Transcript

Press Briefing by IMF Managing Director Michel Camdessus

October 1, 1998

MR. CAMDESSUS: To keep with tradition, I will start by giving you the agenda of the Interim Committee meeting next Sunday, particularly as it gives you an idea of what are the themes on which we will be working during this week.

 
As usual, we will start by discussing the world economic outlook, on which yesterday you had a statement and comments by Mr. Mussa. We invite the Ministers to focus on the problems and challenges in the world economy and international capital markets and on the policy responses to the recent crisis. And, of course, I hope we will get guidance for action in the future.

The second main item will be the discussion of what can be done to strengthen the architecture of the international monetary system. You know that work is advancing in this domain. But in all the issues I will list for you we need guidance from Governors to proceed. I hope that this meeting will be extremely fruitful in helping us to speed up the process of strengthening the architecture of the international monetary system.

We have three main themes under this heading. First, the strengthening of the financial system itself and the orderly liberalization of capital movements. Second, the strengthening of Fund surveillance and the functioning of the markets. Here you have all these topics you are very familiar with already--namely, transparency, establishment of international standards, data availability, dissemination, and provision of data to the Fund, which in turn helps the Fund to be more effective in its own surveillance. A third topic of importance is the involvement of the private sector in forestalling and resolving financial crises. I believe that with these two discussions on WEO and strengthening the architecture you have truly the heart of the discussions to be expected.

On other issues, due in particular to the lack of time, I will only report to the Interim Committee and try to obtain quickly a guidance of orientation, but I do not expect broad discussions. These issues on which I will report are the Fund's liquidity situation, the quota increase, the New Arrangements to Borrow, SDR amendments, and then ESAF and the HIPC initiative (their implementation, the financing, the lessons from recent evaluations and review) and the post-conflict assistance. Then we will report on our constant but intensified efforts with the World Bank to strengthen our collaboration and to adapt it to our ongoing work. Then we will have a brief discussion on the new situation, institutionally speaking, created by the starting of the European Monetary Union. There are a few operational issues which will have to be addressed and for which it will be good for us to hear the reactions and suggestions of our members.

You see, it is quite a heavy menu, but the situation certainly calls for that, and I must tell you that I look forward to these discussions and to the guidance that the membership will give us in continuing our work to bring the world to a safer pace of high-quality growth. I will not add anything more now. I would prefer to answer your questions.

QUESTION: President Menem is coming next week to speak to the IMF. The first question I would like to know is if this means that the IMF considers Argentina a leading case. Second, if it is a leading case, how do you see the relationship with Brazil and, if Brazil has problems, the vulnerability of Argentina?

MR. CAMDESSUS: Your information is correct. I can confirm that I have been informed of the intention of President Menem to attend these Annual Meetings. I warmly welcome this decision. I look forward to hearing from him in his address to the Annual Meetings about the recent experience of Argentina and Latin America and the lessons he draws for the very important issues these meetings will address. So we will hear from him.

It is true that in many respects the experience of Argentina in recent years has been exemplary, including in particular the adoption of the proper strategy at the beginning of the 1990s and the very courageous adaptation of it when the tequila crisis put the overall subcontinent at risk of major turmoil. It is noteworthy that Argentina was probably the first in reacting by immediately strengthening its policy stance and, in particular, pushing ahead with banking sector reform, which of course turned out afterward to be one of the main elements of trouble in other parts of the world. Notable, too, are the efforts of Argentina since that time to continue its excellent compliance with the performance criteria under our arrangements and much progress in implementation of the structural reforms.

So, clearly, Argentina has a story to tell the world: a story which is about the importance of fiscal discipline, of structural change, and of monetary policy rigorously maintained. Of course, in the case of Argentina, in the framework of its convertibility plan, the basic principle that you cannot solve problems by relaxation of monetary discipline has demonstrated its virtues.

On the relations with Brazil as a problem or a blessing for Argentina, you have neighbors and it is good to have neighbors in good shape. During the last few years, the intensification of the trade and financial relationship between Argentina and Brazil in the very successful framework of MERCOSUR has been a blessing for the two countries. Now, of course, the two countries together are exposed to the turbulences of the market. If one or the other were to have an accident, the other would suffer. Possibly, Argentina could suffer more as there is a certain asymmetry in the size of the countries, but what I can tell you is that I am mindful of the efforts of Brazil to avoid the accident, and so I am reassured about the prospects for Argentina.

QUESTION: In light of the turbulence of the market, Mr. Camdessus, I wonder how do you see, first of all, the efforts of Venezuela to resist the pressure to devaluate its currency.

Second, you are going to meet with the Ministers of Venezuela tomorrow. What is the purpose of this meeting?

Third, I wonder if you are going to continue the conversations that you had with the countries, the emerging markets, of Latin America--the dialogue that you initiated last month.

MR. CAMDESSUS: Let me start with the last question, which is straightforward. Of course we will continue our conversation with the Latin American countries. It is daily bread for us to have conversations with all our members. What is particularly important in the case of Latin America is that we have established a framework of regional surveillance with them which has been extremely successful on this occasion as it has prompted the peer pressure among members pushing mutually to obtain a better individual and collective reaction to the crisis--a collective reaction which is particularly remarkable in as much as it has not at all been focused on trying to find external financing or establishing protections or artificial systems of monitoring the economies, but which has focused on how to speed up reforms and adapt the monetary or fiscal stance to establish an economic stance in each country which could convince the markets to differentiate better and to see better the progress already accomplished by these countries to protect themselves against these kinds of turbulences.

Now, I take question number two: what is the purpose of the meeting tomorrow with the Venezuelan authorities? I will meet I do not know how many delegations during the next eight days. With the Venezuelan delegation, there is something very special. In view of the continuous efforts of the government to associate enterprises, bankers, and labor unions in the definition of its policies in order to create wider support and understanding for these policies, the members of the government and the central bank will be accompanied by representatives of industry, of the bankers association, and of the labor unions. This will provide us with an extremely interesting occasion for assessing the situation and trying to see what should be the further progress in a medium-term perspective.

On the present situation of the Venezuelan economy, of course, Venezuela has suffered a major shock, with a sharp decline in oil export prices, which are now more or less 35 percent below their level of last year, and that at a moment of political uncertainty in the run up to congressional and presidential elections. This has been accompanied by pressures on the financial and exchange markets and, indeed, a substantial increase in interest rates. Of course, we are concerned, and all the Latin American countries have expressed concern about the situation. But we are encouraged by the measures the authorities have taken. They have adjusted the budget, something very difficult to do in times of preparation for elections, by reducing expenditures further beyond initial spending cuts at the beginning of the year. At the same time, the central bank has allowed a further depreciation of the currency and has allowed interest rates to go up. All of that has allowed the country to resist well. The country has maintained an appreciable level of exchange reserves, and this, I think, affords the basis for continuing with all of the agenda for structural reform, which is still there. But I would not like to convey the impression that they have stopped the structural adjustment during these last difficult months. I particularly value the fact that they have been able to obtain by the parliament the vote of an oil stabilization fund and several other measures which should contribute to prepare for a better future.

QUESTION: The World Economic Outlook is unusually cautious and even pessimistic about the state of the world in the wake of the crises in Asia and Russia, but a World Bank report on East Asia I see as much more upbeat and optimistic. Could it be that the world is not really in such dire straits as portrayed in your report but that you are erring on the side of caution because of the Fund's earlier failure to anticipate the Asian crisis?

MR. CAMDESSUS: There are very interesting points in your question. The first, or last point you make about the early failure of the IMF to anticipate the Asian crisis will certainly occupy the scholars for several years. But what I could say is that in a universe of specialists which did not see the Asian crisis coming, you should recognize that, taking country by country, and taking in particular the first country which entered into the crisis, the IMF was there warning them and pressing for action one year and a half before the crisis. I do not see that as a failure to anticipate the events. What we have not seen well is what I would call the virulence of the contagion. The very nature of this virus was so strong and so quick to strike in the most unexpected places. On that, yes, we have not seen the things properly, and we have not seen how speculation in Hong Kong could prompt an acceleration of the crisis in Korea, and we did not see, either, how a crisis in Russia, with a unilateral decision on restructuring of the debt, could prompt a crisis of confidence in Latin America. On that, yes, we have a lot more to learn, but we are not the only ones. The literature on these issues is still a little bit insufficient.

Contrasting the upbeat, I quote you, statement of the World Bank with the pessimistic, I quote you, statement of the IMF is possibly a little bit exaggerated. We have, no doubt, different perspectives, and our reports are not there to cover the same grounds. The IMF has a particular responsibility for analyzing the whole economic, monetary, and financial system. We do that with our own instruments of analysis, with our tradition for prudence and, let us say, conservative assumptions. Even if from time to time we appear a little bit optimistic, this time we have appeared pessimistic. I do not know if we are pessimistic or optimistic. We try to express as precisely as possible our judgment and the nature of the risks. It is true that when we list the elements of positive risk and negative risk, we see that there are more negative factors than positive ones in the short run. This does not mean that all will materialize, but this is why we are cautious in our assessment, while nevertheless being clear on the policy prescriptions to prevent the downside risks from materializing and to try to put the world economy on a solid path of recovery.

QUESTION: Two questions for you, following slightly on my colleague's question. Looking back at the period between last winter and now, if the IMF could go back and do it again, would you prescribe the same strict, severe, heavily-criticized austerity remedies for East Asia and other countries that you subsequently changed? Would you do the same thing again?

My second question--

MR. CAMDESSUS: Let us take this one.

If we were to go back to July 1997 for Thailand, November for Indonesia, November/December for Korea, and if we were to know what we did know at that time, we would do the same thing. The difference between today and then is the fact that we have learnt things, particularly about the situation of the linchpin of the region, which is Japan, and about the way in which contagion can operate in this kind of universe.

It is true that the critics have been intense and that at times our measures have been seen as severe. With the benefit of hindsight, I would tell you that our monetary prescription was certainly right, particularly when you see the risks otherwise of a tremendous devaluation, as you have seen in Indonesia. Also in view of what was the size of the indebtedness of the banking and corporate sector. There, of course, high interest rates are something extremely unpleasant; but devaluation is much more harmful. So, having to make a choice between an uncontrolled devaluation and high interest rates for a brief period of time, we would certainly have maintained the monetary prescription. Many in my Executive Board have considered that perhaps we were not tough enough in the monetary policy area.

But let us forget that for one minute, and let me call your attention to the fact that Korea and Thailand today have a level of interest rates below the level where they were before the crisis. You know also that their balance of payments turned from a heavy deficit to significant surplus. Let me tell you also that inflation is controlled and below the level where we expected it to be. I am not singing victory, even if under a very narrow traditional conception of the role of the IMF--to have the current account in order, to have the inflation low and the interest rates low--there would have been the elements of a victory. But we do not sing victory. Why? Because growth is still depressed, and the social suffering is enormous. And there is still a lot to do on the structural side. But the work is well advanced, and when we saw that the environment was different we have adapted our program and introduced a great degree of flexibility in all of them, and at times pressed governments to take social measures which were not among their priorities. We will continue doing that, taking advantage of the remarkable turnaround in the financial conditions to help the speeding up of the recovery.

So, in one word, here we are. I am repentant for my personal sins, but not that much for what we did in those circumstances.

QUESTION: You have proposed transforming the Interim Committee into a decision making, policy setting Executive Council of sorts--a council of ministers that would meet on a regular basis. This position has also been underwritten by the French government, by Dominique Strauss-Kahn in particular, and is going to be formally proposed during these meetings here in the next few days. The United States has indicated that it will veto this. U.S. officials have said they will, if necessary, veto this and have the voting power to block it. That was reported in the newspaper I work for a day or two ago. They have also indicated that this is not going to happen. So I guess the question is, given that the votes do not stack up, would you consider withdrawing the proposal; will you press ahead with it; do you consider it dead or alive; and could you elaborate on what you really want to do with this proposal?

MR. CAMDESSUS: First of all, let me tell you that I am used to working with officials of the United States of America, and I have never seen them vetoing something before discussing and before careful analysis of the merits and deficiencies of the ideas. So possibly they will end up by vetoing, but I would be surprised that they would do that without analyzing what is at stake.

Second, on the idea itself, I am delighted that the French government endorses this idea. It happens that the French government is right. Let me tell you why I myself have also indicated that it was time for us to turn to this. First, of course, because it is part of the Articles of Agreement of the International Monetary Fund: Article XII, section 1. This was decided in Jamaica. But at Jamaica the situation was quite confused, with the world going to a new exchange system and the abandonment of the Bretton Woods structures, and then they preferred to test the water in some way by having an Interim Committee with only a consultative role. Scholars will certainly analyze that in the future. But there you had Ministers who were extraordinarily modest, preferring to leave the responsibilities for some time to their civil servants in the Executive Board rather than to take the responsibility for the decision themselves.

Now, however, the world has changed. First, this institution has become universal in its membership--almost universal: 182 members. Second, no doubt, the responsibilities of the institution have grown, and, more and more, as you observe, the world has a tendency to put on our shoulders more and more responsibilities, which at times bring us de facto beyond the limited universe of economics. Then there are more and more remarks, and you as journalists hear them every day, that this is too much of a technocratic institution and that we are not sensitive enough to political realities. You know all of that. I do not know if this criticism is right. But what I know is that going now to the structure of the council will not draw anything from the virtues of the IMF, its professionalism, the high technicality of its advice and prescriptions. What it would do is add this dimension of political endorsement by having the Ministers not only giving advice but deciding on the key strategic decisions which are at this stage being prepared here. So I think this is an idea which deserves consideration. Is this the right timing? One can discuss. But, certainly, at the moment, as you discuss a new architecture for the international monetary system for the next century, you cannot escape this question.

QUESTION: Could I just follow up on that question. I am slightly puzzled by the council proposal because it seems to me that if the Interim Committee has any faults, the fact that it lacks political authority to make sure that its instructions are carried out by the Board does not seem to be one of them. The problem with the Interim Committee, certainly from the eyes of the U.S., given the fact that they felt it necessary to start the G-22, which looks rather like another one-off idea which will carry on and on, is that it is the wrong group of people to discuss a lot of these issues. Is that not the sort of question that should be addressed, how to make the Interim Committee more adaptable to particular issues, rather than giving it an extra political authority it probably does not need?

MR. CAMDESSUS: I beg to disagree with you. The Interim Committee, as well as the Executive Board of the Fund or of the World Bank, has the merit of a clear legitimacy. The composition of our Executive Board derives from treaties. The treaties provide for the number of seats and for the way in which seats are allocated. No country, except the five big shareholders, has a permanent seat. The allocation of seats depends on the size of the quota, the calculation of which is reviewed periodically, and on decisions among the members of constituencies. You know that countries rotate in the chairs of the Interim Committee. But at least the people sitting there have a kind of legitimacy in their presence, which is determined by the treaty.

I have the highest respect for the G-22 as responding to a given purpose, which is to help reflection on the present state of the markets and the way in which the emerging countries are affected by developments in the markets. In this kind of consultative group, it is good to have countries which are not represented at this stage at the Interim Committee but which have something to do and something to say about these matters, complementing usefully the central role of the Executive Board and of the Interim Committee. So I do not see any kind of competition between these two animals. In my country, we would say that they are not boxing in the same category.

QUESTION: You made the point that you have learned a lot in the recent crisis. I am wondering if you can talk about what you have learnt about controlling contagion, and also if you can put that in a context of the recent rate decrease in the United States. Is that a measure that is helpful in terms of the global contagion?

MR. CAMDESSUS: Yes, we have learnt a lot about contagion. I would have preferred to know before and to have been better prepared to react instantaneously or to preempt potential contagion. But at this stage of the knowledge of economic developments at this moment in the world, it is extremely difficult to decide when you have a unilateral decision in Russia that within two weeks Latin America will have interest spreads skyrocketing. At this stage, these kinds of things depend more on a kind of crystal ball than on macroeconomic equations. So we need to learn more about that.

QUESTION: Are you saying there is not a way to contain it?

MR. CAMDESSUS: Yes, there are ways, and I will tell you about what we can do. One of the ways of containing and resisting these kinds of very dangerous developments is for the major players to discharge their full responsibilities for orderly growth in the world economy. This is why I welcome the initiative of the Federal Reserve to start reducing interest rates. I say "start reducing" because I believe that we can be in circumstances in the future where they will want to utilize the margin they have still available for further movements in that direction. It is noteworthy to see that the Federal Reserve here has been forward looking and has tried to adapt better the monetary stance of the United States to the problems which could come for the United States in the future and to the developments in the overall international environment. This being said, there are other things to do, but I am not sure that you wanted to hear more about the overall strategy; you wanted to hear about the United States, I understand.

QUESTION: I would also be interested in the overall strategy.

MR. CAMDESSUS: Then, talking about what the major players should do, I believe that there is also room in Europe for a reduction of interest rates, and this will take place through the convergence of interest rates in the euro zone to the level in France and Germany, which now have the lowest interest rates. In other circumstances, one could have imagined that they would converge at an intermediary level. It seems to me that now they have decided to converge at the bottom of the range, and I think this is a valuable contribution to a global strategy.

The most important thing among the big players is certainly the present efforts of Japan to put its financial sector in order, and to maintain, increase, and sustain during 1999 the needed fiscal stimulus while continuing with its efforts at opening and deregulation. I hear that Japan also wants to increase its support to the countries in their recovery process in Asia, and of course I welcome this courageous and generous attitude.

This brings me to my second point. The second pillar of a world strategy for recovery is certainly to help countries which have been severely hit by the crisis in their recovery process. They must help themselves by implementing steadily and in all their dimensions the programs they have agreed with us. And they are doing that. But the rest of the world must help them, be it by speeding up the debt restructuring arrangement, by extending bilateral support--and here, in addition to welcoming the initiative of Japan, I welcome the initiative of Spain to extend support to Latin American countries which could be in difficulty.

A third thing is we must also help countries trying to resist contagion. It is certainly something very similar, and here is where the efforts to help Latin America could be important. But reversing contagion implies first that the countries do what is needed. I am very encouraged, I must say, by the fact that at this very moment you have in the world 77 countries that either have programs with us or are negotiating programs with us. It gives you an idea of the ongoing efforts of countries to adapt themselves better to the present situation. And then, of course, in a strategy for protecting the world against negative developments, against downside risks, there is certainly the need, if you want the IMF to be able to contribute to all of that, to replenish the resources of the IMF. You see what I mean. And there is also the need to take advantage of this time of change to adapt our institutions to this new world to enable us to respond even better to the changing world.

QUESTION: The WEO remarks that it was appropriate for stock markets to come down to a certain extent in industrial countries, but warns that an overreaction could spark a further collapse in Asia and spill over to an even greater loss of confidence, if that were possible, in the remaining emerging markets, particularly in Latin America. Given the sharp fall in the stock markets since the Fed did not go as far as they were expecting on Tuesday, how close are we now getting to the point where the overreaction is too big?

MR. CAMDESSUS: I have no response to this kind of question. We have no instrument to forecast the day-to-day developments of stock markets. If we had that, we would be doing a different job, and possibly we would be better paid. So I cannot tell you that, but what I believe is that if during the meetings of the next few days the leaders of the world take a clear and decisive stance on all the avenues I have just listed for your colleague here--namely, efforts of the G-7 in taking the lead for growth in the world, efforts to help the countries out of the crisis, efforts to help countries to resist contagion--giving us the means for doing our job and to adapt ourselves, then I believe the markets will see that next year will be better than this one and then will not have many reasons to continue overreacting.

QUESTION: I just want to bring you back, if I may, to your answer to the person in front here on the various points you listed, including the likelihood of interest rate cuts both here and in Europe. Are you talking about some grand pseudo Marshall Plan, something that is preconceived and coordinated, or are you talking about a series of events which may occur for different reasons yet drive toward the same result?

MR. CAMDESSUS: No, I am not proposing a kind of a grandiose Marshall Plan. I would add that, as far as monetary policy is concerned, "coordination" cannot be the right word, because you are in very different cyclical conditions in Japan, in the United States of America, which is at the top of its own cycle with still relatively high interest rates and starting a kind of decline, and Europe, which is at the beginning of a recovery with low interest rates. So you cannot coordinate. You cannot say, "Well, all of us reduce by half a point." No, each of them must, in view of their own situation in their own region, serve the same purpose, which is to optimize the conditions for growth in the world.

This being said, the strength of the response of the leaders of the world, not only within the G-7 but within the Interim Committee, in putting together a new consensus for bringing the world out of the crisis can, of course, be of major importance. It will call for differentiated actions according to the countries or according to the regions, but obeying a same purpose, which is to restore better conditions for growth.

QUESTION: [INTERPRETATION] I would like to refer to the subject of the Spanish initiative to create a Latin American fund. What do you think about this initiative and its likelihood of success?

I would like to ask you something about Spain. In the World Economic Outlook, it said that the forecast for Spain does not take into account the fiscal reform that you propose to the government. I would like to know whether you think a significant cut in taxation is timely now.

MR. CAMDESSUS: [INTERPRETATION] First, I welcome the Spanish initiative, and I thank the Second Vice President of the government. I think this shows the interest Spain has--and that Europe has, because this idea was also welcomed in Vienna last Saturday--in helping the countries of Latin America to maintain themselves on the path to growth. It is not just in the interest of Latin America, but in the interest of Europe, too, and I think that for the countries of Latin America the fact of knowing that, if it were necessary, there would be this kind of support, this is certainly a reason for hope. I do not know whether it will even be necessary, but the mere fact that the proposal has been made and will certainly be worked on in Europe and the IMF to see how it could be implemented, if necessary, is most certainly a positive thing. It will be discussed in the next few days. I do not know whether it will have to be used, but it was well worth while giving Latin American countries this sign of solidarity.

Regarding Spain, as you know, when we make our forecasts, we cut them off at a specific date. It was not possible for us, as you know, to include the potential consequences of the recently adopted reforms. We will try to do this as soon as possible. When we do reach conclusions then we will inform you.

QUESTION: Former Russian tax chief Boris Fyodorov said yesterday that the Russians pretended to implement their reforms and the IMF pretended to see them there. What is your comment on that? How do you feel about the new government, which has already been talking about doing a monetary policy with printing presses and fiscal policy with credits.

MR. CAMDESSUS: There are many things to say about Russia, about the past. I could give you three lessons, which are straightforward, about what took place.

One, I persist in thinking that Russia's economic program and strategy were fine; implementation was poor.

As a matter of fact--and this is the second lesson--implementation requires at least two things. First, political support; not only from the government in its globality--and it was not always the case--but also from the state Duma and from regional governments. Indeed, the more difficult the reforms, the more indispensable this support. Implementation also requires much more priority to the repair of administrative weaknesses than we have seen in Russia. Administrative weaknesses, you know them--they are tax collection, expenditure control, and bank supervision. In these three domains, even if the strategy was good, the means for implementing them were insufficient.

Third, another lesson, absolutely straightforward, that the new government should have very high and very clear on its mind is that borrowing in order to avoid fundamental budgetary adjustment and reform is a recipe for disaster.

So, these being the lessons of the past, what are we thinking about what is needed in Russia? First, a government having a clear strategy, a clear vision of what is needed, and going public with that. At this stage, we do not yet have that. Of course, there are suspicions, and your words are reflecting that, that they could be tempted to go to the printing press or to administrative controls. But these are suspicions. These are not policy stated intentions. What is needed, and what I hope to hear from them, is that they will make every possible step to re-establish a good working climate, a good confidence climate, with their creditors, demonstrating that they are no longer tempted by unilateral action. This is a must. Second, that they recognize that the key problem of Russia is its incapacity so far to collect sufficient resources to pay for the state’s core responsibilities for defense, for payment of wages and salaries, et cetera. This then implies that the government announces a very strong effort in this domain. They will certainly also have to announce a solid plan for restructuring the banking system, continued structural reform, and demonstrating that they are convinced that inflation is in no way conducive to growth--and, in turn, that going to the printing press can never be a solution to the problems of a country.

QUESTION: Assuming that we re-elect the President (of Brazil) on Sunday, when we go for the fiscal adjustment that he announced last week, assuming that we ask your help, your response will be given in this context of public perception that the Fund made things worse in Asia. It may be an unfair perception, but that is the perception. I would like to ask you this: what kind of international support should Brazil expect? Will the international support be enough to allow Brazil to go through this adjustment avoiding a recession? What is your forecast for growth in Brazil next year? In general, why should we be optimistic that we will not repeat in Brazil what happened in Asia; that contagion will be really contained this time?

MR. CAMDESSUS: You know that I have no influence on the results of the elections in Brazil, so I will not enter into speculations on this matter.

What should Brazil expect in its relations with the IMF? Brazil must tell us what it expects from us. I will soon have the visit of Minister Malan, who will certainly discuss that. We, with the rest of the world, are ready to extend support to Brazil, if necessary, provided the country comes with a program we could support.

I have already paid tribute to the very valiant, courageous program announced by President Cardoso a few days ago. I think he puts the finger on what is needed in Brazil, particularly this strong effort at fiscal consolidation and an effort up-front in order to convince the markets that these kinds of problems--with Brazil for a long time--will now be addressed. So we support this policy. If Brazil wants our financial support, our financial support will be tailored in such a way that it facilitates the success of such a strategy and optimizes the growth conditions of the country.

The growth of the country will depend a lot on the program itself--the appropriateness of the policy mix, fiscal measures, monetary measures. Certainly, a strong effort in the fiscal area will help to attenuate the monetary pressure, and this will be important. Certainly, the program will have a structural content which will increase the dynamism of the economy and help speed up growth. I know that the intention of the government is to make sure that growth is fairly distributed in the country. You know that the inequality in distribution is one of the key problems of the country. I hope that in the framework of a program with the IMF--or in the framework of the strategy of Brazil, without our support, if they do not need it--this problem of equality in distribution could be improved.

I would like to insist on the fact that in Brazil, as in all countries of the world, what seems for us of the essence for the success of a program is the quality of the ownership. What I like in the present situation of Brazil, in spite of the difficulties, is that President Cardoso has announced clearly what he wants to do, and he has established his own ownership of the program which could be implemented. This is a key element for success.

You know pretty well that there are no reasons at all to compare Brazil and Asia. Brazil has been continuously, for several years, improving its macroeconomic and structural stance; strengthening its banking sector; privatizing its economy boldly; and then creating a set of conditions which certainly already has done a lot to prevent in Brazil and Latin America the kind of problems we had in Asia.

QUESTION: There are many, many recommendations for solving the problems of the new international economic order. Alan Greenspan has called for a lead regulator of some kind. Would the empowerment of the Executive Committee fulfil this kind of idea by Alan Greenspan?

Also, Tony Blair called for a merger of the IMF and the World Bank, and the United States has a bill, SB1769, which calls for a special committee by five U.S. Treasury secretaries to take a look at the consolidation of the IMF, the World Bank, and the World Trade Organization.

MR. CAMDESSUS: As you see, there is no scarcity of bold suggestions for improving IMF and World Bank relations. May I say in passing that, if you look at the new world monetary and financial order, you should not be too much obsessed by these two important institutions-- which are important, of course, but which do not suffice by their own progress to make the world a better place. If you want to make the world a better place, you must go for bold transparency in the overall world system, including in each of your countries, ladies and gentlemen. If you want to go for a better world order, you must go for a generalized universal strengthening of banking and financial systems. You must go for an orderly financial integration of emerging countries in the world financial system. You must go for the proper association of the private sector into our efforts for preventing crises or to solve them. You must also try to do at a world level what each of our countries has done during the last century: to establish order, discipline, and civilization, if I may say so, in the working of our domestic markets. The challenge today is to make at the world level what was done so well in our countries since the time of Zola and Balzac, or the time of the robber barons. It is a lot of work. Now the challenge for us is to do that at the level of the world. And then, of course, you must look at the relations between the World Bank and the IMF and the WTO. It is important, and we must work on that. I am not sure that Prime Minister Blair has pressed for merging the two institutions. He has been a little bit more nuanced, and he has talked possibly on merging here or there units of the one with the other. There are plenty of ideas, as you see.

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