São Paulo – This Friday (21), the World Bank announced that it has swapped 1 US$ billion for euros for Morocco. The swap operation is used by countries and companies to hedge against exchange rate fluctuations. The country can switch the revenues in one currency for the revenues in another. It carries out the operation in tandem with a bank, which takes on the risk.
In the case of Morocco, the World Bank will retain the US dollars raised through a bond issue and Morocco will keep the euros. According to a World Bank press statement, the transaction will hedge Morocco against fluctuations of the US dollar relative to the euro. The operation will also reduce the risk of the Moroccan external debt.
The World Bank’s vice president and treasurer, Madelyn Antoncic, said the institution has perceived a “shift” in the cultures of several countries regarding foreign currency fluctuations. According to Antoncic, the countries are hedging themselves against risks “before they materialize” instead of reacting to “shock” after it has taken place.
*Translated by Gabriel Pomerancblum
