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Financial markets

Brazil and China to Sign Currency Swap Agreement

Strategic Insights

— 2 min read

Brazil and China are set to strengthen their financial ties with the signing of a currency swap agreement, as Central Bank President Gabriel Galípolo and his Chinese counterpart, Pan Gongsheng, meet in Beijing. The agreement, which will provide a maximum outstanding balance of R$157 billion over five years, is designed to facilitate the functioning of financial markets in times of need. This move comes as Brazil already has a similar arrangement with the U.S. Federal Reserve, and China has signed 40 similar currency swap agreements with other central banks worldwide. The agreement is part of an effort to deepen economic cooperation between the two nations.

Key Takeaways:

  • The Central Bank of Brazil (BCB) and the People's Bank of China (PBoC) are set to sign a currency swap agreement on Tuesday (13) in Beijing.
  • The primary goal of the agreement is to provide liquidity to facilitate the functioning of financial markets in times of need.
  • The maximum outstanding balance allowed under the swap agreement is R$157 billion, with a term of five years.
  • Brazil already has a similar arrangement with the U.S. Federal Reserve called the Foreign and International Monetary Authorities Repo Facility (FIMA).
  • The PBoC has signed 40 similar currency swap agreements with other central banks around the world, including those of Canada, Chile, South Africa, Japan, the United Kingdom, and the European Central Bank.
  • The agreement is part of an effort to deepen economic cooperation between Brazil and China.
  • Central Bank President Gabriel Galípolo is also scheduled to participate in the Seminar on China's Bond Market Opening-up and Panda Bonds, hosted by the National Association of Financial Market Institutional Investors (Nafmii), on Thursday (15).

Statistics:

  • R$157 billion: The maximum outstanding balance allowed under the swap agreement.
  • 5 years: The term of the agreed-upon currency swap.
  • 40: The number of similar currency swap agreements signed by the PBoC with other central banks worldwide.
  • 2021: The year the FIMA arrangement between the BCB and the U.S. Federal Reserve became permanent.
  • Tuesday (13): The day the currency swap agreement is set to be signed in Beijing.
  • Thursday (15): The day Central Bank President Gabriel Galípolo is scheduled to participate in the Seminar on China's Bond Market Opening-up and Panda Bonds.

Sources:

  • Gabriel Galípolo, Central Bank President (statement)
  • Central Bank of Brazil (BCB) (statement)
  • The Central Bank of Brazil, Resolution from the National Monetary Council (CMN)
  • Central Bank of Brazil (BCB), Press release
  • People's Bank of China (PBoC), Statement

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