Liquidity Facility

The Liquidity Sub-line (contingent credit) and Foreign Exchange Volatility Mitigation Line is designed to provide security to foreign investors in the event of exchange rate fluctuations significantly exceeding projected levels. Its use reduces liquidity risk arising from excessive currency depreciation, which directly impacts project rates of return (in hard currency), thereby mitigating the effects of financial oscillations beyond those covered by traditional currency hedging mechanisms, within the context of cash flow management for investment projects in Brazil. 

To that end, the Contingent Liquidity Sub-line seeks to mitigate the risk that high exchange rate volatility events may create short-term cash flow challenges or excessively impair the dollar-denominated economic return on investments in projects in Brazil. The availability of a mechanism to cover events that could compromise a project's cash flow — particularly during the pre-operational phase — may provide additional assurance to debt creditors, thereby enabling a reduction in the overall cost of project financing. 

In general terms, the Liquidity Sub-line mechanism provides liquidity during periods of sharp currency depreciation, characterized by a positive percentage deviation of the observed exchange rate relative to the originally projected rate. The mechanism also provides for the possibility of replenishing the liquidity line balance during periods of currency appreciation. 

The operationalization of this Contingent Credit Sub-line is currently being developed within the scope of the Executive Committee.