Brazilian Official Comes to U.S. for IMF Talks

Brazilian Finance Minister Pedro Malan arrived here for urgent talks with International Monetary Fund officials Saturday to discuss the fallout from Brazil’s decision to float its currency, the real.

Malan and newly appointed Central Bank President Francisco Lopes met with IMF Managing Director Michel Camdessus and were expected to meet with U.S. Treasury officials today.

Both Malan and Camdessus said they expected to have “good conversations.”

Malan said he would discuss a new exchange policy to be announced by Brazil’s Central Bank in Brasilia on Monday.

He flew to Washington to seek approval for Friday’s surprise move to stop defending the real, which since 1994 has been the pillar of economic stability in the world’s ninth-largest economy.

Faced with a renewed run on the currency, Brazil tried a controlled devaluation Wednesday, but on Friday it stopped intervening to prop up the real, which fell to 1.42 to the dollar, down about 15% from the start of last week.

The moves at first raised fears that a $41.5-billion rescue plan put together for Brazil by the IMF in November was unraveling and could bring further world financial turmoil.

But dollar outflows from Brazil slowed to $300 million Friday from nearly $2 billion the day before, and shares soared more than 33% on the Sao Paulo stock market.

Latin American stock markets rebounded at signs that the Brazilian currency would not tumble out of control, as investors worldwide saw with relief that Brazil would not be burning up valuable international reserves to defend its currency.

“You saw what happened. There was no big run,” Malan told reporters on arrival in Washington.

“The market set the value [of the real], and it was a stronger level than some people had expected,” he said.

Malan said long-term investors have never lost faith in Brazil and that the country received $25 billion in direct foreign investment last year.

He also denied reports that Brazil had fallen out with the IMF by failing to consult staffers at the fund before allowing last week’s devaluation.

“We never lost the confidence of the IMF,” he said.

Economists do not expect Brazil to require additional funds from the IMF and the wealthiest industrialized nations.

But Malan said speeding up a second disbursement of money due at the end of February is a possibility as long as Brazil meets the targets agreed to last year with the IMF.