UPDATE 2-Brazil to lend $20 bln to co's from reserves-cenbank

Wed Jan 14, 2009 4:09pm EST
(Adds figure on interventions on the spot currency market)
By Walter Brandimarte
NEW YORK, Jan 14 (Reuters) - Brazil plans to lend some $20 billion of its international reserves to more than 4,000 domestic companies with problems rolling over their foreign obligations, the head of the central bank said on Wednesday.
The new facility, designed to ease the impact of the global credit crisis in Latin America's largest economy, will be available this month to any domestic firms with foreign debt maturing from September 2008, when the crisis deepened, until the end of 2009, he explained.
Central bank president Henrique Meirelles said the bank intends using this strategy to make up for the decline in supply of foreign credit to Brazilian companies, eventually lowering financing costs in the domestic market as well.
"The supply of domestic credit is already normal in Brazil, although rates are still high," the central bank chief told reporters and investors in a presentation organized by the Brazilian-American Chamber of Commerce in New York.
"One of the most important reasons for (high rates) is the fact that external credit lines have not returned to normal levels, so companies which cannot roll over their foreign debt are taking loans in Brazil," he added.
Before the global credit crisis took its toll on emerging markets, Brazilian companies were rolling over all of their foreign debt as well as taking on additional loans abroad, at a rate of 120 percent to 130 percent of the maturing obligations.
That rate fell to as low as 22 percent after Lehman Brothers collapsed, spreading havoc in global credit markets. It has been recovering slowly since, Meirelles said, finishing the year at 50 percent of the maturing obligations.
"In the first few days of January, that rollover rate was even higher but we are not sure if that level is sustainable" in the short term, the central bank chief said.
Brazil has more than $200 billion in foreign reserves and can also make use of a $30 billion swap line agreed with the U.S. Federal Reserve to finance local companies. But Meirelles said that "so far we decided that there is no reason to withdraw" dollars from that line.
Direct loans to Brazilian companies are the latest of a series of measures adopted by the government to keep credit flowing in Brazil, which is seeing a severe slowdown of its economy in the last couple of months.
The central bank has already lent about $13 billion to Brazilian exporters in the last quarter of 2008 and that kind of financing, available through loans to foreign trade or repo dollar auctions, will continue to be offered during 2009, Meirelles said.
It has also sold $11.6 billion on the spot foreign exchange market in the same period, according to central bank data. That strategy did not stop the real from weakening some 24 percent last year, however.