Lagarde pledges IMF reform in bid to woo Brazil

The backing of Brazil, Latin America’s largest economy and an influential diplomatic power, could help ease discontent among developing countries over the long-standing practice of choosing a European to head the Washington-based IMF.

Brazilian finance minister Guido Mantega said Brazil had yet to decide whether to support Lagarde or her only declared rival, Mexican central bank chief Agustin Carstens. But he underscored the need for more reforms to give emerging economies a greater voice in the IMF, something Lagarde was eager to stress she supported.

Lagarde’s comments came as Carstens kicked off his own tour to campaign for the job, starting in Spain where he urged IMF members not to elect a European by default.

Brazilian officials said in private before Lagarde’s visit that President Dilma Rousseff is inclined to back her candidacy as long as she pledges to continue reforming the IMF. They see Lagarde as having more clout to push reforms than Carstens, who arrives in Brazil on Wednesday.

“If I was elected, I’d make sure that the diversity of members is represented at all levels," Lagarde told reporters at a news conference in Brazil’s capital, Brasilia.

She added that the fund “must continue the reform process it began under Dominique Strauss-Kahn," who quit as IMF chief after being charged with the attempted rape of a hotel maid in New York this month.

Lagarde, who is a strong favorite to win the post and who France says has the backing of the G8 group of leading economic powers, also said it was important for the IMF to increase international cooperation to avoid excessive currency swings.

Carstens said France was “spinning" its comments regarding votes from the G8 and criticized the view that Lagarde, as a European, would better understand the region’s debt crisis.

“The Europeans are wrong to think only a European can help them out of their crisis," he told Mexican radio in an interview from Madrid.

Lagarde said she did not discuss with Brazilian officials the possibility of her serving a shortened term as IMF chief until the end of 2012, when Strauss-Kahn’s tenure would have ended. Lagarde has made clear she is seeking a full five-year term.

Mantega said the crucial qualities for the next IMF head were experience, competence and commitment to reform, and that Brazil would wait for all candidates to present their cases before declaring its support. Lagarde is “certainly a “competent minister," he said.

“Brazil wants the philosophy of reform to be maintained by the new managing director," Mantega said after lunching with Lagarde, who also met central bank chief Alexandre Tombini.

Mexican President Felipe Calderon plans to call Rousseff on Tuesday to ask for Brazil’s backing of Carstens’ candidacy, a Brazilian government source told Reuters.

The 187-member IMF has approved reforms that will give emerging economies increased voting rights and board seats by the end of 2012. More than 6% of voting power at the fund will shift to developing countries such as China, which will become the third-biggest member nation.

GLOBAL TOUR

Lagarde’s visit to Brasilia is the first in a hastily arranged global tour that will also take her to India, China, Russia and Saudi Arabia. The IMF has a 30 June deadline to pick a successor. Carstens will visit Portugal on Tuesday.

The resignation of Strauss-Kahn has led to calls from developing countries to end the traditional European lock on the job.

EU nations are strongly backing Lagarde, arguing that a European leader is crucial at a time when the IMF is working with the euro zone to avert the risk of Greece defaulting on its loans and sparking wider financial fallout.

But some emerging economies have objected to another European IMF head, saying it is time to give other nations a turn to reflect a shift in global economic power to developing giants such as India and China.

South African finance minister Pravin Gordhan criticized the rich nation support for Lagarde, saying it breached a decision by the G-20 group of leading economies for a more open selection process.

Mantega reiterated Brazil’s stance that the next IMF leader should be chosen on merit rather than nationality, and that the growing influence of emerging economies should be recognized in the process.

Lagarde’s main obstacle is the possibility of an inquiry into her role in a 2008 legal settlement involving paying 285 million euros ($408 million) to businessman Bernard Tapie, an ally of French President Nicolas Sarkozy.

Neither IMF candidate is expected to meet with Rousseff, who has maintained a lower profile than her outspoken predecessor Luiz Inacio Lula da Silva.

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