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"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."
by:
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 also—I 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
Fund—the 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
indicators—the 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
exemplary.
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