CAF offers $600 million in guarantees to boost Brazil

The Citi International Foreign Exchange PlatformDevelopment Bank of Latin America (CAF) offers a $600 million counter-guarantee for goods exported from Brazil to Argentina, to ensure the smooth progress of bilateral trade.

Brazil's Finance Minister Fernando Haddad and Argentina's Economy Minister Sergio Massa stated on Monday that the proposal still requires approval from the CAF board of directors, scheduled for September 14th.

Although the proposal has received positive feedback from the governments of Brazil and Argentina, it still requires formal approval from the CAF board of directors. If approved, this will provide more stable support for bilateral trade, helping to address current economic challenges.

Massa, in remarks to the media, mentioned that the proposal came from the Development Bank of Latin America (CAF), so there is no doubt that they will approve this proposal.

Compared to Brazil's initial proposal, this proposal is evidently more beneficial for Argentina, which is facing a shortage of funds. Brazil suggested that the Argentine government provide approximately $140 million in guarantees in yuan for the equivalent exports from Brazil. The main goal is to ensure the smooth progress of its export trade, especially in transactions involving automobiles and food products, by providing counter-guarantee payments for Brazilian exports.

However, Brazil's Finance Minister Haddad also recognizes that this arrangement might reduce Argentina's yuan reserves.

This move reflects the active effort in economic cooperation between Brazil and Argentina, and it also serves as a measure to confront Argentina's current economic crisis, characterized by high inflation and a decrease in foreign exchange reserves.

With the support of the Development Bank of Latin America (CAF), Argentina does not need to deplete these reserves to ensure export safety. Haddad emphasized that Brazil's initial proposal remains valid and will continue to adopt measures that are more advantageous for Argentina without causing any issues for Brazil.

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