The head of Brazil's Federation of Coffee Exporters (Febec) said his country had to impose an export tax on coffee to generate enough revenue to prevent it falling further into financial crisis.

"If it doesn't, Brazil has to go back to the fourth world because it's impossible to handle a fiscal and a federal budget and a debt problem in the middle of this mess without changing the equation," Francisco Ourique, secretary general of Febec, a Brazilian body of coffee exporters, told Reuters.

Ourique, speaking late on Thursday on the sidelines of a series of International Coffee Organization meetings in London, said a tax would penalise growers but it was up to the government to find a solution."It isn't a coffee situation, it's a country one...they're going to have to renegotiate our status or generate very quickly additional revenue. It's not good for the producers but it is for the economy," he said.

He said that to his knowledge there had not been a decision yet on whether the government wouldincrease the amount of Brazil's coffee stocks sold at auction to offset tightening supply and soaring internal prices.

This week, two leading industry groups, the Sao Paulo Coffee Industry Union and the Brazilian Coffee Industry Association, requested an auction of 300,000 60-kg bags for February, with an additional auction for the same month.

"In Sao Paulo they came up with a number of 300,000 bags on Monday. Now they say that this number will be the volume where they can stabilise current consumer prices but this has to be taken back to Brazil's coffee council (CDPC) for discussion and/or to the government for approval."

There was nothing to say there should be a fixed amount per month. The volume was fixed 10 days before the auction by the government.

Ourique said that within the country's 1999 budget there was a figure of three million bags of stocks which could be auctioned should financing be required for Funcafe, Brazil's National coffee fund.

"But that is not a commitment, it is simply anequation as the money from the auction cannot be used inside the annual budget. That doesn't mean there is a commitment to sell as it's a budget exercise more than a coffee market decision.

The goal of the auctions, according to Ourique, was to stabilise consumer prices in Brazil and to be sure that roasters had the necessary quantities of coffee to supply the market. His government was currently sitting on 9.3 million bags of coffee and these stocks should be utilised.

Ourique pegged the 1999/2000 crop at between 23 and 25 million bags -- similar to other recent trade estimates -- but said it was still too early to judge.

Asked where he saw market prices heading in light of the economic turmoil, he said there would eventually be a correction to the current drop, but for now Central American producers would be selling their late crop into a weak market.

"The only thing that could wash this framework out would be a massive Brazilian sell-off. For the time being, prices are so unstable economically andproducers are selling into the rally in reais, only selling so much."Ourique said growers had more than enough financing for their crop.

"The exporting sector is not very happy because there is a squeeze, but we don't need any more money...Producers have today a billion reais of various programmes of financing, but remember a billion reais is not a billion dollars any more." (Reuters)