REPEAT:Brazil Cardoso:Crisis Makes
Fiscal Adjustment Urgent
Dow Jones Newswires
BRASILIA -- Amid continuing tension in the financial markets and with
less than two weeks before elections, Brazilian President Fernando
Henrique Cardoso stressed his commitment to attacking the fiscal deficit
quickly and opening the way for new economic growth.
Cardoso took advantage of an annual awards event to discuss Brazil's
response to the international financial crisis, saying that the difficulties have
made the need for fiscal austerity in Brazil "more urgent."
He said all levels of government are overly indebted, but stressed that state
governments in particular must be more responsible with their money.
"The losses have to stop," Cardoso said. "The state has to use only the
resources that society can pay for."
Brazil is currently running a public sector deficit equal to 7.3% of gross
domestic product (GDP).
Cardoso stressed the importance of gaining the confidence of Brazil's
neighbors and investors with a firm stance on fiscal austerity.
"It is a commitment not only to those who invest in Brazil but also to other
countries, especially in Latin America, who like us are trying to make
internal adjustments and build up strength to weather external storms,"
Cardoso added.
Since Russia devalued its currency and defaulted on its debt in
mid-August, Brazil's stability has been shaken by the loss of confidence in
emerging markets and a strong outflow of capital. The country's reserves
have fallen below $50 billion from the $70 billion posted at the end of July.
For more than two weeks, top U.S. government, International Monetary
Fund and World Bank officials have pledged their support for Brazil's
economy and suggested that a financial aid package could be pulled
together to help Brazil meet its debt obligations.
Cardoso said the Group of Seven leading industrial countries "should give
the IMF sufficient funding to be used in case of need in Latin American
countries and a type of contingency fund that would seek to prevent
crises."
He made no reference to the size or the timing of such a contigency fund.
"We will continue to maintain a mature, open and sovereign relationship
with the institutions," Cardoso said in reference to the IMF, World Bank
and the Interamerican Development Bank and the Bank for International
Settlements.
Cardoso said that Brazil needs to be more fiscally responsible as foreign
financing resources are shrinking owing to the current market turmoil.
The president reaffirmed his commitment to put forward a three-year fiscal
adjustment plan, saying that the fiscal reform process must be completed in
a "rapid, decisive, and definitive manner."
Cardoso said that the government plans to raise more revenues by
cracking down on tax evasion and broadening the taxpayer base.
He said that congressional leaders are also committed to voting on and
promulgating reforms as soon as possible.
He said that a landmark social security reform bill should go through a final
vote in October, while the government will present a tax reform proposal
to Congress in November.
Cardoso also said that he will "do everything possible to protect the real."
He added, however, that he hopes Brazil can cut interest rates as soon as
possible so economic growth can resume.
In an effort to prevent a collapse of the real and stem heavy capital
outflows, the government on Sept. 10 raised the rate at which the central
bank lends to banks, known as the Tban, to 49.75% from 29.75%.
The president said that economic growth is "indispensable" for job
creation, which he characterized as a top national priority. Brazil's
unemployment rate is around 8%, its highest level since Cardoso took
office four years ago.
Cardoso is expected to win a second term in the Oct. 4 elections. The
latest poll gives him 47% of the vote, while top challenger Luiz Inacio Lula
da Silva has 24%.
-By Mary Milliken and Stephen Wisnefski; (5511) 813-1988 |
