Latin America development bank CAF has offered $600 million in assistance to counter-guarantee payments for Brazilian exports to Argentina to secure trade flows, ministers from both countries said on Monday.

Brazilian Finance Minister Fernando Haddad and his Argentine counterpart, Sergio Massa, said the proposal still needs to be endorsed by a CAF board meeting scheduled for Sept. 14.

“We have no doubt that they will approve the operation because it was the CAF’s initiative,” Massa told the press after a meeting with Haddad in Brasilia.

The agreement is meant to primarily keep the trade flow between Brazil and Argentina of two main sectors, automotives and food products. The guarantees will function as an initial financing mechanism valid for 90 days, which will cover a monthly quota of US$200 million. 

Once Argentina covers the payments, the quota can be renewed for a new term, official sources told Télam news agency. 

The offer represents a sweeter deal for cash-strapped Argentina compared with the one initially proposed by Brazil, which involved the provision of around $140 million in guarantees by the Argentine government in Chinese yuan for Brazilian exports of equal value.

The initiative will involve state-run lender Banco do Brasil BBAS3.SA as Brazilian exports guarantor, Haddad said.

Argentina, Brazil’s third-largest trading partner, is suffering an economic crisis marked by soaring inflation and dwindling central bank reserves.

Yuan guarantees initially proposed by the Brazilian government would provide security to its companies concerning their sales receipts amid Argentina’s dollar shortage.

Haddad acknowledged, however, that with this initial arrangement, Argentina’s yuan reserves would decrease.

“Argentina, with the support of CAF, does not need to give up these reserves to secure exports,” he said, stressing that Brazil’s initial proposal would stand and it would proceed “with what brings more comfort to Argentina and does not pose any kind of issue for us.”

– with information from Reuters and Télam