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To: 4figureau who wrote (884)	8/7/2002 6:36:38 PM
From: 4figureau	Respond to of 5423

IMF agrees $30 bln Brazil bailout, largest ever >>The 15-month deal effectively gives Brazil a whopping $40 billion of extra cash to help avert an economic crisis, sparked by uncertainties ahead of elections in October that had led many to believe the next administration might decide to default on its more than $250 billion debt load.<< By Mark Egan WASHINGTON, Aug 7 (Reuters) - The International Monetary Fund on Wednesday signed its largest bailout ever, a $30 billion deal with Brazil that also allows the country to slash its foreign currency reserves by $10 billion. The 15-month deal effectively gives Brazil a whopping $40 billion of extra cash to help avert an economic crisis, sparked by uncertainties ahead of elections in October that had led many to believe the next administration might decide to default on its more than $250 billion debt load. The deal, which comes in addition to a $15 billion pact signed with the Washington-based lender last September, makes fully 80 percent of the additional $30 billion in cash available to Brazil in 2003 -- effectively shielding the huge Latin American country from jittery international bond markets. In return for the cash, the IMF said it has demanded that Brazil maintain a primary surplus target of no less than 3.75 percent of economic output during 2003 -- a target to be revisited at each quarter. The deal also demands that same level of primary budget surplus to be targeted in Brazil's budget guidelines law for 2004 and 2005. "By reducing vulnerabilities and uncertainties, a new IMF- supported program provides a bridge to the new administration starting in 2003," IMF Managing Director Horst Koehler said in a statement. Koehler added the deal "supports the continuation of a policy strategy that will underpin macroeconomic stability and bring Brazilian economic growth closer to its potential over the medium term, preserve low inflation and external sustainability, and support efforts to increase employment and improve further social conditions for Brazilians." The deal will be taken to the IMF's board for final approval in September. But by making the announcement now, the IMF is sending a clear signal to financial markets that it fully expects the deal to secure approval at that time. By inking a pact linked to quarterly budget surplus targets in 2003, the IMF has tied any new government to adhering to the terms of the pact or risk being cut off from the vitally-needed IMF funding. With nervousness abounding ahead of October presidential elections, investors have pummeled the currency, stocks and bonds lately. Investors have battered markets on fears that leftist opposition front-runners in the election race could derail macroeconomic stability, undo free-market reforms and mismanage the country's massive public debt load. But IMF sought to squarely assuage those fears, saying talks were underway now to secure support of opposition candidates for the current economic policies. "We note that the Brazilian authorities are 'convinced that this agreement serves well the interest of the country, and are confident that it will be supported by the leading presidential candidates in Brazil.' Consultations are underway in this respect," Koehler said. Underlining that point, Koehler said, "The active democratic debate within Brazil is to be welcomed, and ... the fund stands ready to support any government committed to sound economic policies." biz.yahoo.com