One reason for Brazil’s relative success at navigating the current economic crisis is that it maintains US $243 billion in foreign exchange reserves. These reserves have acted as a crisis fund, of sorts, for the Brazilian government. Brazil has been able to use the fund to avoid having to rely on credit lines from international institutions like the International Monetary Fund (IMF).
The reserves gave the central bank credibility when it deployed a number of mechanisms to help exporters, the financial system and the foreign exchange markets to deal with the sudden liquidity crisis, he said, adding that some have been removed and others can continue to be withdrawn.
Brazil’s National Development Bank, or BNDES, will end its extraordinary funding to the Brazilian economy in June, but the private sector should be ready to take over, he said. “I think it’s about time to exit all the crisis structures,” Meirelles said.
He added that while multilateral credit lines can be complementary, the crisis showed there are two major problems. First, the IMF would struggle to cope with the sheer volume of demand, and secondly, that the need during the crisis was proven to be higher than had been expected.