A Global Journal Report: IMF Approves $30 Billion Loan To Stabilize Brazil --- Bush Team Reverses Course Amid Pressure From Banks; Nation Faces Key Election
The International Monetary Fund agreed to provide a $30 billion rescue package aimed at restoring investor confidence in Brazil, the linchpin of a continent that is rife with financial trouble in this summer of unrest in world markets.</br></br>The unusually large loan is intended to forestall a possible default on Brazil's $264 billion public debt. It is also intended to insulate Brazil's vulnerable finances from the uncertainty of an October presidential election, in which left-wing candidates are both leading the polls and shaking the markets. The agreement represents a significant shift by the Bush administration, which had previously advocated a tough-love approach toward debtor nations and refused to back further aid to Argentina after it defaulted on its loans and scrapped its IMF-endorsed economic plan late last year.</br></br>The Bush administration's view has changed significantly in the last few weeks. Some analysts speculate that officials finally gave in to mounting pressure from U.S. bankers, who argued that a Brazilian default could devastate economies in Latin America and and have repercussions in the U.S. At a time when unrest in the U.S. stock market is threatening an economic recovery, the White House seems less inclined to take the risk that turmoil in Latin America might send ripples northward.</br></br>The Brazil agreement is the most significant evidence so far that the Bush administration, which came into office arguing that big-money bailouts merely encourage high-flying investors and irresponsible governments, is now embracing those emergency loans as one of the few tools it has to deal with emerging markets gone sour.</br></br>"Brazil has the right economic policies in place to maintain stability so that the economy can continue to grow," the Treasury Department said in a written release as Secretary Paul O'Neill flew home last night from a visit to Brazil, Uruguay and Argentina -- the crisis hotspots. "The United States stands ready to support Brazil as it continues to implement these policies."