Brazil will not accept an International Monetary Fund, IMF, proposal to increase the budget primary surplus, which has been agreed by the current government to stand at 3,75% of GDP in 2003
An IMF technical delegation arrived this week in Brazil to assess last August's agreement when an extraordinary 30 billion US dollars stand-by loan was extended to the country, 4 billion immediately available and the rest in 2003 when the newly elected government takes office. According to president Fernando Cardoso currently on an official visit to Portugal, elected president Luis Inacio Lula da Silva holds the same view. "I see no reason to increase budget surplus at this point. Mr. Lula has the same feeling on the matter. Most Brazilian states, government companies and central government have surpluses, and in that sense we're a most healthy economy", stressed president Cardoso. Mr. Lula's transition team that will also be meeting the IMF delegates believes that any changes regarding inflation or budget surplus targets must be addressed next February when the second review, and "the new government is in office", indicated Antonio Palocci coordinator of Mr. Lula's transition team who is working closely with the current Economy and Central Bank authorities. "We believe the IMF people are interested in talking with us, and we will", said Mr. Palocci emphasizing that the "current negotiations involve exclusively the current government", and added rather enigmatically, "we're not interested in being expose to suffering before hand". The IMF team is expected to recommend ways to cut Brazil's public debt that now stands at 260 billion US dollars, a significant percentage of the country GDP because of a strong depreciation of the Brazilian currency. Flagging government revenue and imperious reforms to the pension and tax systems are also IMF, -- and foreign investors--, concerns.
Uruguayan inflation eases The retail prices index in Uruguay during October reached 0,9% the lowest monthly rate since last March, accumulating 23,85% so far in 2002, and 24,31% in the last twelve months. According to Uruguay's Statistics Institute, "clothing and footwear" (3,8%) plus food and beverage (3,03%) recorded the highest inflationary push last October, while transport and communications, and health care actually decreased. Regarding wholesale prices, the index during October deflated 4%, for the first time since December 2001 when it dropped 0,6%. However the official release also indicates that a 15% appreciation of the Uruguayan currency against the US dollar played a decisive role, contrary to what was happening since the peso was allowed to float freely last June. In spite of the fact that in the last twelve months wholesale prices have accumulated a 61,7% growth, the October index was interpreted as a relative stabilization of the price system in Uruguay, following the bank crisis during the second quarter of the current year that forced the country to abandon the exchange rate as the stabilization anchor. In October wholesale agricultural prices decreased 7,9% while industrial goods such as furniture, automobiles, textiles, fell between 16,5 and 12,4%. But the relative price stability can't overcome other dramatic numbers: unemployment in the July-September quarter reached 19% of the labour force, and families real income continues to erode: 6,9% in the January-March quarter; 5,6% in April-June and 19,2% in July-September. Besides the budget deficit on an annual basis is dangerously edging to 5% of GDP.