Brazil's economic crisis is in full swing, with the currency
in free fall and the economy ready to plunge into a severe
recession. It seems inevitable that Brazil's large and
structurally unsound debt must be restructured. Only a
confidence shock that would boost the value of the real and
bring interest rates crashing down could avert this outcome.
The good news is that Brazil's economic problems are mainly, if
not entirely, homegrown. Local investors hold most of the
government's debt, which is mainly short and medium term, and
denominated in reais, although tied to the exchange rate or
overnight interest rate. The incoming government's economic
team could impose a reasonably creative and market friendly
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