Brazil expels IMF office over growth forecasts

The Brazilian government is kicking out the IMF’s representative office in the country after complaints over the institution’s economic 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,” said Paulo Guedes, Brazil’s finance minister.

From June 30 — when the current IMF representative is due to be replaced — Brazil will no longer recognise the institution’s office in Brasília, said Guedes, adding: “We told them to forecast elsewhere.”

The fund said it had agreed to close the office by that date.

The decision follows growing criticism from Guedes over the IMF’s forecasting in recent years, particularly last year during the height of the pandemic. He cited the fund’s estimate of a 9 per cent contraction in gross domestic product last year, which was considerably worse than the 4 per cent drop officially reported by the government.

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

A former fund manager from Rio de Janeiro, Guedes regularly accuses both foreigners — and Brazilians themselves — of talking down Latin America’s largest economy, which he says has entered a “V-shaped recovery” following the downturn caused by the pandemic.

His ministry estimates that GDP will grow by more than 5 per cent this year and 2 per cent next year — a substantially rosier outlook than most economists who are forecasting stagnation or even recession in 2022. In the third quarter, the economy entered a recession as surging inflation damped growth.

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

“[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 representative’s office is typically installed in countries that have received loans from the institution. Brazil exited its IMF programme in 2005, but the office “was justified because it is the largest Latin American economy and it is a difficult place to understand from [Washington],” said a person familiar with the matter.

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

The appointment of Ilan Goldfajn, a Brazilian and former central bank president, as the IMF’s director for the western hemisphere had contributed to the agreement to close the office, Guedes said.

“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 comment.

In a statement, the IMF acknowledged that it would close its office in June after reaching agreement with the Brazilian government.

“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 said.

A diplomat in Brasília said the decision to close 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,” said Charles Robertson, chief economist at Renaissance Capital, an emerging market specialist investment bank. “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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