RIO DE JANEIRO, April 15 (UPI) -- Brazil's finance minister is making the rounds in the United States this week, trying to build momentum for the country's budding economic revival, attack protectionism, and attract new foreign investment.
Having met with top officials of the International Monetary Fund and the World Bank in Washington on Monday, Finance Minister Antonio Palocci's next stop was Wall Street, where he would do his best to convince foreign banks that Brazil's new government was going to stick with austerity.
"A large number of developing countries, including members of my constituency, have made substantial progress in opening up their economies," Palocci told an IMF committee during a weekend meeting. "But unfortunately, their most competitive exports, such as agricultural products, textiles, footwear and steel continue to face heavy barriers in the United States, Europe and Japan."
It is a theme that Palocci, and Brazil's leftist President Luiz Inacio Lula da Silva, have been harping on since taking office Jan. 1.
Palocci is hoping that this message will have more weight during his tour of the United States. In the past two months, Brazil's fortunes have been turning around, ever so gingerly.
Brazil's currency -- the real -- has strengthened significantly in the past weeks. The country's bond prices are roaring back from an anemic state late last year that saw spreads soar -- an indication of investor doubt that the country could remain solvent. Exports -- the sector Brazilian officials hope will be the engine to power economic stability -- are shooting up. And Lula's push for reforms within Brazil's legal, pension and tax systems, while bogged down in an extremely divided congress, are gaining steam and looking to be introduced to lawmakers next month.
After meeting with Palocci in Washington, the IMF's Anoop Singh -- the fund's top official for Latin America -- had only praise for the direction of the region's largest economy.
"The government (of Brazil) knows what it has to do. (The IMF) is very impressed, and we are supporting what is being done," Singh told the Globo newspaper in Monday editions. "Brazil is a very important country, with 170 million citizens, corresponding to 30 percent of Latin America. If Brazil can grow, this would have a strong impact on the other countries."
On Monday, Palocci was meeting with the top U.S. trade representative, Robert Zoellick. "We are encouraging countries that are still reluctant to liberalize trade and to eliminate subsidies to review their position to facilitate the continuation of negotiations within the World Trade Organization," Palocci said before his meeting with Zoellick.
"I support the WTO's efforts and the role the Fund is playing in its enlightened advocacy of the benefits of increased global trade integration and liberalization."
While getting the United States and the European Union to ease its subsidies and tariffs on key Brazilian exports will be a long, uphill battle, Palocci is also tasked during his U.S. tour with proving the worthiness of Brazil -- and by extension Latin America as a whole -- of foreign direct investment.
At a Monday Latin American economic conference in New York sponsored by Columbia University, analysts said the region will face stiff competition from Asia and Eastern Europe when it comes to attracting foreign investment this year.
While Brazil has been driving the Latin American bond turnaround in the first three months of this year, attendees at the conference said Mexico is likely to assume that position, with its close ties to the United States.
Additionally, the war in Iraq, while progressing smoothly for coalition forces, has underscored a tough global environment that emerging-market countries have to work through to win investor cash. "The new Brazilian administration is doing its part to respond to the worsened external environment," Palocci told the IMF committee.
"In addition to strengthening fiscal and monetary policies, the new administration moved quickly to build political support for much needed structural reforms in the pension system of civil servants and in the tax system."
In addition, Palocci also highlighted the fact that Brazil increased its primary budget surplus to 4.25 percent of gross domestic product, going beyond the demands of the IMF aid deal it struck last August. Palocci noted as well that Brazil's primary surplus in the first two months of 2002 hit $5.1 billion, the target for the end of March -- all reasons, he said, for investors to be bullish on Brazil. "Spreads on Brazilian bonds have been cut from 2,400 to around 900 basis points, and there is still scope for further decline," Palocci said.
