Brazil Injects US$ 7 Billion in Economy to Prevent US Contagion

US dollar stack Brazilian monetary authorities eased rules on reserve requirements that banks must keep at the Central Bank in a push to inject liquidity and preserve Brazil from the impacts of the United States financial crisis.

The Central Bank delayed the introduction of higher rates for mandatory deposits from leasing companies by two months and raised the threshold on exemptions for cash, time and savings deposits, according to a Wednesday e-mailed statement.

The measures will add 13.2 billion reais (US$ 7.16 billion) to the financial system, the Central Bank said. The measures are geared to "preserve the financial system from the effects of liquidity restriction which has been observed in the international financial system," said the bank's release.

The measure reverses part of the Central bank's efforts to slow lending growth that's fueling domestic demand and stoking inflation. Policy makers began phasing in reserve requirements on cash deposits from lease underwriters for the first time in May, a move that would remove as much as 40 billion reais from credit markets. In Brazil, leases are commonly used as consumer loans.

Under the rules announced Wednesday, a reserve requirement of 20% of cash deposits from lease underwriters will take effect January 16, two months after the original schedule. The reserve requirement will increase to 25% in March, according to the Central bank.

Banks will only have to keep part of their cash, time and savings deposits at the Central bank if the reserve requirement exceeds 300 million reais, the Central bank said. Previously, this threshold was 100 million reais.

"This is positive for the banks because they will have more money available to lend in a moment when there's credit restrictions abroad," said Aloisio Lemos, an analyst at Agora Corretora in Rio de Janeiro. The higher thresholds will mainly benefit small and medium-sized banks, Lemos said.

Bank lending climbed 33% in the 12 months ended in July after a 27% expansion in 2007, the fastest in more than a decade. The Central bank is scheduled to release August figures on September 29.

This is not the first reaction to the US financial crisis. Last week the Brazilian government decided to "fortify" the country's Economic and Social Development, BNDES bank with the purpose of supporting Brazilian corporations that have loans from international banks and could not be able to renew them because of the current credit drought.

The first transfer of funds to BNDES totaled US$ 2.8 billion but the option remains open if Brazilian corporations "need to renew credits."

"Brazilian corporations are having problems to renew their credits with international financial institutions because of the crisis", admitted Mário Cypriano, CEO from Bradesco, the country's largest private bank.

Mercopress

Tags:

You May Also Like

Thanks to Holland and US Brazilian Flower Exports Grow 500%

Brazil is helping the world to become more flowery. This is what flower export ...

Brazil’s Big Contractors Looking for a Bigger Slice of Belo Monte’s Action

A sweetheart deal? Maybe. After all, the Brazilian Development Bank (BNDES) will ante up ...

Brazil to Push Its Sweets in Asia and Eastern Europe

Brazilians are talking about increasing exports of chocolates and sweets to markets with great ...

Brazil Finds Huge Gas Field Enough to Supply 30% of Country’s Demand

Brazil’s oil and gas company OGX informed the press that a new onshore field ...

If Only Brazil Could Produce Knowledge the Way It Makes Cars!

In 2007, Brazil surpassed Spain and France in automobile production. Brazil produced 2.972 million ...

Brazil Invented AIDS Emergency to Steal Patent, Says US Group

The American Conservative Union, which calls itself the U.S.’s oldest and largest grassroots conservative ...

Brazilian Gets Hollywood’s Women in Film Filmmaker Grant

Winners of the WIF Latina New Filmmaker Grant, announced in February by Women In ...

Lula Opens Bazil-Ghana Chamber of Commerce

Brazilian President Luiz Inácio Lula da Silva inaugurated the Brazil-Ghana Chamber of Commerce, yesterday, ...

A Peek Inside LA’s Little Brazil: a Festival of Flavors and Sounds

If you've spent any time in the Culver City area of Los Angeles, traveling ...

Brazil’s Agriculture Minister Resigns. Landless Won’t Miss Him.

Brazilian Minister of Agriculture, Roberto Rodrigues, announced that he is leaving the government. At ...