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Strategies & Market Trends : The Thread Formerly Known as No Rest For The Wicked -- Ignore unavailable to you. Want to Upgrade?

To: Junkyardawg who wrote (15782)	3/7/1999 9:06:00 PM
From: Waldeen	Respond to of 90042

Brazil gets new lifeline .... cnnfn.com Rough paste of the Reuters article follows: March 6, 1999: 9:31 a.m. ET BRASILIA (Reuters) - The International Monetary Fund paved the way for a new credit lifeline for Brazil late Friday, wrapping up weeks of talks on how to save Latin America's powerhouse economy from a deep currency crisis. Shailendra Anjaria, head of the IMF's external affairs department, said the deal would be reviewed over the weekend and he expected IMF management would recommend to the fund's board Monday that Brazil should receive a second payment. The IMF, worried that Asia-style chaos might spread to South America and trigger new global turmoil, put together a $41.5 billion package for Brazil late last year with support from the world's top industrial nations. But a first $9 billion installment of loans failed to prevent a collapse of the Brazilian real, effectively shattering the bedrock of the country's four year economic recovery after decades of soaring inflation. The real has plunged 40 percent against the dollar since mid-January, forcing Brazil and the IMF back to the negotiating table to hammer out new terms for further loans. Anjaria gave no date for the IMF board to meet but the process usually takes weeks, meaning the new loans could be freed up by the end of the month. The real crawled back under the psychological threshold of two to the dollar Friday as markets welcomed yet another rate hike by the new president of the Central Bank Thursday and cheered his comment that some of the IMF's money would be used to defend the real. The currency closed at 1.99 to the dollar, up eight cents from Thursday and its strongest in 10 days. Finance Minister Pedro Malan said the agreement with the IMF was an "important step" in the country's attempts to restore its credibility among investors. In a statement Malan said he, Central Bank President Arminio Fraga and other economic officials would try to restore vital credit lines from international banks when they travel to Europe, the United States and Japan next week. Brazil needs all the cash it can get to bring the real down and smother inflation, which is already making a comeback. Traders said they detected a first whiff of optimism that Brazil might be turning the corner in its crisis and said banks that had stocked up dollars were selling them. "The mood is a lot more positive," said a foreign exchange dealer in Sao Paulo. "But we're only two days into this recovery and it's difficult to see ahead." He said markets were waiting to see the terms of the latest IMF agreement, including details of where the government planned to make new fiscal savings in return for the loans and what kind of macroeconomic forecasts were included in the deal. Critics say Brazil's decision to push up its benchmark interest rate to 45 percent a year was dictated by the IMF and would only compound already record high unemployment. Brazil's Catholic Church recently attacked the government for cutting spending on social programs. President Fernando Henrique Cardoso said Friday the country would survive its eighth major financial crisis in 40 years. "Brazil continues to be strong and is making progress. This is a country that has no option but to face up to its difficulties and overcome them," Cardoso said during a visit to a remote corner of central Tocantins state, one of Brazil's new agricultural frontiers. The government said Friday it would seek to raise pension contributions from the armed forces, a proposal that would help the government's attempts to narrow its huge budget deficit but which the military has long opposed. The move came on the heels of a freeze on federal government pay increases and new hirings. But economists say Brazil will only finally come to grips with its skewed public finances once Congress approves an overhaul of the tax and pension systems and Cardoso persuades state governors to tackle their own chaotic budgets.