MercoPress. South Atlantic News Agency

Further IMF praise for Brazil's perfomance

More International Monetary Fund praise for Brazil, this time in the latest edition of the IMF Survey, where Deputy Director for the Latinamerican Department Charles Collyns anticipates Brazil will be one of the world's “heavy weights” in the next five to ten years.

"Brazil has long been called the country of "mañana" (tomorrow), insinuating it will never achieve its full potential. Now I'm hopeful this is no longer truth" said Mr. Collyns adding that "I'm optimistic about Brazilian growth, its capacity to address its problems of poverty and inequality and become in the next five to ten years a major player in the world economy".

However Mr. Collyns optimism is conditioned to Brazil's continuing with the current economic policy and sustained growth of 3 to4% annually.

Brazil is forecasted to expand 3,7% in 2005, 3,5% in 2006 after having achieved 5,2% in 2004 according to the IMF.

This is not the first time IMF has praised President Lula da Silva's administration orthodox economic policies, and David Owen from the IMF Brazil Office has predicted that Brazil will continue to lower its debt/GDP ratio helping to reduce the risk component of its sovereign bonds.

"A robust fiscal policy has made sustainable the dynamics of the country's debt", argued Mr. Owen who nevertheless pointed out that a share of Brazilian bonds continue linked to short term interest rates, which are highly sensitive to changes in monetary policy.

Mr. Owen also praised Brazil's budgetary policy and its excellent results but admits it has been achieved basically by increasing tax revenue and "there's a growing consensus in Brazil that the fiscal load is too heavy and now it's absolutely essential to lower expenditure".

Another IMF recommendation for Brazil is a labour reform stimulating employment and eliminating contracting by the black economy which currently represents half of the employment recruitment.

IMF officials also believe Brazil with its orthodox policies has managed to break the high growth followed by recession cycles so common to South America's largest economy.

"A new productive structure has been built, exports' dynamics and the accumulated impact of structural reforms have helped a robust recovery of investment", adds Mr. Owen.

Finally Mr. Collyns praised the high interest rate policy of the Brazilian Central Bank which has helped to contain inflationary pressures and "establish a solid creditability". If this continues "Brazil's prospects are extremely good".