Brazil moves to avert crisis

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The Independent Online
BRAZIL IS close to finalising an agreement on new funds to help head off a financial crisis, the country's finance minister said yesterday. He added that Brazil had ruled out devaluing its currency or imposing exchange controls.

Brazil is on the front line of world financial turmoil, potentially the next to be swamped by massive capital outflows.

Pedro Malan, finance minister, said yesterday that $20bn would cover the remaining third of Brazil's capital requirements not met by expected direct investment flows over the next year. The country is negotiating a package with the International Monetary Fund and other multilateral institutions, but despite days of talks there is no deal yet. However, "there will be news of forward the next few days," he said.

Mr Malan said there was no justification for the assault launched on Brazil by banks and investors following the crises in Asia and Russia. Brazil's economy was on a much healthier course, he said, blaming "trigger happy, shooting-from-the- hip analysts" for ignoring the real economy and "unduly penalising" the country.

"We don't have the same major economic and political problems of other countries," Mr Malan said.

Despite rumours to the contrary, Brazil would not deviate from its present economic policies. "We are not going to change our exchange rate regime," he said, but rather the country would maintain its sliding range against the US dollar, which allows for a de facto real depreciation of 6 per cent a year. Nor would it clamp down on rapid flows of short-term money.