Brazil to roll out measures to help with foreign exchange hedges for green investments
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Brazil’s government plans to introduce new measures next Monday to assist foreigners with foreign exchange hedges for their investments in sustainable development. The goal is to avoid currency and fiscal risks for the Treasury.
According to two unnamed sources familiar with the plan, it involves creating a new channel for approximately $2 billion in forex derivatives, arranged by the Inter-American Development Bank (IDB) and distributed in Brazil by the central bank.
Using the IDB’s robust credit rating, the plan aims to offer more affordable and longer-term currency derivatives to attract foreign investment in Brazil’s green projects.
It will likely be issued through an executive order.
Sources suggest Brazil’s central bank will sign a comprehensive derivatives contract with the IDB to kickstart the program.
The aim is to assist projects that require a strong currency for their debt service coverage ratio.
For example, a solar power plant generates revenue in Brazilian reais but is financed in US dollars.
The new liquidity line would support such projects in meeting their financial obligations during unexpected currency fluctuations.
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