O'Neill offers 'strong support' to Brazil

Mr O'Neill arrived in Brazil at the start of a four-day Latin American tour that comes amid economic turmoil around the region.

Brazilian officials hope Mr O'Neill's visit will help secure financial support from the International Monetary Fund (IMF) in order to tackle a mounting crisis of confidence among international investors.

Following talks with Brazil's President Fernando Henrique Cardoso on Monday, Mr O'Neill said that the country had the right economic policies in place.

"I understand the IMF has said they feel very good about their progress in the talks, and I think things are going forward," Mr O'Neill said.

He also described his talks with the president and other top officials as "very cordial".

Mr O'Neill would have also been keen to soothe Brazilian tempers ruffled by his unguarded remark last week that aid to Brazil could end up going "out of the country to Swiss bank accounts."

Mr O'Neill remains in Brazil until Tuesday, when he will travel on to Uruguay and Argentina, both of which have been swept by severe financial crises this year.

Over the weekend, the US agreed to provide Uruguay with a $1.5bn emergency loan to help it open its banks on Monday.

Open mind

Mr O'Neill's embarrassment over last week's gaffe - which he has stressed did not reflect his views on the country - could help secure a deal this week, Brazilians hope.

Shortly after arriving on Sunday, he seemed to make a good impression.

"I perceived on the part of the secretary a posture that was very favourable, very comprehensive and with a lot of interest about the Brazilian situation," said presidential chief of staff Pedro Parente.

After meeting the president on Monday, Mr O'Neill is to conduct talks with business leaders in Sao Paulo on Tuesday.

Although Brazil is by far the least troubled of the three countries on Mr O'Neill's itinerary, it is seen as especially crucial.

Brazil has the biggest economy in the region, is $250bn in debt, and faces a potentially close general election in October.

During a press conference on Monday, Mr O'Neill declined to answer a question as to whether a victory by the left-winger Luiz Inacio da Silva could complicate a new IMF loan program.

But, despite Mr O'Neill's generally positive comments, the real fell almost 3% to 3.01 against the US dollar.

Crisis talks

As for the rest of the trip, Mr O'Neill plans a stopover of only three hours in Uruguay, a reflection of the country's small economy, as well as the fact that IMF support is taken as read.

The US bailout is intended to be nothing more than a sticking plaster, and the cash will be repaid once the IMF comes through with its own funding.

In Argentina, which has been in the throes of a crisis since late last year, the situation is more complicated.

The worst effects of the financial panic seem to be over, and the new government of President Eduardo Duhalde has held on to power without too much trouble.

But what remains to be established is what longer-term policies the government can put in place to drag the economy out of the stagnation it has suffered since 1998.

Implementing the sort of radical economic reform usually advocated by the US and IMF has so far proved highly politically sensitive throughout Latin America.