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Thursday, 8 August, 2002, 19:52 GMT 20:52 UK
Brazil's delight at $30bn lifeline
Election contenders in Brazil
Free-market candidate Serra is far behind the left-wing Lula
Brazil's government and stock markets have been celebrating the news that the country is go get extra $30bn (20bn) loan to help it to recover from its financial crisis.

Markets in New York and Europe rallied after the International Monetary Fund (IMF), announced details of the loan.


With this the economy will grow

Arminio Fraga, central bank president

In Brazil stocks rose 5% and the currency, the real, rallied.

But the main share index is still 24% below the level reached at the beginning of the year.

Breathing room

Brazil's front-running presidential candidate, left winger Luiz Inacio Lula da Silva, welcomed the IMF loan.

"I'm in favour of Brazil's receiving money because Brazil needs it."

Horst Koehler
The IMF's Koehler hopes the loan will reduce 'uncertainties'

He said it would "calm the country's financial system and markets".

Brazil will choose its next president in elections in October.

The head of the country's central bank, Arminio Fraga, said the IMF loan would give the new president breathing room to implement his policies without pressure from the financial markets.

"With this international aid, the next president will have a base, a support to consolidate his programme and policies, and calm down investors, savers, citizens and society," Mr Fraga said.

"With this the economy will grow."

Financial targets

Brazil's finance minister Pedro Malan said the country was negotiating loans from the World Bank and the Inter-American Development Bank on top of the IMF loan.

But he gave no details of any possible amounts.

Brazil has debts of $250bn and the 15-month loan agreement is intended to shore up the economy and help the transition to a new government.

IMF managing director Horst Koehler said that Brazil "strongly deserves the support of the international community".

The loan - the biggest the IMF has ever offered - comes on top of a $15bn loan agreed last year.

But Brazil's new administration will have to meet financial targets in order to get the cash.

In return for the money, the IMF wants Brazil's budget surplus to be at least 3.75% of economic output during 2003.

On Thursday the IMF also increased its lending to Uruguay by $494m, taking its total loan to $2.8bn.

The aim is to help the national deal with a crisis sparked by a run on its banks.

 WATCH/LISTEN
 ON THIS STORY
Arturo Porzecanski, ABN AMRO
"It certainly has come as a great relief"
Dowber Gontigo, HSBC in Sao Paulo
"It is going to provide Brazil with part of the external finance it needs for this year and 2003"
The BBC's Tom Gibb
"It's much more than a lot of people predicted"

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08 Aug 02 | Business
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28 Jun 02 | Business
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