Brazil Glows, But Can it Grow?

Dec 8, 2003

The country has regained the confidence of investors and but Brazil still faces considerable challenges that the markets have ignored for too long.

The adoration may not last, but for the moment, Brazil is the darling of emerging market investors. A year ago, the country seemed teetering on the brink default and about to follow Argentina into a catastrophic economic collapse.

Today Brazil is one of the few economic bright spots on the continent. In Argentina, the government continues to antagonize creditors holding its nearly worthless paper. President Néstor Kirchner seems more concerned with boosting his popularity with populist measures than in dealing with his country’s shattered finances. Colombia’s President Alvaro Uribe is floundering after a defeat on a referendum that was intended to approve policies he said were needed to avoid a fiscal crisis. In the Dominican Republic, the government’s attempts to renegotiate an agreement with the International Monetary Fund have been thwarted by strikes and riots. President Hipólito Mejía’s bid to win reelection next year now looks close to impossible. Things have turned out much better in Brazil than many people expected because...

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