Impressed by Lula's Work

Brazil's strong performance is clearly bearing fruit: a broad-based
economic recovery is underway that should strengthen during
2004, employment is on the rise, exports have expanded at
double-digit rates, and vulnerabilities have been reduced.
This leaves Brazil well-positioned to benefit from the global upturn.

Horst Köhler

It was with great pleasure that I again visited Brazil. I had a very productive meeting with President Luiz Inácio Lula da Silva and I would like to extend my thanks to his Excellency for his warm welcome. Another highlight of my trip was my visit to communities in Minas Gerais that are benefiting from the Zero Hunger program and the Milk for Life project, as well as to the Jaíba irrigation project.

It has been a little over a year since I last visited Brazil. The changes in this short period of time are immense. The government has adhered to prudent macroeconomic policies and tackled long-standing structural problems by passing reforms of the pension and tax system and making progress on a new bankruptcy law.

This strong performance is clearly bearing fruit: a broad-based economic recovery is underway that should strengthen during 2004, employment is on the rise, exports have expanded at double-digit rates, and vulnerabilities have been reduced. These developments leave Brazil well-positioned to benefit from the global upturn.

My discussions with the President, who was accompanied by Finance Minister Antonio Palocci and Central Bank Governor Henrique Meirelles, focused on the need to instill a framework for sustained medium term growth and improved equity in Brazil and, more generally, in the Latin American region. In this context, we discussed how best the IMF and the other international institutions can contribute to moving forward economic and social reforms toward this goal.

We agreed that consistently building the social and physical infrastructure needs to be given priority in such a framework, especially against a background of falling and volatile infrastructure investment in many countries in the region.

The IMF is working to develop new statistical and policy guidelines that would create more flexibility for increasing sound public investments within an overall framework of fiscal and debt sustainability.

I hope to discuss this issue further in the coming months with Minister Palocci and other Ministers in the region after an initial discussion with the Fund's Executive Board. Of course, we will be coordinating our efforts closely with our colleagues in the World Bank and the Inter-American Development Bank (IDB).

I also listened carefully to President Lula's views on how the IMF can enhance its crisis-prevention role in Latin America and other emerging market countries. I assured President Lula that crisis-prevention lies at the heart of the Fund's agenda and that the Executive Board will soon discuss possible modalities to increase further our role in crisis-prevention and in helping countries cope with unexpected shocks.

During my visit, I was anxious to see first-hand how the government is tackling its mandate to improve living standards for the most vulnerable citizens. My visit to Minas Gerais, in the company of Social Affairs Minister Patrus Ananias, gave me an opportunity to see how the authorities are putting their social commitment into practice, and it has left a very deep impression on me.

The flagship Zero Hunger program has generated interest throughout the world because of its multidimensional approach that addresses the varied causes and manifestations of hunger in both urban and rural communities.

Initiatives like Zero Hunger and the Milk for Life project are concrete examples of social safety net programs whose experience will also be beneficial to other countries combating poverty and hunger.

I was privileged to meet with Archbishop Geraldo Magela de Castro in Montes Claros who explained the enormous contribution that the Milk for Life project is making to the poor families in the area. I also visited the Jaíba irrigation project that is transforming the livelihood of scores of hundreds of poor families dependent on agriculture.

We, at the IMF, have a long-standing commitment to support Brazil's efforts to achieve growth rates that are commensurate with its great economic potential and to improve living standards, particularly for the poor.

Horst Köhler is the International Monetary Fund's Managing Director. For general inquiries send email to publicaffairs@imf.org