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Brazzil - Economy - March 2004

Brazil's Lula Has Been Calling the Powerful

Brazilian President Lula has asked Bush and other First-World
leaders to support changes in the IMF classification of government
outlays in productive sectors. Lula wants such expenditures to
be seen as investments. This way, countries would be able to
spend more while remaining within fiscal limits set by the fund.

Nádia Faggiani

President Luiz Inácio Lula da Silva continues to make telephone calls to leaders of developed nations. During the conversations, Lula asks them to support changes in International Monetary Fund policy regarding fiscal restraint in developing nations. The idea is to allow governments in poor nations to spend on infrastructure so they can grow.

So far, Lula has spoken the leaders of the United States, England, Germany, Spain and France. The next scheduled conversation will be with Silvio Berlusconi of Italy.

According to presidential aide, Marco Aurelio Garcia, the objective of the changes in IMF policy is not just to help Argentina. "Other countries are going through difficulties. Peru and Ecuador are being harshly punished. They are paying what they cannot pay. We want a change in the accounting procedures on infrastructure expenditures. They should be seen as investments, not as spending, when fiscal responsibility is calculated. It is in the interest of Brazil to help not only Argentina, but all of South America where there are many difficulties," said Garcia.

In his telephone conversations, Lula has called for the creation of an emergency fund to protect Latin American countries in cases of turbulence on international markets.

According to Garcia, the Brazilian government has not decided what its position will be if Argentina defaults on a US$ 3.1 billion debt payment which is due this week. Argentina insists it will only pay if the IMF revises the terms of its loan agreement.

In one of the calls, Lula spoke with George W. Bush of the United States for 15 minutes. The Brazilian President asked Bush to support changes in International Monetary Fund classification of government outlays in productive sectors. Lula wants such outlays to be seen as investments and not expenditures; that way the government would be able to spend more while remaining within fiscal limits set by the fund.

Lula also held telephone conversations with French President Jacques Chirac and German Chancellor Gerhard Schröder. During these calls, the Brazilian President once again called for greater flexibility in the rules imposed by the International Monetary Fund (IMF) on Brazil and other Latin American countries.

During the conversations, which lasted around 25 minutes each, Lula requested that the French and German representatives in the IMF support two Brazilian proposals: 1.) that, in its calculations, the Fund not count as expenses the productive investments made by public enterprises in Latin America; and 2.) that the IMF create a type of insurance to protect Latin American countries from eventual crises that arise outside the region.

According to presidential spokesman. André Singer, the current accounting system adopted by the IMF for expenses in Latin America stifles initiatives in various sectors, especially in the area of infrastructure. According to Singer, President Lula considers economic growth the principal factor of peace in the region nowadays—which also led him to ask Chirac and Schröder for their support.

Earlier this month, Minister of Finance, Antonio Palocci, spoke to the visiting managing director of the IMF, Horst Kohler, about the same issue.

Nobel Economics Prize winner, Joseph Stiglitz, from the United States, suggested the name of Armínio Fraga, ex-president of the Central Bank, to assume the post of managing director of the International Monetary Fund (IMF), with the resignation of Horst Köller, who left to become candidate for President of Germany.

Nádia Faggiani works for Agência Brasil (AB), the official press agency of the Brazilian government. Comments are welcome at lia@radiobras.gov.br

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