By Fernando de Castro
President Luiz Inácio Lula da Silva’s proposal to grant a credit line from the BRICS Bank to Argentina through the New Development Bank faces financial difficulties due to the neighboring country’s low foreign exchange reserves.
Lula’s suggestion was presented last month during former president Dilma Rousseff’s inauguration at the head of the institution.
Lula assigned Dilma the mission of guaranteeing the necessary financing to Argentina.
The intention was to announce the agreement during the bank’s next annual governors’ meeting, with the participation of Argentine Economy Minister Sergio Massa, Finance Minister Fernando Haddad, and representatives of the other associated countries.
However, according to the newspaper O Estado de S. Paulo, the implementation of the operation faces obstacles since it would require a change to the bank’s statute since the institution’s purpose is to finance infrastructure projects for associated countries, not to grant liquidity loans to third parties.
Although it is possible to speed up the admission of Argentina as a partner of the bank, bypassing the usual procedure, the approval of a change in the statute to allow the loan seems unlikely.
CHANGE IN PURPOSE
If the statute is changed and the operation is carried out, the bank’s original role would be de-characterized, opening precedents for new requests for financial aid by other member countries.
An alternative put forward by Lula would be to grant guarantees from the BRICS countries for foreign trade operations between Argentina and Brazilian companies.
However, this maneuver also faces difficulties to be implemented.
To make it feasible, each group country would have to offer a portion of the necessary guarantees, which would have internal political implications and impact the guarantees intended for Brazilian states and municipalities abroad.
The most likely solution would be for China to grant Argentina direct aid, demanding compensation, such as using the money to pay for importing Chinese products.
The attempt to use the BRICS Bank for Argentina’s benefit reveals the vision of Lula and his allies about the institution’s governance, seeking to help Fernández’s government, even if it means changing the bank’s original purpose.
With information from Revista Oeste
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