BRASILIA, DEC. 18 -- Finance Minister Luiz Carlos Bresser Pereira, who helped restore good relations between Brazil and foreign bankers, quit today citing an "ethical" dispute with the president over tax reform.

Bresser Pereira announced his resignation after meeting with President Jose Sarney Friday to discuss proposals to reduce the huge budget deficit.

"When I accepted the post I took on the political and, if you wish, ethical obligation that tax reform would affect the rich more than the poor," Bresser Pereira said at a news conference.

The minister said he and Sarney disagreed on a proposal to tax capital earnings -- interest, profits and dividends. The president opposed the tax.

"Sarney said he feared that businessmen would stop investing," Bresser Pereira said.

"A climate of mistrust has been created, and I thought it was better to leave," he said.

A finance ministry official, who spoke on condition he was not identified, said Bresser Pereira's resignation would hurt Brazil's renegotiation of its foreign debt, which the minister supervised.

"Everything would go down the drain," the official said.

Brazil stopped paying interest on about $70 billion of its $112 billion dollar debt in February in a move that alienated international banks.

But Bresser Pereira reached an agreement last month with foreign bankers on repaying $4.5 billion in interest due this year. The accord in essence ended Brazil's debt moratorium.

Bresser Pereira, 53, was to be temporarily replaced by Mailson Ferreira de Nobrega, the deputy finance minister and a former bank director.

Bresser Pereira took over the ministry on April 29, replacing Dilson Funaro. He is the third finance minister to quit since Sarney became president in 1985.

The minister earlier had threatened to quit if the government did not approve his proposals to cut the deficit, which this year surpassed 6 percent of the gross national product, estimated at $300 billion.

The proposals included politically sensitive measures such as raising taxes for the middle class and wealthy, cutting spending and eliminating some state-run companies.