U.S. preparing to use taxpayer funds for Brazil aid package Contribution part of plan to avert economic collapse

October 25, 1998|By NEW YORK TIMES NEWS SERVICE

WASHINGTON -- The United States is preparing to commit U.S. taxpayer funds as part of a lending program of at least $30 billion to try to insulate Brazil, and with it the rest of Latin America, from the worst effects of the global financial turmoil, according to U.S. and foreign officials assembling the program.

Details of the U.S. contribution, which is expected to total several billion dollars in direct aid or loan guarantees, have yet to be negotiated. But several congressional leaders have been alerted to the likelihood that the administration would have to act while Congress is in recess.

This early warning from the administration reflects memories of how Congress erupted with objections and hearings in 1995 when President Clinton committed $20 billion in U.S. funds to the bailout of Mexico.

Administration officials said last week that their early soundings indicate that members of Congress are deeply concerned about preventing an economic collapse in Latin America that would resound in the United States, and thus they expect few objections.

The timing of an aid package for Brazil -- originally expected within the next few days -- is complicated by unexpected delays that have cropped up in dealing with the Brazilian government.

The government of President Fernando Henrique Cardoso faces politically risky gubernatorial elections today, which may determine whether Brazil can execute an austerity program that is the key condition for the loans it is negotiating with the International Monetary Fund.

The biggest role in the rescue program for Brazil will be taken by the IMF, which said last week that it would contribute at least $15 billion -- and appears to be under pressure from the United States to do even more. Another $9 billion or so will come from the World Bank and the Inter-American Development Bank, and the remainder from the United States and other major industrial nations.

Germany and Japan have been reluctant to take part, one U.S. official noted.

U.S. officials working behind the scenes to organize the aid package have said nothing in public about the details of plans for a direct contribution to Brazil.

"Brazil is very important to the economic well-being of the region, the United States and the international community, and all of us are very much focused on seeing how we can be helpful," Treasury Secretary Robert E. Rubin said Friday.

Direct U.S. aid to Brazil would clearly send a symbolic message: that after a year of trying to manage the financial crisis through the monetary fund, the United States is now ready to put a limited amount of its own capital at risk to prevent further havoc -- not only for Brazil but to stop chaos spreading to Argentina, Mexico and other countries that are major U.S. trading partners.

Pub Date: 10/25/98

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