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. Last Updated: 07/27/2016

Brazil, IMF Cautious in Bailout Discussions




SAO PAULO, Brazil -- Brazil and the International Monetary Fund, in the fifth day of talks Thursday, sent signals that neither side wanted to rush a new accord to restore stability after the tumultuous devaluation.


Stanley Fischer, the IMF's first deputy managing director, was due to leave Brazil on Thursday night, one day later than originally planned, but news of more money to stave off an economic collapse may not come for another week or more.


The rest of the IMF mission will continue meetings with Brazil's economic team until the end of next week to seal new financial targets before the Latin American kingpin can draw a second $9 billion installment of a $41.5 billion credit line.


They must also devise a system to intervene in the currency market and parameters for interest rates after Brazil was forced by the market to float its currency three weeks ago.


"The work is naturally difficult because of the complexity of the Brazilian economy, the variables that have to be analyzed," IMF spokesman Francisco Baker said Wednesday.


President Fernando Henrique Cardoso said Wednesday after meeting with the IMF team that talks were progressing but it was not crucial that the IMF speed up the second disbursement.


Fischer has remained silent since arriving Monday night and he was not expected to make an announcement before leaving.


Leading financial daily Gazeta Mercantil reported that talks were strained by IMF demands that Brazil make more spending cuts and tax increases to offset the increase in debt with the devaluation and higher interest rates.


The IMF had assembled the credit line with leading industrial countries in exchange for a three-year fiscal austerity plan to more than halve the budget deficit of 8 percent of gross domestic product.


The prickly Congress has already approved spending cuts of 8.7 billion reals for 1999 and controversial tax increases. The government does not think it can ask Congress for more, Gazeta wrote.


The IMF is expected to recommend that Brazil maintain high interest rates as an essential way to restore confidence in its economy, the world's eighth-largest.


But that policy is finding resistance here as Brazil's already-disheartening economic slump deepens and puts more people out of jobs.