In an act of political expediency that signals growing economic
prowess, Brazil opted not to renew its accord with the
International Monetary Fund (IMF) on March 31. The country’s
economy grew 5.2 percent in 2004 and record trade surpluses have
yielded enough cash to service its debts, including $846 million in
interest it will pay the IMF this year.
President Luiz Inacio ‘Lula’ da Silva, who is up for re-election
next year, is likely to receive high praise for the move from his
supporters and others in Latin America, who argue that IMF policies
have caused economic failures in Brazil and led to massive
poverty.
Brazil and the IMF will continue to work together, along with
the Inter-American Development Bank, in a three-year pilot program
that will allow Brazil to spend $1 billion a year to develop its
infrastructure, something long ignored under previous IMF budget
restrictions.
Brazil’s decision, and the IMF’s recent approval of Argentina’s
plan to pay off only 76 percent of its debt, is reflective of Latin
America’s emerging power in developmental institutions. This
influence grew stronger when leaders of Venezuela, Argentina, and
Brazil signed an accord March 2 to negotiate their debt as a
bloc.
With more control over development dollars and a prosperous
economic outlook, the real test for Brazil is whether it can
translate this success to reducing poverty in a country where
one-third of its citizens live on less than $2 a day.
— Grace Hanson
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IMF
on the Ropes in Brazil
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