China's yuan expands its growing foothold in South America as Bolivia reduces reliance on US dollar

• China's yuan is expanding its foothold in South America as Bolivia reduces its reliance on the dollar.
• The country's yuan transactions from May to July accounted for about 10% of its foreign trade in that span.
• Bolivia has been hit by dollar shortages recently as lower natural gas production hit exports.

Bolivia is reducing its reliance on the US dollar and turning to the yuan, marking the latest sign that China's currency is expanding its growing foothold in South America.

The country made financial transactions totaling 278 million Chinese yuan ($39 million) from May through July, or about 10% of its foreign trade in that span, Bolivia's economy minister said Thursday.

"We're already using the yuan. It's a reality and a good start," Marcelo Montenegro said at a news conference, according to the Associated Press. "Banana, zinc, and wood manufacturing exporters are conducting transactions in yuan, as well as importers of vehicles and capital goods."

He later added, "The amount being used in yuan is still relatively small, but it will increase over time."

Bolivia's currency, the boliviano, is pegged to the dollar. But the country has been hit by dollar shortages recently as lower natural gas production hit exports.

As its foreign exchange reserves shrink, the government's ability to defend the dollar peg has come under pressure.

Bolivia joins South America's two biggest economies, Argentina and Brazil, in tilting toward the yuan and away from the dollar. 

In April, Argentina said it will start buying the bulk of its Chinese imports in yuan instead of dollars, as it seeks to preserve its shrinking supply of greenbacks.

Argentine companies are increasingly turning to China's yuan amid dollar shortages, though many consumers use the dollar in daily purchases as hyperinflation slams the peso.

And in February, Brazil agreed to using the yuan in cross-border transactions with China. And Brazilian President Luiz Inácio Lula da Silva has urged developing nations to find an alternative currency to the dollar, denouncing the central role of the greenback in global trade.