-Caveat Lector-
BRAZIL AGAIN APPROACHES THE BRINK
Only a month ago, it appeared that Brazil might solve its
economic problems and avoid a currency collapse which would
deeply affect U.S. banks and bring on an Asian-style debacle in
the rest of Latin America.
But the country's politicians are balking at vital reforms and,
indeed, appear oblivious to the potential chaos their inaction
invites, financial analysts contend.
o A bill limiting social security benefits to former
bureaucrats has been voted down in the county's Congress
by members of the government's own coalition.
o Efforts to introduce key legislation in Congress have been
opposed by the president of the Senate -- on the grounds
that he was not properly informed.
o Brazilian policy makers are in denial about the country's
internal debt problem -- claiming that the highly
patriotic Brazilians will hold on to government-issued
securities come what may, rather than rushing to bail
themselves out in an orgy of self-interest.
Brazil's economic salvation lies in embracing three policies,
analysts say.
o The government must adopt new expenditure cuts.
o It should get serious about its privatization program --
including divestment of such sacred cows as Brazil's
National Development Bank and Petrobras, the state-owned
oil company.
o Finally, it should adopt a currency board to dispel the
notion of devaluation.
Economists say that with these three measures in place, interest
rates -- now as high as 35 percent -- would rapidly decline,
growth would resume and Brazil would be able to move toward
heretofore elusive prosperity.
Source: Sebastian Edwards (UCLA's Anderson Graduate School of
Management), "Brazilia Is Playing Chicken With Investors," Wall
Street Journal, December 18, 1998.
For more on Currency Issues
http://www.ncpa.org/pi/internat/intdex2.html
For more on South America
http://www.ncpa.org/pi/internat/intdex9.html
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