Brasilia, 9/8/2003 (Agência Brasil - ABr) - Compliance with performance criteria led the International Monetary Fund to approve the third, next-to-last revision of the September 2002 US$30 billion agreement with Brazil. The announcement of the approval was followed by a declaration by minister of Finance, Antonio Palocci, to the effect that Brazil will now withdraw an additional US$4.2 billion, bringing the total it has withdrawn under the agreement to US$23.7 billion.

In a press release, the second managing director of the IMF, Anne Krueger, praised the way Brazil has been conducting tax and social security reforms, saying that progress had been faster than expected, "paving the way to renewed dynamic and sustainable development."

Krueger added that strong fiscal and monetary policy resulted in renewed market confidence. "The government is clearly committed to achieving a primary surplus," said the note. The country responded firmly to inflationary pressure at the end of last year and beginning of this year, reducing inflation and estimates of future inflation, allowing the Central Bank to relax its monetary policy. "With a further convergence of indexes it will be possible to further relax monetary policy which should boost growth," adds the note.

The Krueger note coincides with comments by minister of Finance, Antonio Palocci, regarding a new agreement with the IMF. The present agreement terminates at the end of this year. "Today we look ahead and see a real possibility of economic growth. Under those circumstances any agreement will be a different one," says the minister, explaining that a new agreement will have to permit the country to grow. Palocci added that if a new agreement involves a loan, it will be smaller than the present one. The IMF returns to Brazil in November for a final revision which will determine the release of the final US$7 billion in the agreement.

Palocci insists that any new agreement will be based on technical critieria, without political interference, in order to provide the country with fiscal support. The minister said Brazil does not need an IMF agreement to obtain market confidence. "Market confidence you get by meeting targets and complying with obligations. Brazil is doing exactly that. Confidence in Brazil is growing because of that," said the minister. (AB)