South America May Move to Strengthen Emergency Fund at This Week’s Summit

South America may move toward strengthening an emergency fund to help countries in balance of payments problems this week, the Brazilian Finance Ministry’s international affairs secretary said.

“The discussion has advanced,” Carlos Cozendey said in a phone interview from Brasilia. “The issue is being seriously assessed.”

Heads of state will discuss the issue when they meet on Dec. 2 in Venezuela as part of the Community of Latin American and Caribbean States, Cozendey said. While Brazil and most other South American nations favor strengthening an existing mechanism, the $4 billion Fondo Latinoamericano de Reservas, or Flar, Venezuela and Ecuador want a new fund that will also develop the regional bond market, he said.

Flar pools foreign currency reserves from seven Latin American nations to help address balance of payment problems, Cozendey said.

Members of the 12-nation Union of South American Nations, or Unasur, discussed the possibility of either creating an emergency fund or strengthening an existing mechanism in August.

To contact the reporters on this story: Arnaldo Galvao in Brasilia at agalvao1@bloomberg.net.

To contact the editor responsible for this story: Philip Sanders in Santiago at psanders@bloomberg.net.