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   Soros Urges Quick IMF Action on Brazil
 
   Markets Calm as Brazil Begins Talks With IMF
 
Brazil's Cardoso Faces
Crucial Test Over Rumors

Reuters
SAO PAULO — Brazilian President Fernando Henrique Cardoso, with his popularity at its lowest ever, was under pressure Monday to show resolve with the currency crisis after nervousness spilled from the global marketplace out onto the street.

Photo
Douglas Engle/AP
President Cardoso speaks at the inauguration of a television studio in Sao Paulo

Nearly three weeks after markets forced him to abandon the strong currency policy that beat inflation, Cardoso has seen his real's value slide by 40 percent, dragging his credibility down with it.

In a crucial week at home, Cardoso's cabinet will have to convince the population that it will not take drastic measures to deal with the crisis, like freezing bank accounts — rumors that caused isolated above normal withdrawals at a few bank branches.

For the second time in 12 hours, Finance Minister Pedro Malan assured television viewers early Monday that there would be no bank holiday to announce surprise measures and no confiscation of Brazilians' money. He called Friday's rumors "criminal."

Cardoso's economic team will also hunker down with a beefed up International Monetary Fund mission to Brasilia, led by First Deputy Managing Director Stanley Fischer, to speed up a fresh transfer of money to the world's eighth largest economy.

Fischer said Sunday that the real had fallen too much against the dollar, but will strengthen if the country adopts a credible monetary policy.

"As soon as that happens, or a little after because it takes time for credibility to be gained, the exchange rate overshooting will begin to reverse, (and) the currency will strengthen," Fischer said in a panel discussion at the World Economic Forum annual meeting in Davos, Switzerland. He arrives in Brazil Monday.

Brazilian media reported that the IMF team will demand that Brazil's government raise annual interest rates to 70 percent from 37 percent now as part of the credible monetary policy. Brazil has already raised rates three times in two weeks.

After opening meetings with the IMF team Sunday, Brazilian officials gave no clues to possible changes in policy, but noted that Fischer's participation will add strength to the discussions.

Brazil needs to renegotiate the economic targets set with the Fund last November in exchange for a $41.5 billion international credit line, meant to save Brazil from a Russia-style economic collapse.

Once the two sides have agreed to new parameters on interest rates, a budget deficit and exchange policy, Brazil can receive a second $9 billion disbursement of the loan package after having spent the first chunk in a futile attempt to defend the real.

Fischer noted that Brazil has made progress in the last two weeks in its drive to slash the budget deficit, considered to be the root of the country's financial problems at a crippling 8 percent of gross domestic product (GDP).

As the government appears to be on its way to convincing the IMF of its credibility, Brazilians seem less than impressed with the performance of Cardoso.

According to an opinion poll published by the Datafolha agency Sunday, 70 percent of those polled in the business capital, Sao Paulo, said Cardoso had lost control of the crisis, and 59 percent believed he had deceived Brazil's electorate with his promise to maintain currency stability.

Cardoso's approval rating when he was reelected in October was more than 50 percent. The Datafolha poll showed that 38 percent considered his personal performance in the crisis as bad or very bad, with 22 percent regarding it as good or excellent.

It was Cardoso's lowest popularity rating since he became president in January 1995.

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