Brazil's Ballooning Debt

Brazilian authorities revealed at the end of October that public debt as a share of gross domestic product would reach 56% by the end of the year, up from 49% at the end of 2000. The real has lost nearly 30% of its value against the dollar since the start of the year. To stem the slide, Brazil's central bank has jacked up the benchmark interest rate to 19% from 15.75% in January. These factors make it more expensive to service Brazil's $248 billion public debt, a large portion of which is indexed to dollars. Analysts fear that if the trends persist, Brazil could follow Argentina down the road to insolvency. For the moment Brazil can count on a $15.5 billion credit facility from the International Monetary Fund.

Edited by Pete Engardio

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