Brazilian officials to resume talks with IMF
Top Brazilian officials are to resume talks with the International Monetary Fund this week in Washington in an effort to speed the release of $9 billion in aid.
Headed by economic policy director, Mr Amaury Bier of the Brazilian finance ministry, the delegation hopes to help advance the work of an IMF team of analysts who spent two weeks in Brasilia but did not complete their key mission to report on Brazil's economy.
IMF directors must review a report from the IMF technical team before authorising release of the aid, which would be the second tranche of a $41.5 billion loan package allocated for Brazil.
The $9 billion was scheduled to be released by the end of February , but could be delayed until IMF directors receive and review the final report.
Mr Bier said that "negotiations with the IMF have hit no delays and are proceeding at a good pace, but we need to accelerate the technical work". He said he and his delegation "will stay in Washington until negotiations are concluded". Tentative plans, however, are for the delegation to return to Brazil on February 27th.
A spokesman for the IMF technical team, on returning to Washington on Friday, said the team had made progress but would still be working to finish its evaluation of Brazil's economy when it meets the Brazilian delegation today. He said the continuing talks also will focus on resolution of some final details of the understanding between Brazil and the IMF.
He did not elaborate on the nature of those final details.
However, sources close to the negotiations said the delay in the technical team's report stemmed from differences between the IMF and Brazilian experts on what measures to adopt to shore up Brazil's economy.
According to the sources, the IMF favours raising Brazil's key interest rate, the Basic Assistance Rate, to 50 per cent to help defend the country's currency and encourage investors to keep their capital in Brazil.
The Basic Assistance Rate currently stands at 39 per cent, and the government favours leaving open the possibility of letting the rate decrease as inflation diminishes, since maintenance of high interest rates risks pushing the economy into recession.
Other points of divergence between the government and the IMF, according to the sources close to the negotiations, include the IMF's demands for further government budget cuts this year.
The government believes the $8 billion in cuts that it has already made, by reducing the budgets of all of its ministries, are sufficient.
Two weeks ago, the IMF deputy managing director, Mr Stanley Fischer, and Brazilian Finance Minister, Mr Pedro Malan, reached an accord, in principle, stipulating that the government would try to achieve a primary surplus amounting to 3 per cent of Brazil's gross domestic product this year.
Prior to the real's devaluation and the ensuing economic crisis, that figure had been the goal for 2001.
The primary surplus refers to Brazil's government budget balance excluding payments on public debt.