Rubin says ESF fund to be used for Brazil
Reuters, Friday, November 13, 1998 at 12:18
WASHINGTON, Nov 13 (Reuters) - A U.S. pledge of support for
Brazil worth up to $5 billion will be guaranteed through the
controversial Exchange Stabilization Fund, Treasury Secretary
Robert Rubin said on Friday as he hailed a multinational pact
to help the Latin American nation.
The United States and 19 other nations announced their
willingness to back an overall Brazilian package valued at more
than $41 billion with up to $14.5 billion in bilateral support,
mostly through guarantees of lending by the Bank for
International Settlements.
"The United States' portion of this this support will be to
guarantee, through the Exchange Stabilization Fund, up to $5
billion," Rubin said in a statement. The ESF is a
multi-billion-dollar pot of money set up in the 1930s to
protect the U.S. dollar against fluctuation. The fund falls
under Treasury's control, subject only to presidential
approval.
Its use in the past, to help Mexico and as a pledge in
bailouts for South Korea and Indonesia, has provoked
Congressional ire because it enables the Clinton administration
to act without first securing approval from lawmakers.
Rubin said Brazil's success in stabilizing its economy was
"very important" to the United States and laid the groundwork
for defending use of ESF funds if necessary.
"Our decision to provide bilateral support reflects our
commitment to strengthen the international financial system,
guard against financial market contagion, and protect America's
economic interests," Rubin said.
He said Brazil, Latin America's largest economy, should be
able to retain its stability. Analysts have warned a financial
meltdown in Brazil would adversely affect the entire region.
"Brazil's economic program -- fully implemented and with
international support -- provides a solid basis for restored
confidence and renewed growth," Rubin said.
A separate statement from finance ministers and central
bank governors of all 20 countries offering the bilateral aid
said the first supply of money to Brazil likely would come
along with the International Monetary Fund's initial
disbursement. The IMF has to approve Brazil's reform program
first.
The IMF said $37 billion of the total package would be
available to Brazil over the next 12 months if needed and it
would contribute $18 billion to the package, with the World
Bank and Inter-American Development Bank chipping in $4.5
billion each.
Among the leading industrial nations offering the $14.5
billion of credits, the United States was the largest single
bilateral contributor with a $5 billion loan. European Union
countries were expected to provide $7.55 billion with lesser
amounts to come from the remaining countries.
The twenty countries are: Austria, Belgium, Britain,
Canada, Denmark, Finland, France, Germany, Greece, Ireland,
Italy, Japan, Luxembourg, Netherlands, Norway, Portugal, Spain,
Sweden, Switzerland and the United States.
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Copyright 1998, Reuters News Service |
