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A Brazilian Divorce from the IMF? It’s Brazil’s Call.

The International Monetary Fund announced, February 2, that the IMF’s Deputy Managing Director Agustin Carstens will be in Rio de Janeiro, Brazil, on February 14, to speak to a seminar on the Brazilian economy in 2005, organized by the Getúlio Vargas Foundation.

During a press briefing, Thomas C. Dawson, Director of the IMF’s External Relations Department, answered several questions about the relationship between the IMF and the Lula Administration.


Asked if the IMF has a pilot project for Brazil dealing with infrastructure, Dawson answered:


“No, we are doing studies in many countries on this issue. Brazil is one of them. It’s part of a larger effort being done to take a look at the public accounting treatment of infrastructure investments. So in that sense, it is a pilot project, but it is not related to the Fund program.


“It would be going on if there had never been a Fund program in Brazil. We visited India. We visited countries in other regions, as well as in Latin America. So it is not part of the program. It is something that we would be doing anyway because it’s an issue.


“I mean, it’s an issue that came up in the United Kingdom. So it is not a Brazil-centric issue, although Brazil is certainly one of the countries where we’ve been studying it, partly because the Brazilians wanted to and the issue has come up a number of times in Brazil, and Brazil makes an excellent, you know, case study.


“But yes, we have projects””we have pilot projects as part of a grander study, but it should not be related to the Fund program because it is simply not part of the Fund program. Most of the countries we’re talking about this issue with don’t have Fund programs.


QUESTIONER: What other countries?


MR. DAWSON: We can give you””there are at least a dozen or so that we have visited, including industrial countries, because this is a big issue in public sector accounting. And it’s one where we need to have a common approach.


The history of it, for example””I think it’s well known””one of the reasons this came up was a number of countries, particularly in Latin America, felt that the Fund had a different form of treatment on infrastructure, public sector infrastructure investments in developed as opposed to developing countries.


We are responding precisely to that concern by taking a look at, number one, whether that is the case and, number two, whether we can make sure we have an evenhanded treatment; and to the extent that it does seem appropriate to have a different accounting treatment, that we set up some procedures for that.


And the example in the Brazilian context had been Petrobras where, even before this pilot project set-up, a special allowance was made for Petrobras investments.


QUESTION: The President, central banker, Mr. Meirelles, has indicated during the Davos meetings that Brazil is not going to renew the agreement with the IMF. I’d like to know if you have received any formal communication of that, and what’s your opinion on the fact of Brazil leaving the Fund?


MR. DAWSON: Well, I think I can tell you at the outset, first of all, we have not received any such formal indication, so, therefore, I couldn’t give you a reaction in that context.


Certainly we have””variations of this question have been asked for some time, and, you know, we’ve indicated it is””the Brazilian authorities are considering what to do about a possible successor arrangement going forward.


Certainly the performance of Brazil under the current program has been exemplary, but the decision essentially as to whether they wish to go forward with a new program or what kind of other arrangement or association they want after that is up to the authorities. And we’re waiting to hear from them.


QUESTION: But the discussions about which would follow after the end of this agreement were not initiated yet?


MR. DAWSON: No, because we haven’t been informed of what their decision is. I saw the same reports, but we haven’t been informed of what the decision is about a successor arrangement. Clearly, you know, we will continue in a close relationship with the authorities afterwards, but there is a difference, certainly in a public and press media sense, between having a program and not having a program. I know enough about Brazil to know that.


QUESTION: Just a follow-up on the soap opera of the accounting rules and what will happen if Brazil doesn’t have any more program. There has been some reports of irregularities in some of the””by the tribunal that is public account auditing in Brazil in some of the investments that have been singled out to be accounted for, but not for the private targets, that they say there are some irregularities in this””in some of those public investments so that, you know, if””which would be the reaction of the Fund regarding that? And in which way will these steady””these discussions about public accounting go on if there is no””


MR. DAWSON: Well, okay. With regard to any particular stories about, you know, particular projects or sectors, I’m not aware of that, and I think that’s an issue to be addressed within Brazil.


In terms of the effort going on to take a look at the accounting treatment of public infrastructure investments, that is a general issue that’s come up. It did not come up either in just the Brazil context or just a program in Brazil context.


So our work in that area will continue without regard to whether there’s a program in Brazil. Indeed, this work is multi-country, it’s multi-regional, so that that will go ahead no matter what.


In terms of if there were not to be a program, the Brazilian accounting””public sector accounting is really quite transparent now so you will””the same numbers are still going to be published by the authorities that are published now, and, you know, people will be able to take a look at sort of what is going on in terms of public investment spending and so on.


IMF

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