Clinton moves to reassure global financial markets

Clinton moves to reassure global financial markets

WASHINGTON (AP): President Clinton is trying to restore
confidence in financial markets after an abrupt devaluation of
Brazil's currency called into question his strategy for dealing
with the 18-month-old global economic crisis.

Clinton said on Wednesday he and members of his economic team
were monitoring the crisis in Brazil closely and had been in
contact with Brazilian authorities, the International Monetary
Fund and U.S. allies.

"We have a strong interest in seeing Brazil, with whom we have
worked on so many important things around the world, carry
forward with its economic reform plan and succeed, and we
certainly hope that they will," Clinton told reporters at the
White House.

Latin America accounts for 20 percent of U.S. export sales.

Last fall, with the financial crisis threatening to claim
Brazil as its next victim, the administration convinced the IMF
to try a new approach -- offering bailout money up front as a way
of keeping nervous investors from fleeing developing nations
rather than offering assistance only after a country's economy
has been leveled.

Brazil became the first test case of that strategy in November
when the IMF put together a US$41.5 billion bailout package,
including $5 billion from the United States.

The effort bought time, but there has been renewed turmoil in
Brazil in recent weeks as President Fernando Henrique Cardoso ran
into roadblocks in starting the economic belt-tightening he
pledged in return for the IMF money.

The abrupt resignation of the head of the Brazilian bank and
the effective devaluation of Brazil's currency by 7.6 percent
sent a jolt through financial markets Wednesday. The Dow Jones
industrial average lost more than 250 points in the first hour of
trading before recouping some of those loses to close down 123.48
points.

Private economists have warned that more turbulence is likely.

"The administration's test case is looking shaky right now,"
said Clyde Prestowitz, head of the Economic Strategy Institute
think tank. "The problem is that the Brazilians haven't been able
to get their act together and that is posing a lot of real
dangers for the rest of the world."

Administration officials, informed by Brazilian authorities of
their intention to devalue Tuesday night, spent Wednesday on the
telephone to other rich G-7 nations and developing countries in
an effort to assess the damage.

Treasury Secretary Robert Rubin said what's needed is
"implementation of a strong, credible economic program" by
Brazil.