FOCUS-Brazil fin min Malan sees rate cut in April
Reuters, Wednesday, April 01, 1998 at 11:58
By Ben Hirschler
LONDON, April 1 (Reuters) - Brazilian Finance Minister Pedro
Malan said on Wednesday that interest rates would fall again
this month as the country, roiled by Asian turmoil, maintained
its recovery.
"The next meeting of the committee on monetary policy of the
central bank is on April 15 -- and on April 15 you will know
what is the new, lower level of interest rates," Malan told a
meeting of the Royal Institute of International Affairs in
London.
A rate cut is widely expected in Brazilian markets but Malan
declined to speculate by how much rates would fall.
Last month, Brazil's Monetary Policy Committee (Copom) cut
the prime lending rate to 28 percent, down from 43 percent at
the height of the Asian financial crisis in late October.
Malan said current rates were unsustainable, but added that
the pace and scale of further reductions depended on progress to
cut the public sector deficit.
"The speed at which we will move (on cutting rates) over the
medium term depends on the speed, and how confident we are, in
changing the fiscal regime of the country on a durable basis,"
he said.
"This will continue to be the main challenge to consolidate
what we have achieved so far on the inflation front and in
sustained growth."
Brazil has experienced tough times since October, when the
government doubled interest rates and introduced a major fiscal
austerity package to head off attacks from speculators who saw
the real as vulnerable due to the country's twin current account
and fiscal deficits.
Confidence has returned recently, evidenced by record net
inflows of $12 billion in March, this week's
larger-than-expected $1.25 billion 10-year global bond issue and
an accelerating privatisation programme.
Malan said Brazil would register its sixth successive year
of economic growth in 1998, although the rate of increase would
be less than expected before the Asian crisis. He declined to
give a figure.
At the same time, inflation would fall for the fifth year
with most economists expecting an annual rate of between three
and four percent, Malan said.
The current account deficit was set to fall from last year's
4.15 percent of gross domestic product (GDP) and foreign direct
investment would continue to cover much of the gap.
"It will be lower this year. The market projections I have
seen over the last few weeks for the current account deficit
this year range from 3.5 to 3.8 percent," he said.
Brazil would be able to resolve its balance of payments
problems without recourse to either protectionism or a change in
exchange rate policy.
"We are going to keep our exchange rate policy -- it is
flexible enough," Malan said.
Tackling public overspending was the top priority but Malan
said the issue should be kept in perspective. The total public
sector deficit rose to 5.89 percent of GDP in 1997, and
including privatisation receipts the figure was 3.78 percent, he
said.
Brazil's privatisation programme is set to move up a gear
this year with the sale of telecommunications and further power
disposals, including this month's sale of Sao Paulo utility
Eletropaulo.
Malan said Brazil had accumulated nearly $50 billion since
the privatisation programme started in 1991 -- and a similar
amount was yet to come.
"We are at an historical juncture in Brazil. We have a
window of opportunity in the next two or three years, as we have
this privatisation revenue coming in, to consolidate changes."
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Copyright 1998, Reuters News Service |
