Is the IMF money enough to solve Brazils debt crisis?
Unfortunately not. Brazil’s net public debt, now at $255 billion, has risen from less than 30% of gross domestic product in 1994–when the present government took office–to 60% today. That’s not high by international standards, but what really spooks the markets is the profile of the debt: Nearly one third of it is linked to the dollar, while another half is indexed to government interest rates. That means the amount of debt increases as the currency devalues, which is happening right now, or as interest rates rise, which will happen if the crisis worsens. What’s more, the government is being forced to offer shorter and shorter term paper because investors won’t accept long-term risk. Altogether, more than $75 billion worth of domestic debt comes due in the next 12 months. Repayments for September total a relatively manageable $3.7 billion–but jump to $10.5 billion in November. “Brazil has almost no chance of making it,” says Walter Molano, head of research at BCP Securities Inc. in
