He said inflation was receding, economic growth forecasts for 1999 were too pessimistic and interest rates were declining after the financial crisis that hit last January. That's when Brazil had to devalue its currency by 40 percent, which rattled foreign investors' confidence.
"We had no choice but to confront the crisis squarely and find our way out of it," Cardoso said. "That is exactly what we are doing. And that is why the Brazilian economy is recovering so quickly."
Cardoso spoke to the U.S. Chamber of Commerce and the Export-Import Bank before holding talks with President Clinton at the White House. He made a three-nation trip to Europe last month to tell investors Brazil had ridden out its crisis.
Just before Cardoso arrived, Brazil's Central Bank lowered benchmark annual interest rates to 29.5 percent from 32 percent. Cardoso said he expects interest rates at 10 percent by the end of the year.
He also said inflation might reach 7 percent to 10 percent in 1999,
compared with the target of 17 percent stipulated in an agreement with the International Monetary Fund on a $41.5 billion rescue package signed during the crisis.
Although the economy will decline by 2 percent this year, Cardoso pointed out the rate is lower than a contraction of 3.5 percent to 4 percent that many analysts had predicted. Positive growth of 4 percent is expected in 2000.
"As you can see there is room for us to be justifiably optimistic about the future," Cardoso told an Ex-Im bank conference. "Prospects for a full recovery are solid, and the return to the path of sustained growth is well on its way.
He saw no risk that these positive developments will divert Brazil from its budget objectives and austerity measures introduced to stabilize the economy. "Confidence in the long run is increasing," Cardoso said. "We know we are on the right track, but I can assure you that there is no danger of any misplaced euphoria within the government."
He also said that "schizophrenic behavior that has recently influenced
global capital markets must be dropped in favor of a more realistic
approach. " Brazil's economy was weakening last year even before the contagion effects of Russia's devaluation and default on some its debts spread to Brazil, causing investors to flee and raising fears the crisis would infect its Latin American neighbors.
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