JOHANNESBURG (Reuters) – Brazil has submitted a proposal to Argentina aimed at securing Chinese yuan guarantees for Brazilian exports to the neighboring country in an initiative involving state-run lender Banco do Brasil, Finance Minister Fernando Haddad said on Wednesday.
Banco do Brasil under the proposal would oversee the conversion of yuan back into Brazilian reais, based on provided guarantees, Haddad told a press conference in Johannesburg on the sidelines of the BRICS nation summit.
Brazil’s third-largest trading partner, Argentina is in the midst of an economic crisis marked by soaring inflation and dwindling central bank reserves. Chinese yuan guarantees would provide security to Brazilian companies concerning their sales receipts amid Argentina’s dollar shortage.
Brazil’s Treasury looks favorably on the idea, Haddad said, because of the absence of default risk, and Brazil now awaits Argentina’s response.
The move, if approved by Argentina, would be positive for Brazilian companies because “they can have some sales flow for their products with 100% collaterals,” Haddad added.
Haddad, speaking a day after new fiscal rules were approved by Congress in Brazil, said his country must work to improve the macro-economic environment as quickly as possible, adding that the government must now set the pace to balance the budget.
Haddad said the new fiscal rules, measures to increase revenues and tax changes that still need Senate approval should bring a higher economic growth rate in Brazil.
(Reporting by Rachel Savage; Writing by Marcela Ayres; Editing by Will Dunham)
