Madrid, July 15, 2003 (Agência Brasil - ABr) - The Minister of Finance, Antônio Palocci, declared that, if prospects for a real decline in inflation are confirmed, interest rates can be gradually reduced. He foresees a decline in inflation. Nevertheless, he is basing his actions on the inflationary target. The government's initial expectation for inflation over the next 12 months is 6.75%, allowing for a possible adjustment up to 7%. In 2004, inflation can attain 5.5%, according to the Minister.
According to Palocci, the only way to work is with a parameter. Either a target for inflation or for interest rates. "If all goes well in the macroeconomic area, there is no reason to expect higher interest rates. The natural tendency is for them to fall. This month we experienced deflation at both the wholesale and retail levels. This represents a moment in a successful anti-inflationary campaign, but it is clear that we are not going to have a period of deflation," the Minister declared.
Palocci favors an optimistic outlook for monetary policy. The government doesn't have exchange rate targets, and, in his view, Brazilian exports continue to perform well. In June, Brazil's trade surplus broke a record of US$ 10 billion.
"The prospect is for inflation to come into line with appreciation of the currency, but in the economy, whenever one problem is adjusted, a new parameter is formed for another sector. We need to accompany this parameter, and the Brazilian export sector has to work with the expectation that the trade balance must remain positive, which is in the country's interest. Our exports have to be up-classed to conquer new markets," the Minister affirmed.
For the government, if exports are simply a function of the exchange rate, the government is obliged to increase the exchange rate, which produces inflation. "The fall in the exchange rate was necessary for the adjustment of the Brazilian economy. In the sphere of foreign trade, the tendency is for things to improve. In the Budget Guidelines Bill (LDO), our goal for industrial growth is 3.5% in 2004," Palocci said.
At the next LDO meeting, on July 17, in Brasília, the Administration is expected to present investment plans. An organized tax and credit program will be created on behalf of economic growth. The Minister of Finance affirmed that there will not be protection for just certain sectors; the economy will be protected as a whole. According to Palocci, what makes possible the definitive relief of export burdens are effective measures to improve industrial development and exports.
"These are measures that help the economy. Eventually, we may take partial steps, for specific sectors, if necessary, but our our outlook is not for a package of sectorial measures, but, rather, measures that stimulate the economic process in general," he emphasized.
The Minister accompanied President Luiz Inácio Lula da Silva at the Spanish Conference of Business Organizations. (DAS)
