MercoPress. South Atlantic News Agency

IMF fears “Brazil effect”

The International Monetary Fund, IMF, expressed concern that the international confidence crisis in Brazil could spread to the whole region given investors fear of growing risk.

In the quarterly Global Financial Stability report, IMF indicates that Latinamerica has began to feel investors loss of confidence in Brazil and that even Mexico, so far immune, seems to be suffering.

"Latinamerican bonds suffered the greatest sale impact in emerging markets, while bonds from other regions experienced a modest recovery, as investors rotate their exposure from Latinamerica to other regions", reads the report. Although Brazil received a 30 billion US dollars stand by loan from the IMF, and candidates for the coming October presidential election have promised to keep to open market policies, there's a growing feeling that the new Brazilian president might modify current rules and be unable to honour the 260 billion US dollars debt.

So far, former union leader and four times presidential hopeful Luiz Inacio Lula da Silva from the Workers Party, who changed the boiler suit for Armani's clothes, is comfortably leading vote intention. A former Marxist influenced worker, Mr. Lula has proved surprisingly pragmatic lately going as far as to praise the Brazilian military regime that ruled the country with an iron fist from 1964 to 1985.

However the IMF report says that Latinamerican countries are more vulnerable to contagion than other emerging markets, such as Asia and Eastern Europe "that are attracting investors leaving the region". Even Mexico, with a healthy economy, highly integrated to United States is under pressure, particularly since last July when the "Mexico-Brazil co-relation has strongly augmented".