after a chaotic and disputed count. In Colombia, Trump backed the hard-right Abelardo de la Espriella, who joined his international Shield of the Americas organisation on taking office this month, and was promised $1bn in US security assistance the same day (8 August). Trump loves lackeys in a region swelling with them: from Milei and Kast in the Southern Cone to Noboa at the equator to Bukele in Central America.
Latin America’s largest state, Brazil, votes in October. A victory for Flávio Bolsonaro would give Trump his biggest regional prize yet. But beyond the Americas, Brazil’s election is frequently depicted as existential for the planet. The current president, Lula da Silva, advances global climate action and protection of the Amazon rainforest; Bolsonaro, like Trump, denies climate change and, as Lula’s predecessor, his father dramatically expanded Amazon deforestation. Its geopolitical stakes are no smaller.
Having been a founding member of Brics in 2009, Brazil under Lula has pushed further towards multipolarity. His former chief of staff Dilma Rousseff is the head of Brics New Development Bank, which provides investment beyond the US-dominated Bretton Woods institutions. China is already by far Brazil’s largest trade partner. In the current US-Brazil tariff dispute, China backed Brazil, with President Xi Jinping calling Lula to denounce “external interference”. The two discussed a possible trade deal between China and Mercosur (a South American trading bloc that includes Brazil) and deeper cooperation on artificial intelligence, satellites and critical minerals. Last week, the Brazilian government split its AI investment between Chinese and US firms, declaring that the aim was “not to depend on a single company, technology or country”.
Lula has also criticised the exorbitant privilege flowing to the US from the dollar’s global reserve currency status, while promoting trade in local currencies. Roughly half of world trade is invoiced in dollars; 57 per cent of central bank reserves are held in it; and it sits on one side of nine out of ten foreign-exchange trades. That privilege helps Washington finance annual deficits now approaching $2trn more cheaply. It also gives US authorities coercive capacity over transactions they otherwise have nothing to do with: banks can be sanctioned, assets frozen and payments blocked. Trump’s National Security Strategy promises to preserve that power and “bind” developing countries’ currencies more closely to the dollar.
One release from that bind might be found in something as prosaic as Brazil’s digital payment platform. “Credit cards will cease to exist at some point soon,” prophesied Roberto Campos Neto, Brazil’s then Central Bank Governor in 2022. Two years prior, his bank had launched Pix, a public instant-payment system. Four years on, his claim that “this system eliminates the need to have a credit card” sounds less fanciful.
More than 90 per cent of Brazilian adults have used Pix and more than half of transactions now run through it. Scan a QR code or enter a phone number and the money arrives within seconds. Pix is cheap because instead of each payment travelling through a private card network, money moves between accounts across a public infrastructure. Transfers between individuals are generally free. For a Brazilian business, accepting Pix costs on average 0.22 per cent, against around 2.2 per cent for a credit card. Nobel prize-winning economist Paul Krugman has suggested that Brazil might have “invented the future of money”. Visa and Mastercard have reason to fear he might be right.
Since Pix was launched, credit card companies’ share of transactions in Brazil has dropped from above 20 to 15 per cent. Falling market share in Latin America’s largest economy is bad enough. But the larger threat of Pix would be in its imitation. No wonder Mastercard’s Securities and Exchange Commission filings for last year note the competition it faces from “digital public infrastructure”; Visa has made similar warnings to investors. Their industry representatives have lobbied Washington over Pix. Both companies also contributed to Trump’s inauguration.
Last month, the Trump administration imposed new tariffs on thousands of Brazilian products, after accusing the country of a slew of “unfair trade practices”. Among them was the hit to US card-company revenues from the Central Bank-operated Pix. Gabriel Galípolo, Campos Neto’s successor, captured the logical absurdity of the complaint, comparing it to “saying that creating basic sanitation hurt the revenues of those who own water trucks”. Trump’s usual tariff arithmetic fails here too. For decades he has treated an American trade deficit as proof of foreign cheating. But the US does not have one with Brazil: it runs a significant trade surplus in both goods and services.
The real issue is Pix’s potential threat to dollar dominance, rather than the volume of US-Brazilian trade. For transactions in Brazil, the hit to US companies’ market share is already present; linked internationally and used for business and trade outside the dollar, Pix could challenge the larger global dollar system. Following Trump’s tariffs, the Central Bank said it was assessing integrating Pix with other countries’ platforms and participating in multilateral payment hubs. The bank has already signed information-sharing agreements with 65 foreign counterparts.
The next day, India’s central bank governor confirmed that Brics members are discussing linking their fast-payment systems and central bank digital currencies for cross-border payments. Trump has threatened Brics countries with tariffs of 100 per cent if they try to rival the dollar as the global reserve currency. In a phone call last week, Lula raised Pix directly with Trump and rejected Washington’s allegations. On the campaign trail, Lula has been unequivocal: “No one is going to change our Pix. It’s public, it’s free, and it will stay that way.”
Lula standing up for Pix has proved popular at home. Sensing political danger, Bolsonaro, Lula’s opponent in October, travelled to Washington earlier this summer. He proposed preventing Pix from integrating with non-Western payment systems and asked Washington to postpone the tariffs until after the election. The Trump ally is right to be worried. A July poll found 42 per cent of Brazilians saying the tariffs pushed them towards Lula and just 27 per cent towards Bolsonaro. Still, the race is tightening: the latest Datafolha polling has the incumbent winning 47-43 in the second round run-off.
Trump’s hemispheric hectoring is meant to make plain the price of disobedience. Voters across the region have taken heed. But it also advertises the price of dependence, which includes how you pay for your groceries. How other countries, in Latin America and beyond, interpret the force behind US threats – and what they build together in response – is what will determine the future of money. Brazil has shown that there is no technological need to fund US credit card companies and there is a path beyond dollar dominance. But it cannot walk it alone.
[Further reading: The normalisation of Israeli violence]
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Subscribe here to commentBrazil’s development of Pix points the way for countries like the UK who are also in danger from the Visa/Mastercard cartel. At present, an executive order from Trump to these companies could shut down our whole credit and debit card system, forcing us back to using cash or cheques for every transaction. The Government needs to tell the Bank of England to set up our own sovereign payment system, which would have the added advantage of increasing growth as a percentage of every transaction would no longer be leaving the country.