Argentina, Brazil to sign trade currency pact: Lula

BUENOS AIRES, Sept 7 (Reuters) - Argentina and Brazil will sign a pact on Monday that will abolish the dollar in bilateral trade seen hitting $30 billion this year, Brazilian President Luiz Inacio Lula da Silva said in an interview published on Sunday.

The initiative, announced in September 2006 and which had been expected to come into effect in July 2007, seeks to reduce exchange rate costs and simplify bilateral trade between the south American neighbors.

The pact will be signed in Brazil on Monday, when Argentine President Cristina Fernandez attends a bilateral summit -- an initiative that could later be extended to other members of South American trade bloc Mercosur.

"On Monday we will sign an agreement with President Cristina (Fernandez de) Kirchner that will officially launch the use of reais and pesos in our trade exchange," Lula told Argentine newspaper Clarin in an interview.

"We are going to abolish the dollar as a currency in our trade."

He said he wanted Brazil and Argentina's trade balance to be more balanced. Argentina had a $2.7 billion trade deficit with its larger neighbor Brazil in the first half of the year.

"The trade balance should be a two-way street," he said. "There has to be certain balance: one can have a small difference, one year a trade deficit and the next a surplus."

"It is not in Brazil's interest that there be a big trade surplus in Brazil's favor."

Lula played down differences with Argentina over the failed Doha round of trade talks, which collapsed in late July.