RIO DE JANEIRO -(Dow Jones)- U.S. Deputy Treasury Secretary Kenneth Dam said Friday that a proposal by Brazil's president-elect to hold bilateral talks between the Mercosur trade bloc and the Bush administration is a good idea.
"The idea is right, it's just a question of sequencing and timing," with respect to talks for the creation of the Free Trade Agreement of the Americas, Dam said. The hemisphere-wide trade zone is slated to take effect in 2005.
At the Latin American Summit of the World Economic Forum here, the Treasury official was responding to a request from Senator Aloizio Mercadante, a top advisor to Brazilian President-elect Luiz Inacio Lula da Silva, that bilateral U.S.-Mercosur talks start soon.
Brazil is the leader of the Mercosur trade group - which also includes Argentina, Uruguay and Paraguay - and is co-chairing the steering committee for the FTAA with the U.S.
Dam said he thinks FTAA talks are "on track" but added that important challenges lie ahead.
He also tried to deflect criticism of restricted access to the U.S. for agricultural producers in Latin America by saying countries like Brazil and the U.S. should work together at the World Trade Organization (news - web sites) to force the European Union and Japan to lower agricultural subsidies, which are much higher than those in North America.
Treasury's Dam said the administration of Brazil's Lula has agreed to pursue policies of fiscal discipline, suggesting that a 35% depreciation of the country's currency this year and a tightening of foreign credit availability have been unwarranted.
"International financial markets are worriers, but I don't see any reason for a great deal of worry," Dam said.
He praised Lula's team for endorsing the terms of Brazil's $30 billion support package with the International Monetary Fund, which requires the country to post a budget surplus, excluding interest payments, of 3.75% of gross domestic product next year.
Treasury's Dam later said major commercial banks might need to again meet about reopening credit lines to Brazil.
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