MercoPress. South Atlantic News Agency

Brazil signs agreement to purchase 10 billion USD in IMF notes

This is the first time ever Brazil becomes an IMF creditor

The Brazilian government and the International Monetary Fund signed a technical agreement under which Brazil will buy up to 10 billion USD in IMF notes over the next two years.

Brazil's government last year expressed its intention to participate in an IMF program to raise funds from certain members nations as a way to expand lending operations to needy countries hurt by the global credit crisis. The purchases will represent the first time for Brazil to become an IMF creditor. In past years, Brazil often borrowed money from the IMF.

The IMF notes will be denominated in IMF Special Drawing Rights, which represent a basket of currencies. They will pay interest quarterly.

In a joint statement, the Brazilian Finance Ministry and the Brazilian Central Bank noted that the purchase of the IMF notes will not substantially alter Brazil's foreign reserve position, “it will merely alter its composition.” The statement said the Brazilian government will pay for the notes with money from existing reserves. The notes themselves will then be re-incorporated into reserves.

Brazilian foreign reserves currently stand at about 240 billion USD.

IMF said the agreement offers Brazil a safe investment instrument at the same time as boosting the Fund’s capacity to help its members to weather the global financial crisis.

“IMF can now add these resources to those already available through other agreements which contribute toward an increase in Fund resources that was requested in April 2009 by G-20 leaders and IMF”.