CAF Provides $600 Million in Counter-Guarantees for Brazilian Exports to Argentina – Ministers, by Reuters

BRASILIA (Reuters) – The Latin American development bank CAF has proposed a $600 million assistance package aimed at providing counter-guarantee payments for Brazilian exports to Argentina, a move intended to facilitate trade flows between the nations, according to ministers from both countries on Monday.

Brazilian Finance Minister Fernando Haddad and Argentine Minister Sergio Massa announced that the proposal requires approval from a CAF board meeting set for September 14.

Massa expressed confidence in the approval, noting, "We have no doubt that they will approve the operation because it was the CAF’s initiative," following discussions with Haddad in Brasilia.

This new offer presents a more favorable arrangement for the financially struggling Argentina compared to an earlier proposal from Brazil, which required around $140 million in guarantees from the Argentine government for Brazilian exports of equal value.

Under this initiative, state-run Banco do Brasil will serve as the guarantor for Brazilian exports, as mentioned by Haddad.

Argentina, Brazil’s third-largest trading partner, is currently grappling with an economic crisis characterized by high inflation and declining central bank reserves.

The initial proposition by the Brazilian government included yuan guarantees designed to provide security for its companies concerning sales receipts due to Argentina’s dollar shortage. However, Haddad acknowledged that this arrangement would see a reduction in Argentina’s yuan reserves.

"With the backing of CAF, Argentina does not need to deplete these reserves to secure exports," Haddad emphasized, indicating that Brazil’s initial proposal remains unchanged and aims to prioritize comfort for Argentina without presenting any complications for Brazil.

Haddad noted that the CAF’s offer of counter-guarantees will mainly focus on automotive trade but will also cover food products.