Salomon economist sees Brazil package at $42 bln
Reuters, Thursday, November 12, 1998 at 16:45
By Apu Sikri
NEW YORK, Nov 12 (Reuters) - Salomon Smith Barney projects
a multilateral assistance package of around $42 billion for
Brazil, with about $5 billion coming from the United States,
Joe Petry, the firm's Latin American economist, said on
Thursday.
The International Monetary Fund would contribute about $18
billion, of which about 70 percent would be available fairly
rapidly, said Petry. This would be disbursed in two tranches,
with the first tranche made available within a few weeks of
signing and the second tranche within three weeks of signing,
he said.
Petry said his information is based on a variety of
sources. He declined to elaborate.
The analysis by the Citigroup Inc. (NYSE:CCI) unit's economist
is among the first from U.S. analysts to give a detailed
breakdown of what individual country contributions are likely
to be.
Meanwhile in Washington, officials involved in the
negotiations told Reuters the package would likely be announced
Friday and would be about $45 billion. They confirmed that the
IMF would provide about $18 billion to Brazil with the World
Bank putting in about $4.5 billion.
Salomon's Petry said the package would probably be a two-
to three-year arrangement with a supplementary reserve
facility. Of the remaining of $24 billion in assistance, the
World Bank and the Inter-American Development Bank (IADB) would
each contribute about $4.5 billion, he said.
With the United States contributing $5 billion, the United
Kingdom, Italy, France and Germany would each put in about
$1.25 billion, the economist said. Salomon communicated similar
information to its clients earlier in the day, said money
managers.
Japan and Spain would likely put in $1 billion each, Petry
said. Canada is likely to contribute $750 million and Sweden,
Belgium, Netherlands, Switzerland, Portugal, Finland, Denmark
and Austria contributing $250 million each, the Salomon Smith
Barney economist said.
The Bank for International Settlements (BIS), the
international body that coordinates between banks worldwide, is
expected to put in about $250 million, Petry said.
The investment bank's estimates are similar to those put
out by press reports in Brazil based on sources within the
Brazil government.
The funds will be utilized to build up reserves with a
target of about $50 billion in foreign exchange reserves by the
end of the year and also to meet any reserve requirements.
In addition to supporting reserves, the government's policy
objectives would be to limit contraction in the economy,
improve exports and slash interest rates in half to the low
20-percent range, Petry said. Short-term rates in Brazil
currently are at 42 percent.
An international effort to provide assistance to Brazil was
put in motion late summer after Russia's effective default on
domestic debt threw emerging markets into a new financial
crisis. Brazil was the worst hit as investors worried about the
country's large fiscal deficit, bloated debt and low level of
exports.
Petry was until recently an economist at Citicorp
Securities until its parent company, Citicorp, merged with
Travelers Group Inc., parent of Salomon Smith Barney. Salomon
now is a unit of the combined company, Citigroup.
Copyright 1998, Reuters News Service |
