Brasília – The president at the Central Bank of Brazil, Henrique Meirelles, announced today (06) that the institution is going to offer a line of credit using dollars from foreign reserves in order to fund exports.
According to Meirelles, the Central Bank is going to purchase bonds from foreign private banks and then pay the institutions using the United States currency. After some time, the monetary authority is going to return the bonds to the banks, which will then reimburse the dollars they received.
Meirelles explained that the operation will actually function as a loan, and will not deplete Brazilian foreign reserves, which currently total US$ 207 billion. The reason is that dollars from the reserves are going to be returned later on. “This is an intelligent way of using our reserves," he declared.
The president at the Central Bank did not provide details on the lines of credit, such as the deadlines for the contracts and the volume of United States currency to be offered. However, Meirelles stated that the institution has US$ 23 billion available for operating in the futures exchange.
The system is the same as with the US$ 2.5 billion that have been auctioned by the Central Bank since the international crisis worsened. Over the last two weeks, the institution sold US$ 1 billion with contracts for future repurchase.
By injecting dollars into the market, the Central Bank will obtain the corresponding deposits in Brazilian reals, but further on it will receive the United States currency back.
“What really takes place is an exchange of assets, which allows us to maintain the level of reserves and also feed the foreign trade system," explained the minister of Finance, Guido Mantega. The process for the US$ 1.5 billion foreign exchange swap auction, held today for the first time since May 2006, was a similar one.
Meirelles also said that the Central Bank is prepared to take additional measures. “We have over US$ 200 billion in foreign reserves, over US$ 20 billion in the futures market, and 200 billion reals (US$ 97.3 billion) in mandatory deposits," he stated.
In the assessment of the president at the Central Bank, these funds are only available due to previous action taken by the institution, which purchased dollars in the futures market when the United States currency was depreciated. “Those operations were met with harsh criticism at times [because they led to greater losses by the institution], but they are important when the country needs funds, as is the case right now," he said.
*Translated by Gabriel Pomerancblum