Go Back

Brazzil
Economy
May 2003

IMF Wants More from Brazil

Every Brazilian had to work one whole month in 2002 just
to pay Brazil's interest rates on its loans. However, in spite
of meeting the demands of the International Monetary Fund,
Brazil did not succeed in balancing its payments and
had to sign a new Letter of Intention with the IMF.

Finance Minister Antônio Palocci and Henrique Meirelles, the president of the Central Bank, were praised and applauded at the International Monetary Fund's (IMF) meeting, on April 13-14, in Washington, DC, and at subsequent meetings with U.S. bankers and government representatives. Brazil's economic authorities clearly indicated their choice to give highest priority to international and national banks. Since the first days of Lula's presidency, in order to gain the confidence of creditors, they have guaranteed in words and acts, that the country will honor the payment of its debts by implementing an economic policy of tightening and high interest rates.

Brazil also received special mention in a document of the G-7 countries who welcomed the "strong macroeconomic policies and ambitious structural reforms that the Brazilian authorities are implementing". In a meeting in New York with creditor banks, Meirelles stated that the climate was quite positive.

During their spring meeting in the northern hemisphere, the International Monetary Fund, responding to demands from the richest countries, decided to impose even greater demands for countries with economic difficulties who requested aid parcels that surpassed their limits at the IMF. Now, when a country surpasses its limits and requests more aid, it must go through a special mechanism of the IMF called the Supplementary Reserve Facility (SRF). Through the SRF, the country will incur greater costs and shorter deadlines for payment. In these cases, the IMF demands detailed reports about the situation of the country and an evaluation of the sustainability of its debts.

This toughening of standards had been requested by the rich countries since the Asian crisis in 1997, when the resulting turbulence resulted in unrestrained international financial speculation that led many countries to insolvency, which contributed to a great rush to the IMF in search of help. This assistance is backfiring for many nations who lose their sovereignty and remain with little chance to have an economic policy that meets the needs of their people.

The Brazilian external debt grows (it was $211 billion in 2002) as does the inflation rate (more than 12 percent). In 2002, Brazil paid $115 billion in interest rates on the public debt (internal and external). This corresponds to more than 8 percent of all that is produced in the country (PIB). "Each Brazilian worked one month in 2002 to pay the country's interest rates", said Marcelo Manzano, a Unicamp (Universidade de Campinas) economics teacher. However, in spite of completing the demands of the IMF, Brazil did not succeed in balancing its payments and had to sign a new Letter of Intention with the IMF.

In spite of praise for Brazil, Horst Köhler, the managing director of the IMF, demanded a new round of economic reforms of Brazil and other Latin American countries. Speaking specifically of Brazil, Kohler stated that, "Brazil is not yet out of the woods and there are still many problems to resolve". The new recipe for Brazil and the region includes a focus on social programs (cutting programs to benefit other aspects of the economy), prioritizing agencies that regulate privatized businesses, and the acceptance of the Free Trade Act of the Americas (FTAA) initiative. Köhler indicated that the "first priority of Brazil and the Latin American region should be the strengthening of commerce and a commitment to implementation of the FTAA".

Finance Minister, Antônio Palocci requested that the White House and IMF give "opening signals" that would permit the acceleration of the FTAA. There is a division within the Brazilian government regarding FTAA. The Ministers of Agriculture and Development as well as the President of the Central Bank are in favor of FTAA, while President Lula, the Ministers of Agrarian Development and Cities, the executive secretary of the Itamaraty (the Foreign Ministry), and the president of the National Bank for Economic and Social Development are opposed to implementation of FTAA.

Social and pastoral movements are working to convoke an official national plebiscite on the FTAA. An unofficial national plebiscite on the FTAA was held in 2002 with over 10 million Brazilians voting. Over 9, 980,000 voted against FTAA.

According to Reinaldo Gonçalves, researcher and teacher of economics at the Federal University of Rio de Janeiro, the implementation of the Free Trade Act of the Americas is of interest to a small group of Brazilian exporters and to large transnationals. Gonçalves believes that FTAA will make Brazil more vulnerable to international capital and block the possibility of an autonomous national project while promoting more misery and unemployment.

Those who will profit from FTAA are exporters and business men/women who want to protect their investments and to sell their textile products and steel in the United States. Large landowners will have advantages in being able to sell their land to transnational agricultural businesses. According to Gonçalves, increasing the deregulation of the economy will only increase Brazil's external vulnerability which is the principal cause of the country's instability.

The pastoral section of the National Bishops' Conferences also is campaigning against the FTAA and calling for a new model of development for Brazil that includes the creation of jobs, a just distribution of income, higher investments in social areas, agrarian reform, and working against the liberation of genetically-modified food products. The national plebiscite on FTAA is scheduled for the beginning months in 2004. Committees will work in schools, workplaces and diverse sectors to educate the population as to the major issues involved in FTAA.

Sources: Brazil de Fato, April 26, 2003 and Folha de S. Paulo, April 30, 2003

This material was supplied by Sejup, which has its own Internet site: http://www.oneworld.net/sejup  



Send yourcomments to Brazzil

To Top / Go Back