Companies with debts abroad to use up to US$ 36 billion from reserves
Folha de S. Paulo 02/06/2009
The Central Bank is willing to transfer up to US$ 36 billion from the Foreign Exchange Reserves of the Government to companies with difficulties to refinance their debts in the foreign market. The resources will be lent by the Central Bank in several installments - the first one of which to be released on the 27th. The amount to be released is equivalent to the total number of installments of the foreign debt of companies based in Brazil whose maturity is scheduled between October of 2008 and December of this year. Currently, the international reserves of the government are at US$ 200 billion. The President of the Central Bank, Henrique Meirelles, affirmed the institution has enough resources to finance all the US$ 36 billion in debts that will become due during that period, but he estimated that the demand for funds should be at nearly US$ 20 billion. "The expectation is that the companies are able to postpone part of what becomes due on their own", he said. The aid of the Central Bank will be released as follows: the company interested in the credit line should go to a bank to present the value and the maturity schedule of its foreign debt. With that information, the financial institution goes to the Central Bank and requests a loan in US Dollars. The Central Bank will then grant the bank a loan in US Dollars to mature within one year, provided that all guarantees that this loan will be actually paid at its maturity have been presented. Only then will the financial institution release the funds to the company. In the operation, the Central Bank will charge the banks an interest rate equivalent to the Libor rate - reference rate in the foreign market - plus 1.5% a year, which is normally the interest rate practiced in the export loans. The financial institutions are free to charge the companies the interests they want. According to the President of the Central Bank, Henrique Meirelles, the measure should help normalize the credit offer. "That should also help to reduce the [banking] "spread"."