The IMF recently declared that measures taken by the Brazilian government in the aftermath of the Asian financial crisis have prevented the extension of the crisis to Latin America. The IMF also emphasised that the Brazilian stabilization programme depends on the implementation of constitutional amendments on public administration, social security and financial matters. The finance minister, Pedro Malan, stated that the reforms would need to be approved and implemented within two years. Meanwhile, Brazil´s financial situation would be sustained with the proceeds of the privatization programme.On March 11, 1998, the Senate approved, in the final round of voting, a constitutional amendment eliminating existing job guarantees and establishing a maximum ceiling for salaries for public servants. This may result in 1% savings in 1999.

Final voting in Congress is expected in April 1998. This should be followed by further considerations on private sector participation in pension funds, as well as a new law facilitating procedures for hiring and dismissing employees.

The government is negotiating general points with state governors, which will be presented to congress immediately after approval of the social security reform. It will relate not only to tax collection and its allocation within the government, but also to public expenditures. It is expected that the Brazilian tax system will be transformed in line with present systems in developed countries.

The government expects to obtain about US$ 30 billion through privatizations in 1998. Main sectors include petroleum, natural gas, electricity, telecoms, banking and insurance. In relation to petroleum and natural gas, on March 5, 1998 the National Petroleum Agency (ANP) published the draft agreement for public consultation of 30-year-concessions of exploration and production. ANP intends to have complete access to data of all market players, including Petrobrás. For a transitional period, no fee will be due for Petrobrás to retain its existing rights in some areas (still to be announced), provided Petrobrás shows enough resources to efficiently exploit the areas without assigning control to third parties. Accordingly, some foreign groups have been negotiating non-voting investments in those ventures.