MercoPress. South Atlantic News Agency

IMF agreement with “social” targets

Brazil has decided to renew its current agreement with the International Monetary Fund, IMF, but will insist that the next understanding also includes more growth favourable clauses plus “social” targets.

Brazil's current agreement with the IMF was reached in August 2002 and expires next November. The total assistance was 30,4 billion US dollars to be disbursed quarterly and conditioned to strict fiscal targets such as a primary surplus equivalent to 4,25% of GDP.

The Brazilian initiative advanced by the Sao Paulo press and credited to "high government sources", comes a day after Argentina reached an agreement with the IMF that contemplates targets linked to the performance of financial and social indicators.

In the coming IMF annual assembly scheduled in Dubai next week, Brazil is expected to propose that government managed companies investments are not considered as expenditure, broadening the budget deficit, because this limits government capacity to spend in the country's infrastructure.

Economy Minister Antonio Palocci and Central Bank president Henrique Meirelles are expected in Dubai next week.

Brazilian authorities have pointed out that the country, financially, "is not in need of another agreement with the IMF", and that a new agreement will not necessarily involve financial issues but rather other targets.

Otaviano Canuto head of the Finance Ministry International Affairs Department said that "not having a financial accord with the IMF means no restrictions regarding international reserves that now stand at over 50 billions US dollars".

President Luiz Inacio Lula da Silva recently announced a massive social-economic development program equivalent to over 600 billions US dollars for the next five years.

Mr. Canuto stressed that renewing the accord with the IMF will not be interpreted by markets and investors as a weakness of the Brazilian economy or its determination.

"We manage our economic program; IMF has become secondary. Markets are more interested in the consistency of our decisions than our relation with the IMF".

Economist Roberto Fendt from the prestigious Getulio Vargas Foundation underlined that "even more important than an agreement with the IMF is the fact that Brazil and the current administration have given ample evidence of being dependable, trustworthy". And this can be attributed to "the consistency of the current economic policies".