Brazil economic team gets down to fiscal business
Reuters, Monday, October 12, 1998 at 14:35
By Shasta Darlington
SAO PAULO, Oct 12 (Reuters) - While re-elected Brazilian
President Fernando Henrique Cardoso relaxed with his family on
the beaches of sunny Bahia, Brazil's economic team was getting
down to business in the nation's capital on Monday.
The president's economic advisors, including Finance
Minister Pedro Malan, met behind closed doors through the
weekend and into Monday's holiday in a hurried bid to draw up a
tough austerity plan needed to fend off a financial crisis,
local media reported.
The economic advisors hope to present the plan to Cardoso
before Friday when he heads to Portugal, Globo television said
on Monday.
The measures are aimed at cutting the nation's bloated
fiscal deficit and are expected to win Brazil a big
international loan. The International Monetary Fund and other
agencies are reportedly putting together a loan of more than
$20 billion.
In the wake of Cardoso's successful re-election bid, Brazil
and the IMF agreed Thursday on the broad outlines of a
hard-hitting fiscal plan Latin America's largest nation must
announce to qualify for a multibillion-dollar, IMF-led credit
line.
Cardoso announced last week that his economic team will
draw up a proposal for him by Oct. 20, though the local press
sees advisors completing the proposal before then.
"The economic team met Saturday, Sunday and today they are
expected to meet into the evening," Globo news presenter Luiz
Carlos Braga said on Monday. "They are in a hurry to deliver
the proposal by Friday when Cardoso is traveling to Portugal."
The president was scheduled to return to Brasilia Tuesday
after a five-day holiday in Brazil's northeast to pour over a
proposal aimed at reining in a budget deficit approaching 8
percent of gross domestic product (GDP) and restoring foreign
investor confidence in the economy.
The proposal is expected to include a number of spending
cuts and even less popular tax hikes which between them are
seen saving the government a combined 25 billion reais.
While political allies have pledged to support tax
increases if necessary, many political analysts expect Cardoso
won't make any unpopular announcements until after a second
round of voting in key state gubernatorial elections on Oct.
25.
"Already frightened by the prospect of a worldwide
recession, Brazilian business should still be worried about the
risk of higher taxes next year," the widely-read O Estado de
Sao Paulo newspaper said in an editorial on Monday.
"Close to half of the 20 to 25 billion real fiscal
adjustment for 1999 will be guaranteed, according to the
Central Bank's director of monetary policy Francisco Lopes, by
an increase in taxes," the editorial continued.
Cardoso isn't expected to announce such drastic measures
until after the political fate of key states like Sao Paulo and
Rio de Janeiro have been decided.
Still, economists say he can't drag his feet too long.
The financial crisis in Russia sparked huge dollar flight
from emerging markets and Brazil in particular that drained
reserves, sent markets into a tailspin, and put pressure on the
government to devalue its currency.
A hike in interest rates helped slow the dollar hemorrhage,
but the new administration will have to act quickly to keep
Brazil from crumbling in the face of the international crisis.
"We are at the eleventh hour defining whether we will see
an extraordinarily deep crisis, or instead a difficult crisis
that will confirm the country as a mature nation that can get
organized," Atlantic Institute economist Paulo Rabello told O
Estado.
shasta.darlington@reuters.com))
Copyright 1998, Reuters News Service |
