10/07/2008 11h37
Government announces more measures to improve liquidity
Valor Econômico - 10/07/2008
The government announced new measures to diminish the impact of the lack of international credit lines. Two of them, with already decided implementation, will generate financing to exporters. While the BNDES will offer R$ 5 billion (US$ 2.27 billion) in new pre-shipping credits (production stage), the Central Bank (BC) will use exchange reserves to purchase assets of Brazilian banks abroad, with the buyback commitment from those institutions. This will allow them to recover liquidity in US dollars and resume the offer of Advances of Exchange Contracts (ACC, post-shipping financing type). The announcement was made by the Minister of Finance Guido Mantega and by the president of the Central Bank Henrique Meirelles, in the afternoon, after a meeting with president Luiz Inácio Lula da Silva. Little before nine p.m., Meirelles came back in public to announce that president da Silva had signed a Provisional Measure giving the Central Bank more legal safety to make two other kinds of operation. At first, however, these will not be necessary, he said, making it clear that he does not intend to make use of the legal change for now. Based on the provisional measure, the BC can, if it wishes, create two other lines of rediscount (loans of the monetary authority to the banks), one in Real, taking credit operations given by the banks in domestic currency as guarantee, and another one in foreign currency, guaranteed by loans and financings of the institutions, also in foreign currency. According to him, the legislation that existed before the provisional measure already allowed the Central Bank to make these loans. But there was still the need to give the National Monetary Council (CVM) powers to make rules regarding the pricing of the credit portfolios offered as guarantee, in case of the need for execution. The delegation of this power to the council is the main object of the provisional measure, he explained. The greater legal safety, he explained, will allow the Central Bank, if and when it deems necessary, to offer rediscount lines with a longer term than it offers today. Regardless of the PM, the Central Bank already has the legal authorization to practice terms of up to 180 days, renewable for another 180 days, in the rediscount. But, "out of conservatism", it only offers one-day rediscount operations today, with security in government bonds. The term of the possible new lines has not been defined yet. According to Meirelles, although it should not be used, the PM is important to expand the scope of instruments at hand for the BC to quickly react to the international liquidity shortage, which should last for some time.
