MercoPress. South Atlantic News Agency

Brazil considers reducing IMF dependency.

Brazilian Central Bank president Henrique Meirelles confirmed that Brazil is planning to abandon stand-by agreements with the International Monetary Fund. This will probably happen next March when President Luiz Inacio Lula da Silva officially announces the non renovation of the current agreement.

"We have until March to formalize the initiative" said Mr. Meirelles adding that at the most "we will consider a special IMF contingency line, which is available for countries with an orderly macroeconomic policy that should help financially when facing unexpected international liquidity problems".

However Mr. Meirelles admitted that Brazil's main problem is "believing that all problems have been solved which could lead to a slackening of fiscal and monetary policies".

Brazil which has consistently been praised by the IMF recently increased its primary budget surplus from 4,25% to 4,50% as part of its long term policy to reduce the GDP/debt ratio.

In related news Brazilian Finance Minister Antonio Palocci said that inflation is "under control" is spite of the Central Bank's decision to increase inflation forecast from 6,4% to 7,2% in 2004 and from 4,4% to 5,6% next year.

IMF estimates are 6,6% this year and 5,9% in 2005.

"Inflation is just above target, but under control" insisted Mr. Palocci also present at the IMF-WB annual assembly in Washington.

"This will enable us to continue with reforms and help businessmen and workers enjoy stability in terms of improved productivity and salaries", added Mr. Palocci insisting that "one must always keep track of inflation in a scrupulous, correct and vigilant manner".

The latest release from the Brazilian government statistics office indicates that the country's GDP during the first half of 2004 expanded 4,2% compared to the same period last year.

This is the highest expansion rate since 2000 confirming the Brazilian economy recovery following the 2003 contraction of 0,2%.

GDP in the first quarter was equivalent to 135,948 billion US dollars; 150,462 billion US dollars in the second quarter totalling 286,400 billion in the first half of 2004. Based on this performance the Brazilian government expects economic growth this year to reach 4,5%.