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Brazil's Minister of Finance, Antonio Palocci, has announced that Brazil will anticipate the payment of an International Monetary Fund loan of US$ 15.5 billion, which will mean an economy of around US$ 900 million in interest payments.
The loan was to have been paid off in installments ending in December 2007. Palocci pointed out that whereas the country's total reserves were US$ 15 billion in 2003. Today the country has US$ 51 billion, above the IMF loan amount, so the payment will not have a negative effect on its international reserves. Brazil's Vice President and Defense Minister, José Alencar, stressed that the decision to pay off the IMF was the right one: "This is going to convey to the world the valuable information that Brazil is a country where you can invest without risk," he commented, during a hearing before the Senate's Foreign Relations and National Defense Commission. Alencar, who is a prosperous businessman, once again criticized Brazil's high interest rates and said that the tax burden, the amount of tributes paid by the country in connection with the value of what is produced, cannot get any higher. "We cannot think about raising either the tariffs, or the tax burden in Brazil", he stated. "We don't need either inflation or senseless interest rates like the ones we have in order to fight inflation, because there are other instruments that can be used", the Vice President added, referring to the monetary policy carried out by Brazil's Central Bank. ABr
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If there is no risk, why should the government borrow at 18 % or so in local currency, when inflation is around 6 % ?
Common sense doesnt exist in Brazil.