Brazil FinMin calls for G7 action on world turmoil
Sunday August 30, 2:14 pm Eastern Time
BRASILIA, Aug 30 (Reuters) - The Group of Seven leading
industrialized nations must take swift action to contain the global fallout from economic crisis in
Russia, Brazil's Finance Minister Pedro Malan said in an interview published Sunday.
''We are dealing with a problem which is not limited to a number of emerging economies,''
Malan told O Globo newspaper.
''It is a problem with a larger dimension, which is serious and will require concerted action by
the G7, the leading countries of the world, as soon as possible,'' he added.
On the weekend, G7 leaders agreed to coordinate their efforts on Russia with the European
Union, and said the best way for Russia to overcome its problems was to stick to the path of
reform.
Brazilian share and currency markets took a battering last week as nervous global investors fled
emerging markets to cover losses in other regions and take refuge in the safe haven of U.S.
Treasuries.
Sao Paulo's key Bovespa (^BVSP - news) index of blue chip shares last week hit its lowest
level in 21 months.
Malan was scheduled to attend a meeting next week of Latin American finance ministers invited
by the International Monetary Fund to discuss the impact of the latest world financial turmoil on
their economies.
The minister said it was already apparent that recent events would result in a slowdown in global
economic growth and international trade, although it was too early to predict what the impact
would be on Brazil's economic growth in 1999.
''For this year, we continue with an estimate for growth of close to 2 percent. For 1999, it will
depend on the capacity of the international community to respond adequately,'' Malan said.
Comparisons between Brazil and Russia -- both giant emerging economies struggling to contain
rampant fiscal deficits -- are unfounded because of a long-term process of restructuring which
had made Brazil much safer for investors, he said.
''What sets Brazil is apart is not this or other measure, but the process of productive
restructuring, of reorganization of the state, of institutional consolidation. The culture of stability is
taking root,'' Malan said.
The main challenge for the Brazilian government now was to reduce the nominal budget deficit,
estimated at an annual 7 percent, and it was preparing a fiscal program with targets for the next
three years, he added.
In a separate interview published Sunday, Finance Ministry Executive Secretary Pedro Parente
accused investors pulling out of Latin America because of the Russian crisis of thoughtless
short-termism.
''We believe it is myopia, bad faith or even stupidity for anyone to think they have to leave other
emerging markets, especially in Latin America, because of everything that happened in Russia,''
Parente told Folha de Sao Paulo newspaper.
Pointing out differences with Brazil, he said Russia lacked even the basic tools to reduce its
budget deficit, being burdened by many layers of government over a vast geographic terrain
without the benefit of a market economy infrastructure.
''There is a form of predatory capitalism there. The lack of control is total,'' said Parente, a
former International Monetary Fund consultant who has worked in Russia.
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