The Executive-Director of the International Monetary Fund (IMF), Paulo Nogueira Batista Júnior, pointed out as positive results for the post-crisis Brazil the strenghtening of the G-20 group and its acquired status as the main forum for economic discussion and for the agenda setting of international financial institutions. "Actually the crisis accelerated changes on world governance that would come anyway because the developing countries specific weight was naturally growing. It was great for Brazil because for the first time in History Brazil is a member of the main decision maker group of the planet", he stressed.

He made the statements on Tuesday (17th), at a seminar sponsored by the Committee on Finances and Taxation and the Committee on Economic Development, Commerce and Industry, focused on discussions about the consequences of the global financial crisis.

Nogueira Batista said he was impressed by Brazil´s performance in face of the crisis. "I never thought Brazil would get through the largest crisis since 1929 almost harmless and besides lending money for IMF. Specially us who used to be hereditarian borrowers", he said.

The economist recommended yet caution with excessive confidence in order to avoid the development of speculative bubbles, specially on matters like interest rates and the Real exchange rate.

Exchange and Interest Rates
Deputy Arnaldo Jardim (PPS-SP) asked about improvements to be made on exchange and interest rate policies. He reminded that Batista Júnior used to be a tough criticist of Central Bank strategies on interest rates.

The IMF director answered that it is not worth of at the moment trying to transform the current exchange rates system into steady or band rates, as in Brazil before the 1999 crisis. As for the interest he reinforced his remarks against the very high interest rates levels adopted by Brazil along the last decade.

Carlos Thadeu de Freitas Gomes, representing the National Confederation of Commerce (CNC), was enthusiastic about the way Brazil recovered from the international crisis. He stressed that the trend for next year is still an anemic recovery for the American economy and of a devaluation of the Dollar against less convertible currencies like the Real. "Such weakness of their economy might keep the Dollar as a cheap currency here", he said.

Gomes believes in a trend of appreciation of the Real faced to the Dollar for the coming months. "We shall have during 2010 an economic growth rate above world average, with inflation under control in the short term as well as fiscal solvency with growing levy and Brazil in a steady position as external creditor", he listed.

Among the positive aspects of the economy at the moment, Freitas Gomes reminded that there is still an industrial idle capacity allowing a production increase without inflationary pressure. Among the negative ones he mentions the national interest rates that although low enough today are historically high and are at risk of going up in the coming months. "Credit is already more expensive. If interest rates make credit still more expensive, this will mess up our normal trade business and by consequence the whole economy."

Alliances
During the debate, Nogueira Batista drew attention to the international interaction of the BRIC alliance (Brazil, Russia, India and China group). "Those four countries have movement capability of their own. They can sustain stances regardless of others’ support", he explained.

Other important alliances for Brazil would be with South American countries and with the United States. By the other hand, according to the economist, the main adversaries of developing economies today would be the European countries. "They have a little more than one fifth of the world economy but control one third of IMF votes and they don't want to give it up in order to benefit emergent countries", he asserted.

IMF Reform
About IMF, Batista pointed out the Proposal to Legislative Decree 1791/09, which approves the last IMF reform, held in 2008. This proposal is on the agenda of the Committee on Finances and Taxation and has already a favourable report issued by Deputy Ricardo Barros (PP-PR).

The IMF Director explained that this decree is going to confirm the last change in the composition of the Fund that increased in 2,5% the representation of the emerging countries within the IMF voters. According to the economist, the proposal has to be approved by the two Houses of the Congress in order to allow Brazil a stronger voice against the opposition, mainly from the European, to a new reform of the composition of the Fund’s quotas, expected to take place in 2011.

Reporting - Juliano Pires
Edition - Regina Céli Assumpção
Translation – JB Schneider