Press Release No. 05/67

Mr. Rodrigo de Rato, Managing Director of the International Monetary Fund (IMF), made the following statement today:

"On March 21 the Executive Board of the IMF completed the tenth and final review of Brazil's performance under the SDR27.4 billion (about US$41.8 billion) stand-by arrangement, which was originally approved in September 2002 (see Press Release No. 05/64) and is scheduled to expire at end-March 2005. The Brazilian authorities and Fund staff and management have jointly considered the future form of relations between Brazil and the IMF. In light of the sound macroeconomic and institutional framework in place, the government's commitment to pursuing further reforms, and a balance of payments position much stronger than earlier anticipated, the Brazilian authorities have decided not to request Fund support under a successor arrangement. The IMF staff and management fully support the authorities' decision.

"The decision by the authorities reflects the impressive results, generally ahead of expectations, of Brazil's macroeconomic stabilization and reform policies that have been supported by the current arrangement. Underpinned by these policies and a favorable global environment, economic activity has rebounded strongly in 2004, led by robust growth in private consumption and a sharp recovery in investment, bringing real GDP growth to over 5 percent-its highest level since 1994. External performance has been remarkable, with the trade and current account balances close to record surpluses at present, and net international reserves rising to more comfortable levels. Moreover, inflation is being reduced steadily under the inflation targeting framework. A consistently strong fiscal performance has contributed to reducing the level and improving the structure of public debt and has greatly assisted in preserving macroeconomic stability, while private sector efforts to strengthen balance sheets have led to a marked decline in external indebtedness. These developments have significantly lessened economic vulnerabilities and bolstered confidence in the economy. The authorities are committed to continuing with their reform agenda, and further steps to strengthen public finances, through reforms on the social security system, have just been announced and are welcomed by IMF staff and management.

"The Brazilian authorities and the staff and management of the IMF look forward to continuing with the close and cooperative policy dialogue between Brazil and the IMF through the usual channels of surveillance and post-program monitoring."