Brazil does not need IMF help now-finance official
Reuters, Monday, September 14, 1998 at 16:42
WASHINGTON, Sept 14 (Reuters) - Brazil does not need any
assistance from the International Monetary Fund at present and
has sufficient international reserves to defend its currency, a
top Finance Ministry official said on Monday.
"The reserves stand at around $50 billion and are all
usable," Amaury Bier, Secretary for Economic Policy at the
Brazilian Finance Ministry, told the Brazil-U.S. Business
Council.
Bier later told a news conference that the Brazilian
government was not discussing any restrictions on imports or
controls on capital flows.
The official said Brazil's response to external financial
turbulence was "strictly orthodox" and focused entirely on
cutting the country's large fiscal deficit, which he called the
"main weakness" of the Brazilian economy.
Bier said, however, that lower U.S. interest rates would be
good not only for Brazil, but the whole world.
"It would be an important contribution to the whole
rebalancing of the international economy," he told reporters.
"It is something that could be done. There are technical
grounds for it, and I hope this will be the move (that the
Federal Reserve Board takes)," he added.
The Brazilian Finance Minister called for lower U.S.
interest rates last week, while President Fernando Henrique
Cardoso has called on the Group of Seven leading industrialized
nations to act together to calm world markets.
Bier said the main component of the current crisis was
"irrationality" that had a contagion effect on emerging markets
after the Russian default.
"We are paying higher spreads than are reasonable given our
fundamentals, which have not changed," he said.
"Some degree of coordination could help in reducing this to
its correct proportions," Bier said.
"We don't see the need at this time for financial
assistance from the IMF," he said. "What is needed for a
country with $50 billion in reserves is to do the right thing."
That means tackling the fiscal deficit, the worst problem
facing Brazil, he said.
Bier said Brazil had made progress but must continue
deepening its fiscal measures to ensure future economic growth.
Bier said a devaluation was not on the cards and was not
needed.
The government is depreciating the Brazilian currency, the
real, at a rate of 7.4 percent a year, and given 2 percent
inflation, that meant there was a significant degree of real
devaluation and that policy "will continue."
Bier told the Brazil-U.S. Business council that the
government had cut 9.25 billion reais from federal spending in
1998 and was determined to continue working towards balancing
the primary budget in 1999.
He said reform of the social security system was vital,
since the deficit generated by the system this year was 27.4
billion reais.
Financial markets failed to understand that the Brazilian
deficit included state and municipal government deficits, as
well as those of state-run enterprises.
"The fiscal deficit is the fragile link," he acknowledged.
+1 202 898-8383, washington.economic.newsroom@reuters.com))
Copyright 1998, Reuters News Service |
