MercoPress. South Atlantic News Agency

Brazil ratifies orthodoxy in spite of political infighting

Brazil's Finance Minister Antonio Palocci said Friday in London there's no chance that the current administration of President Lula da Silva will abandon the current tight fiscal and monetary policies in spite of internal political disputes.

"There is no possibility for the fiscal commitments to be relaxed because of internal political disputes", emphasized Mr. Palocci who is currently in London participating of a G8 Finance ministers meeting.

President Lula da Silva is facing a serious political situation following claims of corruption involving members of the ruling Workers party, some of which were sacked, but nevertheless it has had an impact in financial markets.

Further claims of "vote buying" in Congress to ensure the passing of crucial legislation is still pending and several members from the ruling coalition have been pinpointed as involved.

The impact of the situation has reached the Brazilian Central Bank forcing President Lula da Silva's office to support banker Henrique Meirelles one of the most resisted figures of the bank for his insistence in an extremely high interest rates policy to cut back inflation threats.

"The president of the Central Bank, Henrique Meirelles will remain in his post which he has been performing with competence and public dedication", said a short official release adding that press reports indicating a possible replacement are entirely "groundless".

Mr. Meirelles is currently under investigation by the Brazilian Supreme Court for alleged fiscal irregularities and a possible electoral offence.

A former Bank of Boston CEO he's considered the symbol of the orthodox economic policies enforced by the Lula da Silva administration, particularly the current 19,75% basic interest rate when annual inflation is in the range of 8,5%.

Mr. Meirelles is under investigation for alleged tax evasion in January 2003 before been named to the Central Bank and for having given the wrong home address when he was a candidate to the Lower House in the 2002 elections.

The influential O Estado de Sao Paulo published Friday that Mr. Meirelles would be replaced as Central Bank president by Murilo Portugal, Deputy Finance minister.