A group of 16 major international banks have pledged to stand by Brazil after underlining their support of the nation's long-term economic policies.

The banks - which include Citigroup, JP MorganChase and Deutsche Bank - have agreed to keep their current credit lines open to Brazil.

The country's central bank president, Arminio Fraga, called the agreement an important step towards reviving South America's largest economy.

Markets responded positively, with both shares and the currency gaining more than 3%.

The Brazilian finance minister and Mr Fraga outlined their economic policies to the bank executives at a meeting hosted by the US Federal Reserve.

Political fears

Institutional investors have worried that October elections may usher in a left-wing president with new economic policies that could lead to a default on debt.

Many large banks have already been burnt by the financial crisis in Argentina.

Concern over Brazil's economy has been escalating recently, and some overseas banks have already cut-off loans or tightened their credit terms.

"There's a lot of pressure because banks are reluctant to finance exports because they're losing money," said President Fernando Henrique Cardoso earlier this month.

Promised lifeline

On 6 September, the International Monetary Fund is due to formally approve a $30bn loan designed to help Brazil avoid a repayment crunch on foreign debts of $250bn.

But the fear over Brazil's economic future has continued to worry some foreign bankers and the markets.

Foreign banks' exposure to Latin American companies takes two main forms - direct loans and export credits.

Export credits are granted to firms in the developing countries to give them a breathing space to pay for goods exported to them.

Recently, the repayment times given to firms who ask for export credits have been getting shorter, according to credit ratings agency Fitch Ratings.