President Luiz Inácio Lula da Silva said Tuesday, January 10, that Brazil’s early payment of its debt to the International Monetary Fund will not end its relationship with the IMF, but will make them partners.
"Our relations are not ending. Now our relations are changing in scope and quality," the Brazilian President said in the presence of IMF Managing Director Rodrigo Rato, in a ceremony in which Brazil made official its early payment of US$ 15.57 billion to the Fund.
The debt, for which payment was not due until 2007, had been contracted in three stand-by agreements, the last of which was approved in September 2002 during the government of Lula’s centrist predecessor, Fernando Henrique Cardoso.
Rato agreed with Lula that relations between the Fund and Brazil were entering "a new era." "Brazil is no longer indebted to the Fund, but the IMF becomes an important partner for Brazil in the debate about economic policy," said Rato, Spain’s former Finance Minister.
He added that, in exchange, Brazil can contribute to the debate within the IMF about the creation of a mechanism that would permit emerging nations rapid access to financing in emergency situations.
"Brazil has left behind a long period of economic instability. There will be no more lost decades or debt crises," Rato said.
The IMF chief recalled that three years ago, on the eve of Lula’s election, Brazil was going through "a profound crisis of confidence" and that many skeptics predicted that it would declare a moratorium on its debt payment, that the country’s currency would plunge against the dollar, and that the stock market would collapse – but nothing of the kind has happened.
"Taking advantage of a favorable world economic situation, Brazil was able to improve its external situation, helped restore confidence and reduce the country-risk rating to its all-time lowest level," Rato said.
Lula’s finance minister and the architect of his government’s conservative monetary and fiscal policies, Antonio Palocci, said that the decision to pay off the IMF early was a "mature" decision and that it does not herald a change in Brazil’s economic course.
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