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

To: wl9839 who wrote (15291)	5/14/1999 8:51:00 AM
From: wl9839	Read Replies (1) \| Respond to of 22640

Brazil's 1Q Fiscal Accounts Seen Showing IMF Targets Met By ADRIANA ARAI and STEPHEN WISNEFSKI Dow Jones Newswires BRASILIA -- The Brazilian government is expected to announce Friday public accounts data for the first quarter showing that its fiscal belt-tightening efforts are bearing fruit. Government officials and analysts have said in recent days that a first-quarter primary surplus target agreed upon with the International Monetary Fund, of 6.006 billion reals, ($1=BRR1.653) was achieved with plenty of room to spare. The primary surplus target is the main performance criterion underpinning an agreement with international lenders for $41.5 billion in aid. "Given that the federal government alone showed a BRR7.13 billion surplus in the period and imagining that the other government levels behaved well, I foresee a first-quarter surplus of between BRR7.5 (billion) and BRR8 billion," said Fabio Akira, an economist at Tendencias Consultoria Integrada in Sao Paulo. Central bank monetary policy director Luiz Fernando Figueiredo late Wednesday cited the strong fiscal performance in the first quarter as one of main reasons allowing Brazil to cut rates for the second time in five days. Brazil's benchmark lending rate stands at 27%, down from 45% in early March. The public accounts numbers in the first two months of the year were better than expected. The BRR5.11 billion surplus during the period left Brazil just BRR895 million shy of the IMF first-quarter goal. Analysts said Brazil is on the right path to easily meet the first-half surplus goal of BRR12.88 billion and full-year target of BRR30.02 billion, or 3.1% of gross domestic product. Nominal Deficit Seen Down on Lower Rates, Stronger Real Last October, the Brazilian government introduced a broad plan of cost cuts and tax hikes aimed at trimming its massive fiscal deficit. The plan, which received final approval by the Congress earlier this year, helped Brazil qualify for the IMF-led aid package, finalized in November. The macroeconomic framework of the aid accord was revised in early March following the devaluation of the local currency. Brazil's currency has lost nearly 30% of its value against the dollar since the central bank abandoned strict controls on exchange rates in January. The local currency had weakened as much as 45% in early March. The revised accord actually increased the year-end primary surplus target to 3.1% from 2.6%. In addition, the new agreement made the primary surplus the main performance criterion, instead of nominal deficit figures, which include debt servicing costs. Tendencia's Akira said he expects the nominal figure for the 12 months to end-March to dip to around 12% of GDP from 14% at the end of February. He cited as principal factors lower interest rates and the recovery of the real, which ended March at BRR1.72 per dollar after having weakened to BRR2.20/dollar earlier in the month. The Brazilian government, for its part, has insisted that its principle aim is to reduce the ratio of debt to GDP. Brazil's net public debt stood at 51.9% of GDP at the end of February. The target laid out in the aid agreement puts the debt/GDP ratio at 49.3%, which compares with an end-1998 figure of 42.6%. During meetings in Washington in late April, IMF officials said they were pleased with Brazil's economic and fiscal performance and hinted that some targets could be revised to reflect the renewed optimism. A team of IMF economists will be in Brazil later this month to begin a quarterly review of the economic and fiscal situation. Brazil has drawn down nearly $19 billion from the aid agreement thus far. Another tranche of international aid could be made available to Brazil by the end of June. -By Adriana Arai and Stephen Wisnefski; (55-11) 813-1988