Brazil rebuff for IMF reserves plan http://www.emergingmarkets.org/article.asp?PositionID=2601&ArticleID=2449724&LS=EMS375897

The IMF’s plan to deter key emerging economies from building up excess foreign exchange reserves, by creating a global currency pool, was dealt a blow yesterday by Brazil.Brazilian central bank Governor Henrique Meirelles said that the Fund’s proposal would have no impact on the country’s reserves management. Ahead of the June meeting of the G20 grouping when the proposal will be discussed, Meirelles said: “It is better to self-insure even if there is a cost associated with that.”

Meirelles’s intervention comes as Nicolás Eyzaguirre, head of the IMF Western Hemisphere Department, told Emerging Markets the Fund needs new capital to “act as a global financial safety net.” But IMF fears that the crisis has hardened the resolve of countries to accumulate large-scale reserves were confirmed by Meirelles yesterday. “It is because we had $200 billion of reserves that eventually everything [the dollar liquidity crunch] came back to normal [in Brazil],” he said.

“We are prepared to replace” capital providers in the “international financial system” as “we have the reserves [for] up to two years” to “self-insure” Brazil if the currency – or access to dollar liquidity – comes under fire, he said. Brazil has increased its accumulation of foreign exchange reserves since the September 2008 crisis broke, and holdings now stand at more than $200 billion.