MercoPress. South Atlantic News Agency

Koehler anticipates new IMF approach

IMF Managing Director General Horst Koehler admitted in Brasilia that the multilateral institution needs to reformulate its approach towards Latinamerica.

Specially invited by Brazilian President Lula da Silva, Mr. Koehler avoided talking about Argentina but indicated that the IMF approach towards countries in the region must concentrate on crisis prevention and good performance support.

"Counties such as Brazil are proving that the time when it was necessary to say if economic policies were correct or wrong is over. The Brazilian Finance Minister and the president of the Central Bank know very well what line to follow. Therefore the IMF needs to define a new chapter in its relations with Latinamerica", highlighted Mr. Koehler after meeting with President Lula and his closest aides.

Further on Mr. Kohler indicated that the IMF to implement mechanisms so "South American countries can develop and implement infrastructure investments, without leaving aside fiscal discipline".

"We are concerned that investments in infrastructure in many South American countries have declined in the last decade, so I've instructed our staff to find ways the IMF can contribute this year, to reverse that tendency".

Brazilian Finance Minister Antonio Palocci revealed that during the meeting with Mr. Koehler one of the preventive mechanisms on which the IMF is working, is very similar to the current standing agreement with Brazil involving 14,8 billion US dollars signed last November.

"There's an important evolution in this area between IMF and countries taking loans, so in future agreements the idea of a kind of stand by insurance to which countries can appeal when exposed to external crisis or unexpected domestic difficulties could very well be a useful mechanism", said Mr. Palocci.

Finally Mr. Koehler underlined he was most impressed by the achievements of the President Lula administration adding that "I have a feeling this will be a good year for Brazil with growth rebounding strongly".

Brazil since 2003 has a traditional stand-by loan with the IMF which now has been redefined and acts as a preventive financial instrument. Even when Brazil faces serious political problems and the economy is just beginning to pick up, the credit standing of the country among foreign investors remains high.