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To: PaulM who wrote (26236)	1/15/1999 5:29:00 AM
From: Alex	Respond to of 116958

IMF Sends Crisis Team to Brazil But didn't they just get through "rescuing" the country? The International Monetary Fund is poised to send a delegation to Brazil after the country's unexpected devaluation on Wednesday threw into doubt a $41bn international rescue package agreed by the fund in November. Scepticism is growing about Brazil's ability to meet the tough budgetary targets that are the basis for the package. The agreement with the IMF ruled out a devaluation, and the Fund was not consulted before Wednesday's decision. Its mission, due to arrive in the next few days, will be led by Teresa Ter-Minassian, deputy director for the western hemisphere. Investors yesterday continued to take a pessimistic view of the new Brazilian currency policy, pushing shares in Brazil down sharply and prompting weakness in markets in the US and Europe. However, analysts said foreign investors were taking a much more negative view than domestic investors. The IMF and Brazil would not confirm whether the country's economic targets would need to be revised as a result of the devaluation. "I don't know if the change will make a complete revision necessary," said Altamir Lopes, chief economist at the Brazilian central bank. On Wednesday Brazil, in the face of a new attack on its currency and a growing recession, abandoned its foreign exchange policy, moving from a narrow trading band, which allowed the Real to depreciate gradually against the dollar, to a widened band, which permitted an immediate devaluation of 8.3 per cent and 12-15 per cent over the next year. After a strong start yesterday, the Real weakened slightly to trade at R$1.32 to the dollar, the upper limit of the new band. Shares on the São Paulo stock exchange were suspended yesterday afternoon after a fall of 10 per cent in share prices triggered a circuit-breaker. Interest rates shot up to 60 per cent in the futures market on fears of a new rate rise. Investors had been initially encouraged by the news that $1.1bn had left the country on Wednesday, following predictions of a capital outflow of $2bn. However, markets turned negative after Standard & Poor's, the US ratings agency, downgraded Brazil's long-term foreign currency debt from B+ to BB-. Foreign investors continued to be concerned about heavy capital flight and predicted that the government would be unable to control the devaluation. "The chances of the devaluation being successful are limited, without, at the very least, follow-up on the fiscal front," said Paulo Leme, economist at Goldman Sachs in New York. "Other developing countries have shown that, by itself, devaluation does not work." In its statement on Brazil, Standard & Poor's said the devaluation had increased the risks for the economy and cast doubt on the government's ability to meet the targets set by the IMF. The agency also cut its ratings on a string of Latin American banks. Economists said if the government could not keep the currency within the new band, it might be forced into adopting tougher capital controls or, as a last resort, a rescheduling of domestic debt. Meanwhile, Alexandre Dupeyrat, finance secretary of Minas Gerais, the Brazilian state which last week declared a moratorium on its debts to the federal government, said he could not guarantee the full repayment of a $100m international bond that matures in February. His statement was immediately contradicted by the state's deputy governor, Newton Cardoso. The Financial Times, Jan. 15, 1999