Brasília, 5/7/2004 (Agência Brasil) - Brazil's desire to have new spending in infrastructure entered as "investments" instead of "expenditures" in its primary account (which does not include interest payments and is the principal yardstick used by the IMF nowadays to measure fiscal control) has support at the Interamerican Development Bank (IDB), says minister of Planning, Guido Mantego. The minister reports that participants at the last meeting of the IDB board clearly accepted the Brazilian idea. The significance of that acceptance is that the then-governor for Spain at the IDB, Rodrigo Ratto, who was present at that meeting, is the new head of the International Monetary Fund.

Mantega explains that the shift does not mean a change in accounting, but rather an inclusion. The idea being to differentiate spending that has concrete results on GDP, for example, paving a highway that increases exports. Because it is not good policy, says the minister, to maintain debt- paying capacity stable while not increasing GDP, the expenditure would be entered as part of the primary account. "We want this to be as transparent as possible. We have made our position clear to the IMF," said the minister.

According to the minister, the managing director of the IMF is cautious about the issue, but has indicated that the idea could be accepted.

Yesterday Mantega met with an IMF mission headed by Gerson Fhill that is in Brazil on one of the routine visits that occur every three months.

With regard to the oscillations in the dollar and Brazil risk premium that have taken place over the last few days, Mantega said he expected things to calm down once the US Federal Reserve decides on an interest rate increase, "that should be 0.25 or 0.50 percentage points." The market has a tendency to react to what is going to happen in the future, he explained.

As for the domestic situation, Mantega declared that economic fundamentals were sound and that the government had a majority in Congress and could get favorable votes for important bills such as the new Bankruptcy Law.

Translator: Allen Bennett