O'Neill's Remarks Steam Brazil

Nation infuriated by U.S. Treasury Secretary's comments that Latin-American aid could end up in Swiss banks.

Brazilian Foreign Minister Celso Lafer told the U.S. ambassador that his country could not accept remarks by U.S. Treasury Secretary Paul O'Neill suggesting foreign aid to Latin America could end up in a Swiss bank account, the ministry said Tuesday.

O'Neill's comments infuriated Brazil, prompting President Fernando Henrique Cardoso to call for a retraction Monday.

Lafer, in a meeting late Monday of less than 15 minutes with U.S Ambassador Donna Hrinak, said O'Neill's remarks caused "extreme ill feeling and negative repercussion in government and political fields, with the public and in Brazilian markets", the ministry's press office said Tuesday.

"Neither government nor society can accept the declarations made by the Treasury Secretary", the office said.

O'Neill, who is scheduled to travel to Brazil, Argentina, and Uruguay next week, said in appearances on Sunday talk shows that the countries need to enact sound policies so that "[aid] does some good and it doesn't just go out of the country to Swiss bank accounts".

He added that he would not bring the economically troubled countries any offers of aid on his trip.

O'Neill's words contributed to a pummeling of Brazilian financial markets Monday as investors, eager for signs of fresh international aid for Latin America's largest economy, fretted that cash would not be forthcoming.

Brazil's Bovespa rebounded slightly Tuesday afternoon as the main index gained 63.33 points, or 0.69%.

Brazilian markets are beset by investor angst over the outcome of a presidential election in October for its economy and its delicately balanced public debt load of $250 billion.

The diplomatic tiff coincides with the departure later Tuesday of a Brazilian negotiating team to the International Monetary Fund after Brazilian officials said Brazil would probably seek fresh IMF money if market turbulence persists.

The United States is the IMF's biggest shareholder.

The U.S. Treasury tried Monday to mend the damage caused by O'Neill, who earlier this year also questioned whether giving U.S. taxpayers' money to Brazil was a wise move.

"Brazil has demonstrated its ability to use multilateral assistance effectively", Treasury spokeswoman Michele Davis said Monday. "We will continue to support assistance to Brazil as long as their sound economic policies remain in place."