JOHANNESBURG, Aug 23 (Reuters) – Brazil has launched a proposal aimed at securing Chinese yuan guarantees for Brazilian exports to neighboring countries in an effort involving state lender Banco do Brasil (BBAS3.SA). It has been submitted to Argentina, Finance Minister Fernando Haddad said. on wednesday.
Speaking at a press conference in Johannesburg on the sidelines of the BRICS summit, Haddad said the proposal would oversee the conversion of the yuan back into the Brazilian real based on guarantees provided by Banco do Brasil.
Argentina, Brazil’s third-largest trading partner, is suffering from an economic crisis characterized by soaring inflation and declining central bank reserves. The Chinese yuan guarantee would provide Brazilian companies with a turnover guarantee amid Argentina’s dollar shortage.
Under this plan, the Brazilian government will invest $700 million to provide loans to Argentine importers trading with Brazilian exporters within the established framework of the Export Financing Program (Proex) established in 1991. A new line of credit for the Real ($144 million) will be created, the person said. Government sources with direct knowledge of the matter.
The money will not require Treasury contributions and will be a readily available voluntary resource, said the person, who asked not to be identified because negotiations are ongoing.
Under the proposed approach, Argentina would provide a renminbi guarantee matching the exact value of the credit facility and then transfer these funds to Brazil through an exchange operation managed by Banco do Brasil.
Proex will pay the Brazilian exporter a security deposit in Brazilian reals protected by the Bank of Brazil, which will be immediately transferred to the national treasury if the Argentine importer fails to meet its obligations under the program. It will be.
Haddad said Brazil’s finance ministry was happy with the proposal because there was no risk of default, and Brazil was now waiting for Argentina’s response.
Haddad added that if the measure is approved by Argentina, it will be a win for Brazilian companies, as they will be able to “secure the sales flow of their products with 100% collateral.”
Speaking a day after Brazil’s parliament approved new fiscal rules, Haddad said the country needed to work on improving the macroeconomic environment as soon as possible, and the government now needed to set the pace to balance the budget. I added that there is.
Haddad said new fiscal rules, revenue-boosting measures and tax changes that still need to be approved by the Senate should boost Brazil’s economic growth.
(1 dollar = 4.8529 reais)
Reporting by Rachel Savage from Johannesburg and Marcella Ayres from Brasilia.Editing: Will Dunham and David Gregorio
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