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Strategies & Market Trends : Telebras (TBH) & Brazil -- Ignore unavailable to you. Want to Upgrade?

To: MGV who wrote (8078)	9/15/1998 3:51:00 PM
From: DMaA	Read Replies (2) \| Respond to of 22640

WSJ Today: Sex, Lies and the IMF While America grapples with the weird Presidency of Bill Clinton, the international financial crisis rolls on, through Asia, Russia and now toward Brazil, where the real is under heavy attack. The mess in world markets tracks back to the same kind of problem that has bedeviled Mr. Clinton's Administration from the start: countries thrive in an atmosphere of truth. Markets, not least, need all the transparency they can get. Instead, we have an Administration that has lied about sex, lied about Iraqi weapons inspections, and is now sending out confusing signals about its policies in world markets. What is becoming clearer with each fresh economic crisis, however, is that a prime cause of all this chaos is none other than the Clinton Treasury and Deputy Secretary Larry Summers in particular. Mr. Summers's latest performance is Brazil, where the big task right now is to defend the real. This is vital in warding off new rounds of competitive devaluation and the wreck of years of progress in Latin America. Brazil's Finance Minister Pedro Malan has been staunch. But he's pitted against the folks at Treasury, who after the free-fall devaluations in Asia and Russia must be about the last people on earth who still think that in this age a nation under currency attack can arrange a "controlled devaluation." Earlier this month, The Wall Street Journal received and published a letter from Treasury's Brazil desk officer, Britta Hillstrom, saying the real is "unarguably overvalued" and urging significant devaluation. Treasury last week disavowed Ms. Hillstrom's views, but neither Secretary Rubin nor Mr. Summers has yet taken the trouble to state directly whether the U.S. stands behind a defense of the real. (A Treasury spokeswoman says Ms. Hillstrom is no longer on the Brazil desk, but won't say where she is now.) Meanwhile, in a move that can only further muddy both Brazil's and the world's fortunes, the IMF's number two man, Stanley Fischer, is saying the Fund stands ready to support the real--but he's not saying how. That how is a crucial question. Back in 1995, the IMF actually did the right thing in helping support Argentina's banks, while the country stuck by its currency board and so fought off an attack on the peso. A similar approach in Brazil could be the beginning of salvation. Unfortunately, Brazil has no currency board. And Argentina--where Finance Minister Domingo Cavallo brooked no compromise--is about the only nation where the Fund's gotten it right since the current crisis began with the Mexican bailout back in 1994. The more typical approach, in line with hints from Treasury, has been IMF rescues in which we are invited to fantasize that to save an economy, we should raise taxes, debase the currency and bail out reckless investors. So what will it be for Brazil? Treasury and the IMF aren't saying. Mr. Clinton announced yesterday that the crises abroad represent the "biggest financial challenge facing the world in half a century" and that the U.S. obligation is "to lead in a way that is consistent with our values." Well, as to the values of the United States, truth and information do matter. It is time the President instructed his Treasury Department to explain clearly and specifically the policies it is recommending for nations in economic crisis. And it is time Treasury insisted that the IMF spell out in public the content of its back room councils--starting with Brazil. This should be of great interest to Americans not least because Treasury for months now has been demanding that Congress approve $18 billion in fresh money for the IMF. The issue is not simply the large amount of money, but also an IMF record that in any responsible financial institution would require the firing of senior management. Since the global economic crisis began last year, the IMF has engineered $141 billion worth of bailouts for four countries. Thailand and South Korea are still shaky. Indonesia and Russia are smoking wrecks. For the rest of the world economy these bailouts have produced growing moral hazard, instability and the tremors now shaking Brazil. Rather than think too hard about all this, or ask Treasury any tough questions, the Senate two weeks ago shoveled through approval of $18 billion for the IMF on a 90-3 vote. The House Appropriations Committee last week shoveled through approval of $3.4 billion for the IMF, on condition the Fund do a better job of coming clean about its deeds. The worry is that by the time Congress gets through, the reforms will be gone and the full $18 billion will be in the IMF's pocket. In April, several of America's more far-thinking political and economic leaders, including Jack Kemp and John Whitehead, wrote Mr. Rubin about the IMF, saying "failure to comply with reasonable requests for information may undermine confidence in the world's financial markets." They noted that "Congress cannot be expected to vote on such important matters" without knowing what the U.S. is being asked to support. The need for truth and transparency in this Administration extends way beyond the need to apologize for "Saturday Night Fever" antics in the White House. The roller-coaster stock market has already been signaling that we cannot forever stay safe from the volatility abroad. Before Congress antes up that $18 billion, the country needs to know what Treasury and the IMF are really up to, who these folks are and what precisely they propose to do next. A good place to start would be full disclosure on Brazil, today--not tomorrow--by Mr. Summers and IMF Managing Director Camdessus.