This is encouraging news for Brazil and, in advance of his anticipated reëlection bid next year, a smart move for Lula:
Brazil on Monday said it would
not renew a $41.75 billion loan accord with the International
Monetary Fund when it expires at the end of March, electing to
brave financial markets alone for the first time since 1998.
Brazil, the IMF's largest debtor, said improved fiscal
controls and external accounts, combined with the best economic
growth in a decade, had cut its vulnerability to foreign
financial shocks and improved its creditworthiness.
Brazilian President Luiz Inacio Lula da Silva, a longtime
critic of the IMF before becoming president, said the decision
to end support showed his unpopular spending cuts and
commitment to orthodox fiscal policy had paid off.
"This decision was taken with the calm and serenity of a
government that, with the sacrifice of all Brazilians, won the
right to walk with its own two legs," said Lula, who faces
re-election in October 2006.
Assuming current trends in terms of Brazil's budget surplus, the trade surplus and inflation are maintained this is a can't lose proposition for Lula. His critics on the left are happy that the IMF is out of the picture:
"It is important we are no longer subordinate to the IMF,"
said Workers' Party congressman Ivan Valente.
The right also seems to be pleased:
"It's terrific news, a hallmark of financial accomplishment
for the country, and great credit goes to President Lula for
this success," U.S. Treasury Secretary John Snow said in a
statement on Monday.
As does the center-right:
Former President Fernando Henrique Cardoso, who signed
Brazil's IMF accord in 1998, said countries should only
negotiate deals when they are needed.
"If it isn't necessary, there is no reason to maintain it,"
he said.
A word about Snow's comments. Here are some of the reasons for the plan's success:
- Although the debt remains high at 960.5 billion reais
($350.54 billion), or 51.3 percent of gross domestic product,
it is still down from 57.2 percent of GDP in 2003.
- The government posted a primary budget surplus of more than 4.5% of GDP.
- Inflation has declined and the economy grew 5.2% last year.
So they've reduced the debt, have a budget surplus and inflation was reduced while the economy grew. Maybe the US will do that again some day, hopefully before we need the IMF to bail us out . . .