Brazil May Ease Bank Requirements to Boost Farm Loans

By Carlos Caminada and Carla Simoes

Oct. 9 (Bloomberg) -- Brazil, the world's biggest exporter of beef, sugar and coffee, may ease bank-reserve requirements for the fourth time in two weeks to free up lending for farmers, Agriculture Minister Reinhold Stephanes said.

Brazilian banks need an extra 5 billion reais ($2.2 billion) to meet financing demands from growers as a global credit crunch drains liquidity, Stephanes said today in a Bloomberg Television interview in Brasilia.

``We are going through a small strangling of credit,'' Stephanes said. ``Banks lack liquidity.''

Brazil, Latin America's biggest economy, has already eased requirements over the past two weeks, freeing up as much as 60 billion reais in a bid to weather the global credit crunch. Interbank interest rates have soared as lenders worldwide hoard cash, restricting loans.

The Brazilian real has slumped 24 percent against the dollar since the start of August, the worst performer among the 16 most-traded currencies tracked by Bloomberg, as financial turmoil prompted investors to pull money out of emerging markets.

Stephanes said he expects the currency to strengthen in the next four to five months as economic growth in Brazil lures investors. The real will probably rally to between 1.8 and 2 per dollar, he said. The currency rose 2.2 percent to 2.2826 per dollar at 4:29 p.m. New York time.

Financing Needs

Credit for next year's crop is about 15 billion reais short of farmers' financing needs, Stephanes said.

Stephanes said he is in talks with Finance Minister Guido Mantega and Central Bank President Henrique Meirelles to seek to inject 10 billion reais into commodity-trading companies to encourage them to lend to producers. He didn't provide details on how the government would help boost the liquidity of trading companies.

Commodity-trading companies, which previously financed farmers, have stopped lending to producers, Stephanes said.

To contact the reporters on this story: Carlos Caminada in Sao Paulo at at ccaminada1@bloomberg.net; Carla Simoes in Brasilia at csimoes1@bloomberg.net.