---------- Forwarded message ---------- Date: Tue, 3 Nov 1998 14:30:49 -0500 (EST) From: Robert Weissman <[EMAIL PROTECTED]> To: Multiple recipients of list STOP-IMF <[EMAIL PROTECTED]> Subject: IMF/Brazil deal Compiled by the Preamble Center: > 1) Money from ESF for Brazil? 20b from Europe and US? > > >From USA TODAY, November 3, 1998 > > Brazil's economy: Negotiators from Brazil and the International > Monetary Fund met Monday in Washington to discuss the possibility > of a $ 20 billion IMF aid package as the basis for about $ 40 billion > in aid from governments and lenders in the USA and Europe. Brazil's > Foreign Minister Pedro Malan goes before his country's Congress > today to argue for $ 23.5 billion in tax increases and spending > cuts to repair Brazil's deficit. A member of the Brazilian delegation > to the IMF said, "There is no other choice but to deal with this > situation now. I'm quite optimistic about the approval of the > measures by Congress and the approval of (Brazilian) society as > a whole." > > --------------------------------------------------------------------------- > 2) What the IMF is saying about Asia now... > > The Straits Times (Singapore), November 2, 1998 > "Turning point in world crisis" > > By Hubert Neiss > > THE international financial community may have reached a turning point > in the struggle to contain > the global crisis that first erupted in Asia. > > After 16 months of bleak economic news, there is a new commitment to stem > the contagion and to > erect new defences to fend off future outbreaks. Moreover, there have been > very encouraging > developments in many East Asian countries. > > The recently concluded annual meeting of the International Monetary Fund has > produced a > common purpose that could transform the crisis into a temporary setback. > > The meeting produced an important consensus on two parallel themes: the need > for a rapid response > to the crisis, and a resolve to strengthen the international financial > system. > > It concluded with a consensus on the need to reinvigorate world growth. The > US has cut interest > rates twice, and European policy-makers are taking steps in the same > direction. > > Japan has also responded: the Diet has finally passed legislation that > should advance the difficult task > of restructuring the Japanese banking industry, and has apportioned US$ 500 > billion (S$ 845 billion) > to the task. > > After the meetings, the US Congress moved to approve long-delayed IMF > funding. This was a > signal of a broad consensus in Washington of the depth of the global crisis > and the need for the US to > shoulder its responsibilities. This action will free up funding from other > countries that should put a total > of about US$ 90 billion at the IMF's disposal for future crises. > > Brazil is also making a serious effort to deal with its economic problems, > not only for itself, but for > Latin America. The Brazilian authorities have unveiled a programme of fiscal > constraint and structural > reforms. > > All these steps should shore up stability after months of uncertainty. > Nowhere has that been more > evident than in Asian financial markets, as currencies and share prices have > firmed. > > But rebuilding confidence will involve more than responding to the immediate > crisis. There is a need > to rethink the practices and regulations that have governed global markets > during these years of rapid > growth and technological change. > > The proposals are called the "new international financial architecture". > That is shorthand for the mix of > measures that embrace changes in the way countries are expected to monitor > and discipline > themselves, changes in the way banks and borrowers are expected to interact, > changes in the way > markets are expected to behave, and changes in the way the IMF operates. > > The consensus on the new international financial architecture is crucial to > the effort to ensure that East > Asia and other emerging markets proceed on the path of balanced growth once > the crisis is over. > > The key elements of this approach include: greater private and public sector > transparency and new > standards of corporate governance. > > The IMF is ready to play its part by increasing the amount of information it > makes public and in > monitoring the implementation of the standards, whether devised by itself or > by other professional > bodies. > > * Increased economic policy scrutiny by national governments and > multilateral organisations. > > * A commitment to financial sector reform to bring markets and banking > systems up to international > standards and enable countries to adjust to the complex demands of the > global market. > > * Plans to involve the private sector in preventing future crises and keep > it involved -on a voluntary > and cooperative basis -in the solutions the next time problems erupt. > > These are not headline-grabbing topics. But they are steps that can head off > future instability. In > devising these new policies, the IMF and the international community will > study closely the lessons to > be drawn from Asia's recent experience. Many of the issues that the new > international architecture > addresses are being faced right now in Asia, and the progress made so far > will be instructive for the > future. > > The fact is that there has been progress. Regional currencies have found new > stability at much > strengthened levels, foreign exchange reserves are rising, current-account > surpluses have increased > room for manoeuvre, and interest rates have come down sharply. > > Thailand and Korea are expecting economic growth again next year. The > Philippines is holding its > own and has avoided falling into recession. Even in Indonesia, there are the > first signs of > improvement. > > In several countries, major steps have been made to restructure financial > systems that could not > handle the stresses of rapid asset inflation and weak credit controls. > > The task of rebuilding Asia's economies -and re-orienting the global system > -will not be easy. The > IMF is aware of the criticism that has been levelled at the programmes put > in place in the region, in > no small measure because of the human cost of the crisis. > > In Indonesia, programmes have been set up to provide subsidised rice and > other essentials to the > poor. In Korea, the IMF has been instrumental in urging the government to > establish a social safety > net -including unemployment insurance -for the first time. Thailand has also > Strengthened Its Safety > Net. > > The goal of fiscal and monetary policy has shifted decidedly towards > expansion in all countries. > > And the IMF stands firmly behind the World Bank's effort to temper the > impact of the crisis on those > least able to cope. > > There are no easy solutions. The task now is to ensure that the > unprecedented improvement in living > standards in Asia and other emerging markets is sustained into the next > century. > > (The writer is director of the Asia and Pacific Department of the > International Monetary Fund in > Washington, D.C. He contributed this article to The Straits Times.) > > ---------------------------------------------------------------------- > 3) Today's FT on Brazil > Financial Times (London), November 3, 1998 > > HEADLINE: Brazil debt roll-over sparks fears > > By Richard Waters in New York > > BODY: > Foreign banks and investment institutions continued to show little > appetite yesterday for a formal > restructuring of Brazil's foreign debts, despite a growing belief in > financial markets that the official > package now in preparation cannot succeed without a large degree of private > sector help. > > Brazilian officials have yet to approach the country's foreign bank > creditors and investors officially to > ask for their support. Unofficial soundings suggest Brazil hopes to win > broad backing from foreign > creditors to roll over existing commitments and extend new money. > > "They would prefer to ask financial institutions to maintain or even > increase their facilities in an > informal way," according to one financial source. That would contrast with > the sort of formal debt > plan needed to prevent a default by South Korea earlier this year. > > Brazilian officials are expected to ask directly for private sector support > once a deal with the > International Monetary Fund and the Group of Seven leading industrial > nations is completed. That > agreement, expected as early as this week, is expected to provide $ 30bn-$ > 50bn (#18bn-#30bn) to > bolster Brazil's external finances. Unofficial approaches are believed to > have been made to leading > commercial and investment banks, but there seems little appetite among > financial institutions to lend > more. > > Even the large scale of the official financial package being discussed could > fail to bolster the Brazilian > currency if confidence does not return quickly to the financial markets, > according to foreign > economists. > > The country's foreign reserves have fallen from $ 75bn to $ 43bn since > August, said Geoffrey Dennis, > emerging markets strategist at Deustche Bank Securities. "I think they're > going to have real problems > rolling over the foreign currency debt," he said. "The genie is out of the > bottle - credit lines have been > pulled, the banks are cutting back." > > Complicating the picture could be a move by foreign banks to reduce their > exposures early in the > expectation they might, at some later stage, be required to put up more > money in a Brazilian bail-out. > > Still fresh in many banks' minds is the sequence of events in South Korea > late last year, when an > IMF deal failed to stem the outflow of foreign capital, leading eventually > to an emergency rescue > from private creditors. > > However, for US banks, at least, heading off a crisis of confidence over > Brazil is likely to be viewed > with a greater sense of urgency even than that of South Korea.
