MercoPress. South Atlantic News Agency

Brazil eases foreign currency credit to exporters

Brazil's central bank will offer credit lines in foreign currencies as of next week in a bid to ease a credit crunch afflicting the country's exporters, the bank's president, Henrique Meirelles announced on Friday.

Meirelles said the first such auction will take place on Monday and it will accept Brazilian sovereign bonds as collateral for the loans. The size of the credit lines and terms of the loans will be determined at each auction. Starting with the second auction, it will accept sovereign bonds from other countries so long as they have a minimum credit rating of A. In addition to the sovereign bonds, banks can also use export receivables as collateral for the loans. The bank will also mandate that financial firms drawing on the funds use them to extend credit to exporters. The government last week allowed the central bank to extend credit lines in foreign currencies to local financial institutions and also loans through its discount window as it seeks to add liquidity to the domestic financial system. However, officials, including President Lula da Silva, have complained in recent days that banks drawing on those funds were investing them in high-yielding government bonds instead of lending them to companies in need of credit. Meantime Finance minister Guido Mantega said that despite the deterioration caused by the global financial crisis, Brazil will grow between 4 and 4.5%. Brazil's economy has grown rapidly in recent years but its financial markets have taken a thumping since the financial crisis took a turn for the worst after the collapse of Lehman Brothers Holdings Inc in September. "I still believe that we can keep growth between 4 and 4.5% for next year" Mantega told television station Globo News. In September, he had forecast Brazil's economy would expand 5% this year and 4% in 2009.