MercoPress. South Atlantic News Agency

IMF recommends Brazil persistence in fiscal objectives.

International Monetary Fund (IMF) Managing Director Rodrigo de Rato praised the “impressive advances” made by the Brazilian government and forecasted that “looking ahead, there could be some further limited room for modifying the fiscal objectives to provide further space for public investment, provided that this is done in a manner that is fully consistent with debt sustainability”.

Mr. Rato concluded this Monday in Brasilia his week long visit to Mercosur members including brief stays in Argentina, Uruguay and Chile and three days in Brazil. In a written statement where he thanks Brazilian president Luiz Inacio Lula da Silva for his welcome and underlines meetings with Finance Minister Antonio Palocci and Central Bank president Henrique Meirelles Mr. Rato insists that to ensure the current economic recovery is sustained into the medium term, it's crucial to continue with prudent macroeconomic policies and further progress on structural reforms.

"The advances made by the Brazilian government are very impressive. President Lula's administration has adhered to disciplined macroeconomic policies and developed an ambitious structural reform agenda. These courageous policies have paid off. Brazil's vulnerabilities have been reduced, and the increased resilience has helped to weather recent global market turbulences. GDP growth is now robust, benefiting from continued strong export performance, a pick-up in domestic demand, and rising wages and employment. Moreover, we strongly support the government's commitment to strengthening social programs, which is helping to ensure that all Brazilians benefit from improving economic conditions. The IMF program is well on track, and our Board will complete the eighth review later this month.

"My discussions with President Lula focused on the challenges that lie ahead. I shared the president's optimism about the prospects for growth in Brazil. We agreed that it was critical to ensure that the current economic recovery is sustained into the medium term through a continuation of prudent macroeconomic policies and further progress on structural reforms, and continued attention to ensuring that the least advantaged share in the benefits of growth. Key priorities for reforms include initiatives to reduce the cost of borrowing, improve Brazil's attractiveness for private investment, and strengthen social programs further. "Increasing public investment also has an important role to play for raising productivity and overcoming bottlenecks that are hampering economic development. Given Brazil's still high level of public debt, it will be crucial to maintain the government's commitment to high primary surpluses, implying that over the medium term the scope for a sustained increase in public investment will have to come largely from shifting resources from lower priority current spending. The current program already provides room to accommodate higher investment by the state oil company, Petrobras, and for additional investment in high-quality sanitation projects. Looking ahead, there could be some further limited room for modifying the fiscal objectives to provide further space for public investment, provided that this is done in a manner that is fully consistent with debt sustainability. At the same time, it will be key to improve project selection and evaluation and encourage higher private investment in infrastructure through concessions, public-private partnerships, and improvements in the regulatory environment. The Fund is working closely with the Brazilian authorities as well as with a number of other countries in the region on these issues.

"The IMF certainly stands ready to offer Brazil its support and expertise in helping to develop the country's vast economic potential and improve the living standards of the population, particularly for the most vulnerable segments of society. We wish the government and the people of Brazil every success in achieving their goal of a prosperous, inclusive, and equitable country".