Brazil In Talks With IMF Over New Funding Accord - Report
Dow Jones Newswires
July 18, 2001
SAO PAULO -- The Brazilian government is talking with the International Monetary Fund about the possibility of putting together a new funding agreement, according to Folha de S. Paulo Wednesday.
Such an accord could last between six months to a year, the paper reported. Brazil entered a $41.5 billion bailout package with the IMF shortly after it devalued its currency in January 1999. The accord expires in December.
Folha said an IMF team, which visited Brazil last week, advised the government to agree to a new accord that would last for up to 16 months.
The paper said the size of the loan would be enough to help Brazil meet its external financing gap.
Such an accord, if put together, would help alleviate concern at a time when the markets are worried about fallout from Argentina possibly defaulting on its debt and an energy rationing program at home that's expected to shave one to two percentage points off this year's initially forecast 4% to 4.5% economic growth.
Also, there is market concern about rising interest rates that have been hiked 300 basis points to 18.25% since March, accelerating inflation and a local currency that has depreciated as much as 25% this year. All of this is adding pressure on Brazil's debt-servicing costs and increasing the need to tighten public spending.
President Fernando Henrique Cardoso last week said he would be willing to extend the accord in some form, but didn't think an extension was necessary at the moment. Going into an election year, his Brazilian Social Democrat Party may come under criticism from opposition candidates if the accord was lengthened.
The IMF, meanwhile, has said it would be willing to talk about extending the accord, but only if Brazil made a formal request for a renewal.
Monday, the Finance Ministry said it wouldn't make any official comments about any possible plans to extend its existing accord with the IMF until next month, when a report will be released about the IMF's latest visit to Brazil to verify the country's fiscal performance.
Leaders of the Sao Paulo Federation of Industries, or FIESP, said Monday that extending the accord was necessary and inevitable, because of contagion from economically troubled Argentina and the energy crisis.
-By Anthony Dovkants, Dow Jones Newswires;55-11-3145-1478 anthony.dovkants@dowjones.com |
