Brazil FinMin Pledges Prudence, to Unveil Targets

Fri January 3, 2003 02:11 AM ET www.worldtribune.com

BRASILIA, Brazil (Reuters) - Brazilian Finance Minister Antonio Palocci kicked off his first day on the job on Thursday with an impassioned pledge to fight poverty and promised to unveil market-friendly economic targets next week.

Speaking at ceremony to mark his assumption at the ministry, the former physician said Brazil lived "the paradox of a state that spends a lot, but in which few benefit."

Palocci promised his ministry would improve the management of the country's public finances to begin alleviating the poverty that afflicts almost one in three Brazilians.

Seeking to assuage investor concerns the new left-wing government will stray from the path of orthodox economics, Palocci reiterated his commitment to prudent policies.

"We are going to preserve fiscal responsibility, the control of inflation and our floating exchange rate. We are not going to reinvent the basic principles of economic policy. We, in fact, have a much more ambitious project: to reinvent the Brazilian state and its place in society," Palocci said in his first speech as the new economy chief.

Palocci, who like many in the new government sports a beard, said the ministry would unveil its economic targets for 2003 next week.

"Those goals will make clear our commitment to a responsible and consistent administration of budgeted funds," said the former Trotskyite.

"THE NECESSARY SURPLUS"

Brazil is expected to have ended 2002 with a healthy fiscal surplus that should beat the 3.75 percent of gross domestic product mandated under its $30 billion loan agreement with the International Monetary Fund.

But its nominal budget balance, which includes hefty debt payments, is running in the red, meaning the government must make up the difference by issuing debt that in turn further skews the fiscal balance and worries investors.

Palocci was adamant about the new government's commitment to keep its debt payments under control.

"We will pursue the primary surplus necessary to guarantee without a doubt the sustainability of Brazil's public debt," he said.

On Wednesday, Palocci named a Cabinet that includes a mix of career economists and current government officials.

His deputy, Executive Secretary Bernard Appy, is a 40-year-old economist who used to advise the Workers' Party at Congress. Otaviano Canuto, the secretary for international affairs, is a professor at the University of Campinas and University of Sao Paulo specializing in foreign finance.

Secretary for Economic Policy Marcos Lisboa, 38, holds a doctorate in economics from the University of Pennsylvania and teaches at the well-respected Fundacao Getulio Vargas think tank.

Jorge Antonio Deger Rachid will become head of the income tax department, where he was the deputy secretary under the previous administration.