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Brazil Currency Falls Despite Deal

August 12, 2002

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RIO DE JANEIRO, Brazil (AP) _ Brazil’s real continued to fall after initial euphoria over last week’s $30 billion accord with the International Monetary Fund evaporated amid renewed electoral concerns.

The currency fell 4.1 percent to close at 3.15 reals to the dollar Monday, although the central bank sold an unspecified amount of dollars on the market. Stocks at Sao Paulo’s benchmark Bovespa index ceded 2.6 percent.

``The downwards trend reflects uncertainty among investors about the political situation,″ Jose Carlos de Faria, chief economist at Deutsche Bank in Sao Paulo told The Associated Press. ``We don’t know yet whether the leading presidential candidates will adhere to the IMF’s terms.″

The IMF last week said that $24 billion out of the $30 billion loan agreement are to be paid only next year on condition of the continuation of a primary budget surplus of 3.75 percent of gross domestic product a year.

The two left-leaning front-runners in polls for Oct. 6 elections, the Workers Party’s Luiz Inacio Lula da Silva, and former finance minister Ciro Gomes, declared their acceptance of the IMF agreement.

But they criticized President Fernando Henrique Cardoso’s current economic policies that aim at fiscal restraint and low inflation, saying they stifle economic growth.

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