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To: 007 who wrote (72822)	10/18/1998 12:55:00 PM
From: Mohan Marette	Respond to of 176387

<Brazil> A sign of stability. You are quite welcome,thanks for the kind words. Looks like the panic flight of capital from Brazil is over according to the President of the Central Bank. Sunday October 18, 12:26 pm Eastern Time Brazil reserves stabilizing - cenbank chief Franco SAO PAULO, Oct 18 (Reuters) - The huge dollar flight that was rapidly draining Brazil's international reserves has come to an end, the president of Brazil's Central Bank told O Estado de S. Paulo newspaper in an interview published Sunday. ''We are still going to see a little loss of reserves, but nothing that worries us. That's over,'' Gustavo Franco said. ''The trend is toward stabilization.'' More than $30 billion has fled Brazil through its foreign exchange markets since the beginning of August, dragging reserves down to about $45 billion from $70 billion in the same period. Investors began taking their money out of Brazil after Russia devalued its currency, concerned that Latin America's biggest economy -- which also has a bloated fiscal deficit -- could be forced into the same action. Faced with a dollar hemorrhage that averaged about $1.5 billion a day in early September, the Central Bank hiked interest rates up to almost 50 percent. The measure, combined with expectations that Brazil will soon receive an international support package, has helped slow dollar flight, but has not stopped it. Franco said, however, that virtually all of the speculative money that had pumped up reserves in the last year had already fled Brazil, so that flows should stabilize now. ''There was a big outflow of hot money, another on arbitration (of debt yields), principally before interest rates were raised,'' Franco said. He said ongoing negotiations with the International Monetary Fund and other agencies for a support program could help deter capital flight. The IMF has said aid hinges on Brazil putting together a fiscal adjustment program. ''The conclusion of understandings with the IMF will qualitatively change the panorama of international markets for emerging markets and Brazil,'' Franco said. He said reserves could still show almost negligible losses due to negative external circumstances. Recently re-elected President Fernando Henrique Cardoso told his economic team to put together by Oct. 20 a package of spending cuts and tax increases aimed at reining in the fiscal gap, which has topped 7 percent of gross domestic product and paving the way for the international support. A group of Brazil's economic advisors is currently in Washington, reportedly outlining the measures to the IMF. Cardoso may not announce the program, which is likely to include unpopular taxes, until after run-off gubernatorial elections on Oct. 25. Franco said he does not expect Cardoso to face huge hurdles getting the belt-tightening measures through Congress, as some analysts have suggested. ''A sense of urgency naturally exists in all of society and its representatives,'' he said. Franco also reiterated that the fiscal adjustment will be made without any changes to the foreign exchange policy. He said Brazil does not plan to speed up the depreciation of the real against the dollar -- which is currently at about 7 percent a year -- nor does it plan a big one-time devaluation. ''In doing what we must from the fiscal point of view, I do not see any reason to mess with the foreign exchange policy,'' he said.