President Clinton urged Brazil to
persist in its economic reforms Wednesday after it shook world
markets by effectively devaluing its currency.
"We have a strong interest in seeing Brazil, with whom we
have worked on so many important things around the world, carry
forward with its economic reform plan and succeed," Clinton
told reporters. "We certainly hope that they will."
|Brazilians form a long line to get to ATMs inside a bank in Rio de Janeiro
The United States fears that continued turmoil in Brazil
Latin America's largest economy could spread to neighboring
countries and ultimately hurt the U.S. economy, which exports
heavily to the region.
In one sign of the situation's gravity, Clinton said U.S.
officials had consulted with the Group of Seven (G7)
industrialized nations, the International Monetary Fund (IMF)
and Brazilian authorities about the events in Brazil.
In another, U.S. Deputy Treasury Secretary Lawrence Summers
canceled a New York speech Wednesday to stay in Washington and
monitor developments in the financial markets.
World stock markets were hammered by Brazil's devaluation.
The Dow Jones industrial average fell nearly two percent to
stand at around 9,300 in midday trading. However, U.S. Treasury
bonds rallied on flight-to-quality buying.
Brazil, desperately seeking a way out of a deep financial
crisis, effectively devalued its inflation-busting real currency
by nearly 8 percent Wednesday after Central Bank President
Gustavo Franco said he would resign.
The dollar rose by 8.6 percent against the real an
effective real devaluation of roughly 7.5 percent immediately
after the Central Bank removed a tight mini-band in which the
currency had previously traded.
Brazil's foreign exchange policy has served as the anchor of
the country's four-year economic recovery after decades of high
In an effort to prevent the Asian financial crisis from
spreading to Brazil and dragging down Latin America, the IMF and
rich industrial nations last year pledged more than $41 billion
to shore up Brazil's faltering economy.
Clinton stressed the importance of Brazil to the United
States, noting that it is the largest economy in Latin America,
the fastest-growing market for U.S. goods and services.
"We have worked hard to keep the financial crisis in Asia
... from spreading to Brazil," the president said.
"We hope that the situation will be resolved in a
satisfactory way, not only for the people of Brazil but for all
of the people in the Americas," Clinton added. "We're working
hard to that end and we'll continue to do so."
The financial markets have long considered the real
overvalued and have feared that a devaluation might spark the
kind of crisis of confidence among investors that plunged Russia
and much of Asia into chaos last year.
Brazil's latest crisis began last week when a rogue state
governor announced a 90-day moratorium on debt payments to the
While the sums involved were small, the move raised fears
that the country's crucial austerity drive could be derailed and
that concern snowballed into panic by Tuesday.