Brasília, July 9, 2003 (Agência Brasil - ABr) - The reduction of a half percentage point in the prime interest rate, decided by the Copom (Monetary Policy Committee) at its last meeting, represents a clear sign that the economic team has succeeded in controlling inflation. This is the opinion of the Minister of Finance, Antônio Palocci. In his view, more than just a reduction in the index, it is necessary to note that the interest rate curve fell, and inflation is also yielding. The Minister took part in a meeting with leaders who support the Administration, to discuss voting strategies for the tax and social security reform proposals.

"I am not going to say what the Copom will do at its next meeting, but the reduction in interest rates indicates that there is sustainability for a drop in the coming period, because, if the Central Bank had inverted the interest rate curve and the indexes of inflation hadn't followed suit, the government would have bad news to announce to everyone in terms of economic prospects," Palocci affirmed.

Another theme of the encounter was the Bankruptcy Law, which the Administration hopes to get approved during the special session of Congress. This law is important, because it permits firms to recover prior to bankruptcy, guarantees jobs, and provides security to the banks, which have claimed that one of the reasons they don't lower interest rates is precisely because of the lack of guarantees that loans made to companies will be repaid.

The Minister also said that the economic team and President Lula believe that economic equilibrium will only be attained, if a long-run development process is instated. And for this, it is necessary to reduce taxes on consumption and increase them on estates, for example. (DAS)