Brazil heads down final stretch for IMF backing
Reuters, Friday, October 30, 1998 at 23:28
(Updates throughout with comments by Pinho Neto, Malan, Rubin,
pvs BRASILIA)
By Tracey Ober
RIO DE JANEIRO, Oct 30 (Reuters) - Brazil entered the final
stretch on Friday in its quest for a confidence-boosting credit
line from the International Monetary Fund, seen as vital for
calming investors during the country's economic upheaval.
A team of Brazilian officials went to Washington to dot the
i's and cross the t's on a multibillion-dollar loan deal as
leading industrial nations unveiled an overall plan -- using
Brazil as a test case -- to stop global fires from engulfing
individual economies.
"I think it is likely that in the next few days, we are
going to have something signed with the IMF," Demosthenes
Madureira de Pinho Neto, director of international affairs for
Brazil's Central Bank, told Reuters Television in an exclusive
interview.
Brazil cleared a major hurdle to the loan two days ago by
announcing a tough austerity plan to save $84 billion over the
next three years, but the plan must now be approved by a
notoriously volatile Congress.
U.S. Treasury Secretary Robert Rubin said Brazil needed to
move swiftly to implement its plan. "Obviously, it's very
important that they do this effectively and do it with
reasonable dispatch," he told reporters in Washington.
Brazil's Finance Minister Pedro Malan assured foreign
reporters in Rio de Janeiro he had held long talks with party
leaders in Congress and they were prepared to pass a package
that met all government goals.
"I am confident after these conversations that the
Brazilian Congress is going to be on top of what the country
needs," he said.
The fiscal plan is critical for narrowing a gaping budget
deficit and cutting crippling interest rates that have already
condemned the country to a recession in 1999.
Malan said the government had decided to reach out for
international help to avoid economic meltdown after seeing how
investors panicked at Russia's debt moratorium and yanked
billions of dollars out of Brazil's just developing markets.
A full-blown crisis in Brazil, the world's eighth-largest
economy, would probably drag the rest of Latin America into
recession, hindering growth around the world.
Reflecting U.S. concern about the fate of the region's
largest economy, President Bill Clinton said on Friday that
Brazilian President Fernando Henrique Cardoso had assured him
the plan would be implemented quickly.
Brazilian stock markets took heart at the signs of an
impending IMF deal and soared nearly 8 percent on Friday.
But analysts said global lenders would hand over the cash
only after the government proved it had substantial
Congressional backing for the spending cuts, tax increases and
other measures contained in its fiscal plan.
Lawmakers were due to vote next week on three remaining
amendments to a long-delayed social security reform bill in
what will be seen as a key indicator of the government's
capacity to push through other steps.
"(The IMF) will only release the money if social security
reform has been approved and the government has already
introduced some of the measures by decree," said Luciano Dias,
political analyst at Goes e Consultores in Brasilia.
While some of the fiscal steps can be introduced immediately
with presidential decrees, others must be approved through
time-consuming constitutional amendments.
Copyright 1998, Reuters News Service |
