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UPDATE 2-IDB's private sector arm set to approve $3.5 billion capital increase

(Adds more comments in paragraphs 3-6, details, background)

By Marcela Ayres

BRASILIA, March 5 (Reuters) - The Brazilian government expects IDB Invest, the private sector arm of the Inter-American Development Bank (IDB), to undergo a capital increase of $3.5 billion, a top official at the country's Planning Ministry said on Tuesday.

Brazil would contribute $434 million as part of the move, to be paid in seven annual installments starting in 2025, according to the ministry's International Affairs and Development Secretary, Renata Amaral.

Brazil initially supported a slightly larger capital increase of $4 billion, but considers that the negotiated amount will be "very well-received" due to its potential to double the capital of IDB Invest, Amaral said.

The final number resulted from "extensive discussions with significant U.S. involvement", the secretary added.

She noted that the move was aligned to Brazil's advocacy for the reform of multilateral development banks in order to enhance their financing capacity amid the global need for increased resources, particularly for climate transition.

The South American country has been defending it as part of its presidency of the G20 group of the world's largest economies.

The IDB and IDB Invest are scheduled to hold their annual board meetings from March 6-10 in the Dominican Republic, where Brazil will be represented by Planning Minister Simone Tebet.

In November, U.S. Treasury Secretary Janet Yellen expressed support for a

"significant" capital increase for IDB Invest

, as Washington works to shift supply chains away from China and expand "nearshoring" options closer to home.

AMAZON, INFRASTRUCTURE

Brazil also expects an announcement from Sweden providing $250 million in guarantees for IDB's "Amazonia Forever" program, which is focused on sustainable development in the Amazon region, Amaral said.

That would clear the way for the initiative to increase financing by some $460 million, she added.

Amaral also emphasized that Tebet's visit to the Dominican Republic involves a robust agenda aiming to mobilize neighboring countries and development banks to advance infrastructure projects to promote South American integration.

That stands as a top priority for the ministry, looking to enhance trade and reduce transportation time to Asia.

"Our current efforts involve encouraging and listening to other countries in the region so that they prioritize these integration projects and utilize the allocated funds from the banks for these initiatives," Amaral said. (Reporting by Marcela Ayres; editing by Gabriel Araujo, editing by Ed Osmond)

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