In an unusual move, Brazil's president has summoned the four leading presidential candidates to meet with him in an effort to calm the financial markets that have caused Brazil's currency to fall. Brazilian President Fernando Henrique Cardoso wants the candidates to commit themselves to the terms of a massive new loan by the International Monetary Fund.
The Cardoso government hoped the announcement of the $30 billion loan from the IMF last week would be enough to stabilize the financial markets after weeks of turmoil. But the positive impact of the record loan lasted less than 48 hours, after which the value of the Brazilian "real" began to plunge against the dollar once again.
Investor uncertainty over Brazil's economic future after October's national elections is one of the main reasons for the current crisis. Two left-wing candidates, Inacio "Lula" da Silva and Ciro Gomes, lead the polls. The government's candidate, Jose Serra, is a distant third, to the dismay of investors who view Mr. Serra as the man most likely to continue the Cardoso government's anti-inflationary and anti-spending policies.
In an effort allay investor fears over the intentions of the candidates, President Cardoso took the unusual step this week of inviting them to meet with him. The meeting will be held on Monday, and each candidate will see Mr. Cardoso separately.
Political analyst David Fleischer said the Brazilian leader will try to persuade the four men to publicly commit themselves to maintaining economic stabilization policies.
"To try to preserve Brazil's economy and its relations with the international financial markets, Cardoso has decided this is very appropriate and important to meet with the four candidates and to try to get them to align themselves with maintaining the stability model that has been in place for at least the last four years. This is all image building and trying to impress the international markets that any of the four candidates that might be elected would continue the same policies. Whether the markets will react positively to this, I'm not sure," he said.
President Cardoso told reporters the candidates must, as he put it, "assume their responsiblities". While not specifically mentioning the new IMF accord, the Brazilian president said the candidates should understand what is being done and why adding that the upcoming election should not be the cause for a crisis of confidence in Brazil.
For his part, frontrunner Lula da Silva of the Workers Party urged Mr. Cardoso to recognize that not even the IMF accord will resolve the problem of capital flight from Brazil. Mr. Da Silva said he will attend next Monday's meeting, but criticized what he called Brazil's "dependent" economic model that has led the country into the arms of the IMF.
Analyst Fleischer, who teaches at the University of Brasilia, said whoever is elected president will have less room to maneuver under the new IMF accord.
"The agreement itself will put a major burden on the government which comes in in 2003, because there will be five disbursements of $6 billion each quarterly. So the final four disbursements will all be in 2003, and the macroeconomic targets that have to be met will be the responsibility of the next government and this will put them in a very tight corner or bind, in terms of what they would like to do to meet their campaign promises, especially in social programs because they're not going to have too much money left over...so the candidates are very concerned that all of this may put severe constraints on what they might maneuver, and what they might want to do in 2003," Mr. Fleischer said.
The upcoming meeting seems to be an attempt by Mr. Cardoso to achieve a transition pact with the candidates, aimed at dispelling market fears that Brazil will follow Argentina into economic chaos. Much will depend on what each candidate says upon emerging from the talks, and no one is ruling out that the meeting's results may not be completely positive for the government.