With Brazil’s backing, Argentina wins acceptance to BRICS bank
BRICS members will formally discuss Argentina’s entry in August, but move has support of institution’s board.
“Sergio, I have good news for you, I’ve found the way out. The board of directors agrees with Argentina joining the bank. It will be announced at the August assembly in South Africa,” Rousseff said as she greeted Massa at the NBD’S headquarters in Pudon, the high-rise business district of Shanghai which is considered to be the financial capital of China.
The board of directors will also include the incorporation of Egypt, Zimbabwe and Saudi Arabia into the multilateral financial institution, sources close to Massa revealed.
The entrance fee will be a capital injection of US$1 billion between the four nations or US$250 million each. Argentina will reportedly pay its share with sovereign bonds now in the hands of the Sustainability Guarantee Fund of the ANSES social security administration, the Treasury and the Central Bank. The Economy Ministry assures that these dollar bonds total some US$40 billion.
The NDB has a loan capacity of US$50 billion, which will shortly be doubled to US$100 million. That technical availability will enable Massa to have financial bridging with Brazil to finance foreign trade between both countries and thus deflate the demand for dollars from the import of goods and inputs from Argentina’s leading trade partner.
According to Rousseff’s analysis, this alternative is the most efficient way of providing the financial aid agreed between Presidents Alberto Fernández and Luiz Inácio Lula Da Silva.
The BRICS group of emerging economies is made up of Brazil, Russia, India, China and South Africa.
MASSA IN CHINA
The announcement emerged from a meeting in which Roussef received Massa, Central Bank governor Miguel Pesce and deputy Máximo Kirchner. This meeting was Massa’s last activity in Shanghai before heading to Beijing for talks with Chinese government authorities.
In the Chinese capital, Argentina’s economy minister will be negotiating the renewal of currency swaps to the tune of US$18 billion of which US$5 billion to US$8 billion may be used to intervene on money markets.
Facing inflation over 100 percent, Argentina’s central bank has no liquid cash reserves left, according to local economists’ estimates.
Massa arrived in Shanghai on May 30 and travelled to Beijing yesterday. The economy minister was due to meet with Yi Gang, governor of the People’s Bank of China, to discuss a “renewal and expansion” of Argentina’s existing currency swap line with the Asian giant worth 130 billion yuan (US$18.4 billion) swap line. Although the money sits in Argentina’s Central Bank reserves, only a portion, about US$5 billion, is actually allowed to be used as of now to pay for imports or pay down debts. The government is seeking access to a greater portion of the swap.
Talks with China come as Massa is also renegotiating Argentina’s Us$44-billion programme with the International Monetary Fund, aiming to get more cash up front from the Washington lender after a record drought exacerbated the country’s economic crisis.
As for the BRICS bank, the financing for Argentina will come from an expansion of capital supplied by Brazil, local outlets reported. The bank has already authorised similar operations between South Africa and several African countries as well as to India to thus help Bangladesh.
The alternative of Brazil expanding its capital arises from the bank’s statutes not contemplating the authorisation of credits to confront crises in the reserves of countries who are not members, which will now be solved by this announcement of the incorporation of Argentina into the bank.