Oct. 5 (Bloomberg) -- Brazil will buy up to $10 billion in debt from the International Monetary Fund, turning the country into a net creditor of the IMF for the first time, Finance Minister Guido Mantega said.

Brazil will tap its foreign reserves to buy the two-year bonds denominated in the IMF’s special drawing rights, with quarterly interest payments based on the weighted average of the short-term rate in the U.S., the euro region, Japan and the U.K. That rate currently stands at 0.25 percent.

Mantega said today’s “radical change” would help Brazil diversify its reserves. The government first unveiled its intention to buy the bonds in June.

Brazil, Russia, India and China, the so-called BRIC nations, have agreed to buy as much as $80 billion in IMF debt to help the Washington-based lender provide financing to countries hurt by the global crisis. The BRICs have favored the bonds instead of regular contributions as they wrangle with members over redistributing the IMF’s voting power.

The real, the best performer this year amid the 16 most traded currencies tracked by Bloomberg, rose 0.89 percent to 1.7668 per U.S. dollar at 1:10 p.m. New York time. The real gained 31 percent since the beginning of the year.

Mantega said the four countries are still negotiating an agreement with the IMF so their contributions are managed through the New Arrangements to Borrow facility.

Rules Change

The BRICs are pushing to change the rules before 2011 so they collectively have enough representation to block any decision, much in the same way that the U.S.’s 17 percent share in the IMF gives it a de-facto veto over many decisions made by the fund.

Brazil, which owed the fund as much as 23.4 billion in special drawing rights six years ago, paid off its debt to IMF in December 2005. The country used record exports and inflows of foreign direct investment to build up its reserves and pay the IMF two years ahead of schedule.

Since President Luiz Inacio Lula da Silva took office in January 2003, Brazil’s international reserves surged to a near record of $224 billion on Oct. 1 from $37.8 billion.

To contact the reporters on this story: Joshua Goodman in Istanbul at jgoodman19@bloomberg.net

Last Updated: October 5, 2009 13:17 EDT