The Ministry of Economy is pushing for the implementation of a new export insurance model this year

The debate over implementing a new export insurance model has advanced in the Ministry of Economy in the last few days with the goal of having such changes approved later this year, said João Luis Rossi, the ministry’s special assistant secretary for international affairs.

“We hope to complete the model this year,” he told Valor. “Over the last few days, we had good conversations with the National Treasury. So I think we’re close [to the new model].”

According to him, the idea is to have the new export insurance model left “outside the federal government’s budget,” operating based on a monetary fund that would require capitalization. Rossi also explained that it has not yet been decided how the Treasury would participate in the capitalization process.

As Valor informed in February, the “Export Guarantee Fund” (FGE in Portuguese) budget dropped 35% to R$ 1.107 billion, an amount sufficient for it to function only until August. “That’s when we started discussing the implementation of this new model,” said Rossi.

The FGE’s goal is to provide insurance against commercial and political risks, such as for banks that finance Brazilian exports of goods or services, primarily on a medium and long-term basis. Embraer aircraft and defense products are two examples.

Since 1999, when it was first offered, export credit insurance has been used by 201 large companies. Another 48 small and medium-sized companies carried out 1,200 operations between 2015 and 2018, when it became accessible to smaller companies.

For Livio Ribeiro, a partner at the BRCG consultancy and an associate researcher at the Brazilian Institute of Economics at Fundação Getulio Vargas (FGV Ibre), funds like this area important for “diluting the possibility of shocks for exporting companies,” whether they are “derived from exogenous events or changes in the willingness to import” presented by the country or the purchasing company.

He cites the example of Chinese soybean importers, who recently canceled a Brazilian shipment using a contractual prerogative linked to crushing volume demanded in China. Nonetheless, the insurance was activated, and the losses of those involved in the transaction in Brazil were paid. Ribeiro also believes it is critical to have a fund that acts as the Exim Bank, a type of US government financier of exports and imports.

Sorce: Valor Econômico

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https://valor.globo.com/brasil/noticia/2022/03/28/ministerio-quer-novo-modelo-para-seguro-de-exportacao-ainda-este-ano.ghtml

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