Number 336, February 5, 1999.
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Our principal topics this week are:
THE ECONOMY:
IMF and Malan announce more financial squeezing
Second portion of $9 billion to arrive in March
Imported goods are more expensive
4,444 workers 'let-go' in January
INDIGENOUS ISSUES:
President of Funai dies in plane crash
ENVIRONAMENT ISSUES:
Storm kills two people and closes all airports
THE ECONOMY:
- IMF and Malan announce more financial control
Minster Pedro Malan and the vice president for IMF Stanley Fischer
announced that there will be greater financial control. To maintain
financial aid from the IMF, the Brazilian government has to adhere to the
new methods, which are being negotiated with the IMF. Mr. Fischer said,
"other methods are absolutely necessary", but he did not state what exactly
the "other methods are". Malan also remained silent regarding the details
that will be worked out. He said nothing would be announced today, tomorrow
or the day after. There will be no surprises.
According to some sources, the Economic Team promised to maintain high
interests in order to keep inflation under 10% for the year, or under 0.8%
per month. This indicates that inflation accumulated during the year will
be more than 10%. The government had forecasted inflation to reach 2%. The
Brazilian government need to amply privatization programs. The new methods
are necessary for the government to have conditions to arcar the increase
of spending with the public debt, which was provoked by the devalorization
of the 'real' and the increase in interest. Stanley Fischer said," the
essential point at this moment is to contain prices, in order to prevent
inflation". In practice this means that the government need to maintain
high interest - today it is 39% - for the year. With a fluctuating exchange
the political monetary system needs to fulfill their duty by maintaining
inflation at its lowest level.
Fischer who is the second most important person in the IMF came to Brazil
to accelerate discussions for a revision of the agreement which was signed
at the end of 1998 giving Brazil permission to obtain US$41,5 billion
dollars of which only US$9,3 billion were granted up until now. With the
change in the political exchange rate, the devalorization of the 'real' in
relation to the dollar and the raise in the value of the Brazilian debt in
local currency caused the IMF to re-evaluate their initial negotiations
with Brazil.
- Second portion of $9 billion to arrive in March
The liberation of the second part of the IMF's loan to Brazil will arrive
in March and not in February as arranged. A declaration to the minister by
the IMF clearly stated last night that a revision of the agreement has to
be presented to the Council for the IMF by the end of this month. Only then
will the second $9 billion be granted. The request to increase the amount
of money has been thrown out. The anticipation of this amount of money from
the IMF is very important to the Brazilian government in order to maintain
a stable exchange rate.
But there are limits: according to the original agreement signed with the
IMF the country promised to have reserves of over US$20 billion dollars,
not counting international loans. Today the reserves are under US$27
billion and with the loan of UD$9 billion it is US$35 billion. The IMF is
discussing also the way in which the government interfered with the rate of
exchange, an analysis on that will be divulged within the next two weeks. A
revision of the terms of agreement with the IMF, which was signed in
November, is to be realized by the end May. By the end of February the
first evaluation is to include the public accounts and a review of the
methods that were established with the agreement in 1998.
Because of the early evaluation the government can request the second part
of the loan. However, with the free exchange rate and the increase in
inflation the economic perimeters of the agreement were altered radically.
.
- Imported goods are more expensive
The big difference between the dollar and the 'real' was manifested in the
supermarket. Argentina olives rose 9,29& between January 27th and February
3rd. During these dates 15 products rose in price between 0,40% - 9,29% as
compared to 11 products which rose in price the previous week The most
notable price rise was in fried potatoes which rose from 5,06% to 25,49%.
The dollar rose from US$1,70 to US$1,77 during the same week
- 4,444 workers 'let-go' in January
The slowing down of public works in January has resulted in the largest
number of unemployed since 1995. The construction builders of public works
have dismissed 4,444 workers in January. The companies employ 78,243
workers at present. This time last year they had 92,298 workers.
Source: Folha de São Paulo 5.3.99
INDIGENOUS ISSUES:
- President of Funai dies in a plane crash.
The minister of Justice, Renan Calheiros is going to personally accompany the investigation into the plane crash, which resulted in the death of Sulivan Silvestre, the 36-year-old president of Funai (National Foundation for the Indians). The plane belongs to the Aero Base Taxi Aereo Company. It left Brasilia at 20.50 hours on Tuesday night; it caught fire before falling from the sky at 21.30 hours in the outskirts of Goiania, just 3 km from the airport. The pilot along with two workers of FUNAI died instantly with Sulivan Silvestre.
The president Fernando Henrique Cardoso announced last night his sorrow over the death of the tree Funai workers. Silvstre was buried yesterday afternoon. Present at his funeral were 220 Indians of various tribes. The danced in various circles which indicated their honor and respect for Sulivan Silvestre.
Source: Folha de São Paulo February 3, 1999
ENVIRONAMENT ISSUES:
- Storm kills two people and closes all airports
Winds reaching 120 km/h affected the greater São Paulo area causing havoc. The airport in Cumbica, the largest in Brasil had up tp 35 thousand people stranded due to the storm, some passangenrs had to wait 27 hours before embarking on their journey. At the airport in Guarulhos, a number of planes were destroyed as well as the hangers. Landing areas and take-off areas were suspended for up to three hours affecting 181 flights.
Two people died and eight were left seriously injured, with at least 250 families left homeless. The strong winds and heavy rains for more than two hours caused land slides, electrical wires to snap, the falling of many trees, rivers to overflow, which affected more than 550 dwellers.
Source: Sabado 6.2.'99
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