- The Washington Times - Thursday, August 8, 2002

The International Monetary Fund, seeking to contain a deepening economic crisis in South America, announced yesterday it had agreed to provide an additional $30 billion in loans to Brazil.
The agreement, which followed intense negotiations between the lending institution and Brazil, was announced by IMF Managing Director Horst Koehler and came as Treasury Secretary Paul O'Neill was wrapping up a fact-finding mission to the region.
The Bush administration immediately said it was pleased with the agreement Brazil had reached with the IMF. As the IMf's biggest contributor, the United States would have played a major role in the negotiations with Brazil.
"Brazil has the right economic policies in place to maintain stability so that the economy can continue to grow," the U.S. Treasury said in a statement. "The United States stands ready to support Brazil as it continues to implement these policies."
Mr. Koehler said the agreement would provide $30 billion in additional loans to Brazil and 80 percent of that amount would be available to the country in 2003.
The new IMF support comes on top of an existing $15 billion credit line the lending institution has extended to Brazil, which saw its currency the real reach record lows last week on investor concerns about the country's ability to meet its foreign-debt obligations.
The size of the IMF support exceeded the $10 billion to $20 billion package that many investors had been expecting and was clearly designed to show the IMF's strong backing for the economic program being followed by Latin America's largest economy.
Mr. Koehler said the new loan package was aimed at "reducing vulnerabilities and uncertainties" the country has been facing in financial markets and would provide a bridge to the government that will be chosen in October elections.
The recent turbulence in Brazil's currency markets has been attributed in part to investor concerns that the two presidential candidates leading in public opinion polls are left-of-center politicians who in the past have criticized the IMF-backed economic reforms supported by the current government.
The Brazilian Finance Ministry said officials in the government of President Fernando Henrique Cardoso were "convinced that this accord serves the interests of the country and trust that it can count on the support of the principal candidates in the presidential election. At the moment, a process of consultations is under way in this regard."
In his statement, Mr. Koehler said, "Brazil is on a solid long-term policy trend which strongly deserves the support of the international community. The active democratic debate within Brazil is to be welcomed, and as we have said, the fund stands ready to support any government committed to sound economic policies."
The announcement of the $30 billion support package comes three days after the Bush administration provided a $1.5 billion emergency loan to Uruguay. That was the administration's first such direct assistance to a country in economic trouble. It was provided to allow that nation to reopen its banks, which had been closed for four days to halt a run on deposits.
The Brazilian currency fell to record lows last week after Mr. O'Neill said the administration wanted assurances that any new support to Latin America would not end in "Swiss bank accounts."
Mr. O'Neill and the White House quickly backtracked and the Treasury secretary struck a much more conciliatory tone during his four-day trip to the region, which included meetings with the presidents of Brazil, Uruguay and Argentina.

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