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Brazil expels IMF office over growth forecasts

The Brazilian authorities is kicking out the IMF’s consultant office within the nation after complaints over the establishment’s financial forecasts.

“It has been years since they were needed here. They stayed because they like feijoada [black bean and meat stew], football, good conversation and, from time to time, to criticise and make wrong predictions,” mentioned Paulo Guedes, Brazil’s finance minister.

From June 30 — when the present IMF consultant is due to get replaced — Brazil will not recognise the establishment’s office in Brasília, mentioned Guedes, including: “We told them to forecast elsewhere.”

The fund mentioned it had agreed to shut the office by that date.

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The resolution follows rising criticism from Guedes over the IMF’s forecasting in recent times, significantly final yr in the course of the top of the pandemic. He cited the fund’s estimate of a 9 per cent contraction in gross home product final yr, which was significantly worse than the 4 per cent drop formally reported by the federal government.

“If they want, they can keep their office, but we’re officially saying we don’t need to have them here any more,” mentioned Guedes.

A former fund supervisor from Rio de Janeiro, Guedes repeatedly accuses each foreigners — and Brazilians themselves — of speaking down Latin America’s largest economic system, which he says has entered a “V-shaped recovery” following the downturn brought on by the pandemic.

His ministry estimates that GDP will develop by greater than 5 per cent this yr and a couple of per cent subsequent yr — a considerably rosier outlook than most economists who’re forecasting stagnation and even recession in 2022. In the third quarter, the economic system entered a recession as surging inflation damped growth.

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“I am not bragging about Brazil, I am just saying you have consistently underestimated us,” Guedes informed the Financial Times just lately.

“[The forecasters] are making mistakes all the time. They said [the economy] will collapse — it dropped less than expected. They said it will not recover — it recovered in V-shape. They said it will not grow — it’s growing 5 per cent this year.”

The resident consultant’s office is usually put in in international locations which have acquired loans from the establishment. Brazil exited its IMF programme in 2005, however the office “was justified because it is the largest Latin American economy and it is a difficult place to understand from [Washington],” mentioned an individual conversant in the matter.

Ilan Goldfajn, the IMF’s director for the western hemisphere

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Ilan Goldfajn, the IMF’s director for the western hemisphere © Abdrew Harrer/Bloomberg

The appointment of Ilan Goldfajn, a Brazilian and former central financial institution president, because the IMF’s director for the western hemisphere had contributed to the settlement to shut the office, Guedes mentioned.

“There is a Brazilian who is very well informed and prepared, and will criticise us from there [Washington]. You don’t need another representative here,” the minister added.

Goldfajn declined to remark.

In a press release, the IMF acknowledged that it will shut its office in June after reaching settlement with the Brazilian authorities.

“We hope that the high quality of engagement between the fund and the Brazilian authorities continues as we work closely to support Brazil in strengthening its economic policy and institutional settings,” the fund mentioned.

A diplomat in Brasília mentioned the choice to shut the office was supposedly “mutual, but the Brazilian government wanted to make it confrontational”.

“The IMF is concerned about the scale of Brazil’s fiscal deficit and its rising debt levels and that’s not what [President Jair] Bolsonaro wants to hear about,” mentioned Charles Robertson, chief economist at Renaissance Capital, an rising market specialist funding financial institution. “It could be that the IMF is being quite good at doing what it does, which is to dig into the details on the fiscal side, and the government would rather that didn’t happen before [next year’s] elections.”

Additional reporting by Carolina Ingizza and Jonathan Wheatley

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