Congress approves credit to maintain Brazil's good standin

Deputies and senators approved a bill drafted by the Brazilian government on Wednesday (2 May) that guarantees R$ 1.16 billion from the Federal Budget for the Export Guarantee Fund (FGE). The money will be used to cover recent defaults by Venezuela and Mozambique in loans guaranteed by the National Development Bank (BNDES) and other financial institutions in previous administrations. Now with congressional approval, the bill is sent to President Michel Temer for final sanction.

Companies from both countries relied on the FGE (under which Brazil acts as a guarantor with state and private banks) to buy products. After accessing the fund, Venezuela and Mozambique borrowed from BNDES and Crédit Suisse with the Brazilian government's guarantee. Since the Venezuelan and Mozambican governments have not paid their due instalments so far, the country had to pick up the debt. In order to repay the amounts, the National Congress had to approve a bill allowing for the allocation of the money, thus maintaining Brazil's reputation as a good payer abroad.

The Secretary for International Affairs of the Ministry of Finance, Marcello Estevão, alerted to two negative consequences of the bill not being approved: non-compliance with the Fiscal Responsibility Law (LRF) and the undermining of Brazil's credibility abroad. That is why President Temer called the approval of the bill "indispensable". The bill reallocates funds previously earmarked for other areas to the FGE.