MNI BRIEF: Brazil Announces FX Hedge Program To Green Projects

The Brazilian government is launching a new forex hedging program aimed at attracting funds for green projects that will include several measures such as credit lines and derivatives options offered by multilateral lenders like the IDB and World Bank, the Finance Ministry said Monday, confirming MNI's reporting from last week.

Brazil's central bank will act as a intermediary for the program, the ministry said in a press release. The same law will authorize the central bank to carry out operations that enable exchange rate protection solutions, as the monetary authority will act as intermediary in derivatives contracts inside the program.

"The central bank does not take credit risk or counterparty risk, we have a guarantee on the principal in all cases. The cost in the longer term is not that of volatility, long-term hedge is an interest rate differential with US," said BCB governor Roberto Campos Neto.

As MNI also reported last week, Campos Neto said the central bank is studying longer-term swaps, between 12 and 18 months, but this measure is not related to the green currency hedge program and will be announced at a later date. The BCB’s stock of USD100 billion in swaps are currently issued with a 365-day maturity. (See MNI: Brazil To Bolster Legal Basis Of Longer CenBank Swaps)