IMF Pats Brazil on the Back

IMF Pats Brazil on the Back

    "The International Monetary Fund has made it very clear that we
    were respecting and awaiting
    the Brazilian authorities’ judgment
    as to how they wished to proceed, and this was their decision,

    which we are delighted to support. There is strong track record of
    good economic management in Brazil
    that is I think exemplary."

    Rodolfo Espinoza


    Talking to reporters on Thursday, Thomas C. Dawson, Director of the External
    Relations Department of the International Monetary Fund answered several
    questions dealing with Brazil and its just-announced agreement with the IMF.

    Question: In relation to the agreement announced yesterday, number one, does
    the Fund have any projection as to whether Brazil will or not use the $14 billion or the
    $6 billion extra that have been discussed up to the moment?

    And, secondly, the payments that Brazil has to make from 2005 onwards,
    apparently Ms. Krueger said in Brazil that the Board will have no problem in approving a
    new scheduling for those payments. Can we assume that this is a definite answer now?

    Mr. Dawson: I would direct you, and I think you probably have both read her
    statement and have also taken a look at the press conference that she had yesterday
    with Minister Palocci.

    In terms of drawings, the authorities have indicated that they expect that this
    program would be precautionary, and that is certainly the basis on which they are acting,
    and there is no reason to think that is not the case, given the strong performance of
    Brazil under the present program.

    Indeed, the authorities have requested, in order to smooth out Brazil’s payments
    to the Fund, to extend, by one year, payments of about $5.5 billion, and this does
    require Board approval, but management will be recommending that.

    I think it is alsoI would just note that this was an agreement in terms of the
    authorities expressing the direction in which they go, the staff and management support
    for it, and, as Ms. Krueger said yesterday, we do expect to shortly recommend the
    program to the Board. Again, when we have a date, we will let you know.

    Question: How did you see the Brazilian President’s warnings regarding the
    agreement in Brazil? Ms. Anne Krueger was already in Brazil talking with Mr.
    Palocci. And President Lula, in Africa, said that Brazil did not know if it needed the
    agreement. I would like to have your opinion on this.

    Mr. Dawson: Actually, the quotes that I have seen from the President I think are
    quite consistent with what was said in Brazil yesterday. In reality, and this is why I
    was making the point, the review actually will be completed and then the Board will
    take place.

    And in terms of when there will be an accord, the agreement is when the Board
    approves it, which is after it is finalized with the authorities and then presented. So
    that would be in December, and I think that is what the President indicated. I know
    there was a bit of a flurry yesterday afternoon about that subject, but I did not see that
    there was a contradiction.

    Question: If I can follow up on that, what was the hurry in announcing it, then?

    Mr. Dawson: There was no hurry. Indeed, Ms. Krueger went to Brazil at the
    invitation of the authorities, and she was there, and it was the appropriate time to make
    the announcement. Had she gone and come back without an announcement, you
    would have had quite a different story. So I think openness and transparency, we find, is
    a good way to go forward.

    Question: Do you think the way Brazil has gone is what the Fund had
    suggested initially? I mean, was the Fund recommending this kind of program initially?

    Mr. Dawson: We have made it very, very clear we were in the hands of the
    authorities as to the course of action they would choose, and indeed they came to a
    conclusion that this was the way they wished to go forward, and we were able to and
    happy to support them. Had they taken a different course of action, we would have
    judged that on its merits as well, but this is not something that the
    Fundthe Fund has made it very clear that we were respecting and awaiting the Brazilian authorities’
    judgment as to how they wished to proceed, and this was their decision, which we are
    delighted to support.

    Question: You said that you are delighted. Would the fund be delighted if Brazil,
    in the end, does not make of this the last accord and has to come back knocking on
    the door later on?

    Mr. Dawson: That is highly hypothetical, and given the strong performance of
    the authorities right now, it is even less likely that I would fall to the bait of
    answering that hypothetical question.

    Question: Do you see anything different in the new agreement between Brazil
    and the IMF? Because in Brazil the agreement was presented like something
    different, more flexible, but seems to have the same guidelines of any other agreement. I
    would like to have your comments on that.

    Mr. Dawson: I might have to ask you in what sense that is. The program that the
    new government adopted at the beginning of this year is very much a program
    designed and developed by the Brazilian Government. It has shown quite a good deal of
    success in terms of the stabilization of many of the market
    indicatorsthe continued decline of inflation, accumulation of reserves, and so on.

    It should therefore not be surprising that the continuation of the program is
    reinforcing the same policies, but I would stress of course that the Brazilian program is
    a truly owned program, and I think reflects the strong commitment and perseverance
    of this new administration.

    As I say, it should not be a surprise if the program is building on the successes.
    I think I would be more surprised if there was a radical difference.

    Question: Brazil has asked, on the last round of negotiations with the IMF, $30
    billion. Now, Brazil says that it is going to maybe use $14 billion, maybe not, and
    you said that the whole program has been owned by the Brazilian authorities. So it
    is logical and it was possible. Therefore, can we assume that the governments
    before were profoundly incompetent?

    Mr. Dawson: No. Brazil actually has quite a strong track. When they find that
    they need financial assistance from the Fund, they come with a very strong program that
    is proposed, and they work closely with the Fund, and their history is, I think of
    the previous program, one of rapid repayment when they no longer need the assistance.

    I think it is exactly a model for this sort of relationship with the Fund, and it
    has nothing to do with comparing different administrations. It is the fact that I think
    there is strong track record of good economic management in Brazil that is I think






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