MercoPress. South Atlantic News Agency

O'Neill: U.S. supports Brazil's talks with IMF

Visiting U.S. Treasury Secretary Paul O'Neill on Monday praised the economic policies of President Fernando Henrique Cardoso's administration and said Washington supports Brazil's efforts to obtain additional aid from the IMF

O'Neill met with Cardoso Monday, the second day of a four-day tour of the region that will also take him to Argentina and Uruguay. "We support the discussions Brazil's authorities are now having with the IMF," the secretary told reporters after Monday's session with Cardoso, adding that Brasilia's talks with the International Monetary Fund were "going forward in a very good way." On Sunday evening, the treasury secretary met with Brazil's top economic officials.

In his discussions with Cardoso and Brazil's top economic officials, O'Neill said, he had expressed President George W. Bush's firm support for the country.

"Brazil has the right economic policies in place to maintain stability so that the economy can continue to grow. The United States stands ready to support Brazil as it continues to implement these policies," the Treasury Secretary told journalists Monday after meeting with Cardoso. O'Neill, however, was unwilling to get into specifics regarding help for Brazil, Argentina and Uruguay, the three crisis-wracked Southern Cone Common Market (Mercosur) countries that have appealed for assistance from Washington and international lending institutions. Bush understood that Brazil had implemented sound economic policies to stabilize the situation, O'Neill said.

Last week, O'Neill provoked a row with the Brazilian government by saying that international loans to Southern Cone nations often ended up in the Swiss bank accounts of corrupt officials.

The statements were condemned by the Cardoso administration, opposition leaders and the Brazilian press.

They also caused the real to drop to record lows against the dollar and led investors to dump Brazilian bonds.

Investors were concerned that O'Neill's comments would forestall an IMF package that could contain Brazil's economic crisis and bolster the nation's currency.

Speaking in Brasilia Monday, he noted that the purpose of his visit was to learn "first hand" about the challenges faced by Cardoso, who will step down in January after two terms in office. The secretary said that as Latin America's largest economy, Brazil's economic performance was essential to the success of the entire hemisphere.

O'Neill, however, did not expressly say why Washington backed Brazil's talks with the IMF while not supporting a bailout package for Argentina's beleaguered economy. The treasury secretary did take the opportunity of lobbying for the Washington-backed Free-Trade Area of the Americas (FTAA).

The FTAA, which is scheduled to take effect in 2005 and create a free-trade zone from Canada to Tierra del Fuego - with the exclusion of communist Cuba - has been harshly criticized by the Cardoso administration and the leading candidates in Brazil's Oct. 6 presidential election.

Praising the FTAA concept, O'Neill stressed that national economies could no longer be considered in isolation. Brazil's economic problems have led to fears of a "cascade effect" that could have repercussions throughout the global economy.

Most of the world's largest companies have billions invested in Brazil, which is one of the world's largest debt issuers.