Brazil Kisses the IMF Goodbye

Brazil's secretary of the Federal Treasury reaffirmed what the Finance
Minister had already announced: Brazil does not intend to renew
its agreement with the International Monetary Fund when that
accord expires at the end of the year. Brazilians don't need
the IMF to know what fiscal responsibility is, says the secretary.

Gabriela Guerreiro

Brazil does not intend to renew the agreement it signed with the International Monetary Fund (IMF). The agreement expires at the end of this year. According to the secretary of the Federal Treasury, Joaquim Levy, the Fund has been an "excellent partner" for Brazil, but the government's intention is not to renew the agreement.

The secretary emphasized, however, that the government will not make any decision that jeopardizes "the progress achieved" by President Luiz Inácio Lula da Silva, especially the fiscal adjustment.

On June 8, the Minister of Finance, Antônio Palocci, also indicated that Brazil does not plan to renew the agreement. "In principle, our agreement terminates between the end of this year and the beginning of next," Palocci said.

Levy also asserted that fiscal responsibility for the country is a prerogative of the Brazilian government, not the IMF. "It is our commitment. We don't need the Fund to know what our fiscal responsibility is. Our external balance is more than adjusted. We have to keep working," he emphasized.

At a public hearing before the Joint Budgetary Commission of the National Congress, the secretary of the Treasury demonstrated to the lawmakers that the government surpassed the primary surplus target set for the first four months of the year by US$ 1.92 billion (6 billion reais), despite the deficit of US$ 322 million (1 billion reais) turned in by public enterprises.

In the secretary's assessment, the government managed to exceed expectations, because it fulfilled its fiscal targets, as well as maintaining spending close to the limit of the amount budgeted for the social area—since, according to Levy, the ministries in the social area spent 95.5 percent of what was budgeted for the first four months of this year, while the other Ministries spent only 68.6 percent.

Some Good Numbers

"The numbers confirm the significant revival of economic growth, initiated almost a year ago. Following the difficult process of macroeconomic adjustment, which occurred for the most part during the first half of 2003, fortunately we can now reap the positive results."

Finance Minister, Antônio Palocci, transmitted this optimistic message to a group of entrepreneurs assembled June 8 in Brasília, at the seminar "Agenda for Sustainable Infrastructrure Development," sponsored by the Brazilian Association of Infrastructure and Basic Industries.

According to the Minister, "this is the correct moment to activate investments in infrastructure and the expansion of the country's basic industries."

Palocci informed that exports through May were up 25 percent this year, compared with the same period last year. In his view, the success in foreign sales is due not only to the evolution of agribusiness and various other Brazilian manufacturing sectors, but also "to the decreased volatility of the exchange rate and the introduction of various steps to make exportation less bureaucratic, providing greater agility to the sector and modernizing customs policy."

Palocci stated that domestic consumption has also been contributing to growth. He informed that retail sales rose 7 percent this year through March, compared with the same period last year. In addition, he said, sales of non-durable consumer goods in May were up over 4 percent in relation to May, 2003.

The Minister also said that industrial policy, focused on technological innovation and reducing the cost of capital, will allow the country to attain a new and better level of efficiency and productivity, assuring the conditions necessary for Brazil to face the challenges presented by its growing insertion in the world's commercial markets.

Gabriela Guerreiro works for Agência Brasil (AB), the official press agency of the Brazilian government. Comments are welcome at lia@radiobras.gov.br.

Translated from the Portuguese by David Silberstein.