Brazil, tapping into a surge in its foreign reserves, will pay back before year-end the remaining US$ 15.5 billion it owes the International Monetary Fund.
The Brazilian Central Bank was scheduled to make the payments in 2006 and 2007 and will save US$ 900 million in interest costs by paying ahead of schedule, Finance Minister Antonio Palocci said. Repayment would leave Brazil free of debt with the International Monetary Fund for the first time since at least 1984.
"This will allow us to save a lot of money," Palocci said at a news conference at the Sofitel Hotel in São Paulo, in southeastern Brazil. "We can do this because of the significant growth in our international reserves and the improvement in our external accounts."
Brazil’s currency fell after the announcement, reversing earlier gains, as investors bet the central bank will keep buying dollars in the foreign-exchange market to rebuild the foreign reserves it will spend in the transaction, said Ivan Dumont Silva, a trader at Banco Alfa de Investimento.
"What may happen now is that the central bank will keep on buying dollars for a longer period of time to rebuild reserves," Silva said in a telephone interview from São Paulo. "There’s more to be rebuilt now."
Brazil’s foreign reserves jumped to US$ 67 billion from US$ 50 billion a year earlier as the central bank bought dollars amid a climb to record highs in exports and an increase in foreign investment in the fixed-income market.
Brazil, Latin America’s biggest economy, has taken out several loans with the IMF in recent years, including accords in 1998 and 2002 as the government sought to ease investor concern that the country would devalue its currency and default on its debt.
Brazil has had an outstanding loan balance with the IMF at the end of every year since 1984 – as far back as the IMF Web site shows.
This article appeared originally in Mercopress – www.mercopress.com.
