MercoPress. South Atlantic News Agency

Brazil: “No longer to subordinate to IMF”

Brazil announced Monday that it will not renew the stand-by credit agreement it signed with the IMF in September 2002 because the good shape of the national economy makes it superfluous

Brazil, the IMF's largest debtor, said improved fiscal controls and external accounts, combined with the best economic growth in a decade, had cut its vulnerability to foreign financial shocks and improved its creditworthiness.

Brazilian President Luiz Inacio Lula da Silva, a longtime critic of the IMF before becoming president, said the decision to end support showed his unpopular spending cuts and commitment to orthodox fiscal policy had paid off.

"This decision was taken with the calm and serenity of a government that, with the sacrifice of all Brazilians, won the right to walk with its own two legs," said Lula, who faces re-election in October 2006.

Over six years ago, Brazil turned to the IMF just before currency devaluation caused its debt load to spike and raised doubts about the country's ability to pay its foreign debt. Since then, the country has weathered a series of foreign financial shocks, thanks in part to the support of the IMF.

The Washington-based multilateral lender backed Brazil's move not to renew and has urged it to use high interest rates and spending cuts to stabilize the economy and help repay the fund $23.2 billion still owed.

"The decision by the authorities reflects the impressive results, generally ahead of expectations, of Brazil's macroeconomic stabilization and reform," IMF Managing Director Rodrigo Rato said in a statement.

Finance Minister Antonio Palocci said Brazil could weather future shocks and did not require terms of an IMF accord to cut its high public debt. He also said Brazil would stick with its current budget surplus target of 4.25 percent of GDP, a level sufficiently high to keep its debt load on a downward trend.

"Brazil is doing much better, there are no storm warnings in our future," said Palocci, who in 2003 had his effigy dragged through the streets by protestors shouting "IMF Out!" after he slashed public spending.

In 2004, the Brazilian economy grew by 5.2 percent.