Cenbank head "certain" Brazil will overcome crisis
Reuters, Monday, September 21, 1998 at 16:43
RIO DE JANEIRO, Sept 21 (Reuters) - Brazil's Central Bank
President Gustavo Franco said Monday he was "certain" Brazil
would ride through the turmoil currently battering worldwide
financial markets.
"Brazil is being tested, our economy, our foundations, our
government, but I am certain we will pass through this," Franco
said in a speech to businessmen in Rio de Janeiro. "The Central
Bank will do its part."
Franco did not provide further details of how the Central
Bank planned to combat the economic crisis.
The bank yanked up interest rates to almost 50 percent a
year earlier this month to combat massive dollar outflows as
investors dumped local assets after a devaluation in Russia
triggered a global crisis in confidence in emerging markets.
Investors say Brazil's huge current account and budget
deficits make its currency vulnerable to speculative attack.
Franco said Brazilians knew "very well" the reasons they
were being tested and that these included the fiscal situation,
but he added the government was taking the right measures to
address these problems.
The government has announced some $5.17 billion in spending
cuts this month in an effort to reassure investors it is
reining in the nominal budget gap, which towers above 7 percent
of gross domestic product.
"We are building a Brazil which fits within its limits,"
Franco said.
He defended the creation of instruments to prevent regional
crisis from spreading to other markets. Brazil said last week
it was in talks with the International Monetary Fund on a plan
to shield Latin America from the global crisis in emerging
markets.
"There should be some instrument to prevent contagion," the
Central Bank president said.
He noted that foreign direct investment remained high, with
the country currently receiving 4 percent of global investment.
"In three years, 1996, 1997 and 1998, Brazil will have
received close to $40 billion (in foreign direct investment),
which represents more than it previously received in its entire
history," he said.
507-2120, denise.luna@reuters.com))
Copyright 1998, Reuters News Service |
