Sovereign Profile

Sep 1, 2002

Brazilian Bailout

After months of increasing volatility and a crashing currency in Brazil, the International Monetary Fund signed off on a $30 billion rescue package for the beleaguered country. The World Bank  and the Inter-American Development Bank  also came through with $3 billion in emergency financing. The real, Brazil's currency, and government bonds came under severe market pressure in July and August, driving up the size of the government's debt and forcing the authorities to reduce the debt's maturity structure. This further undermined investor confidence with the approach of October's presidential elections, which the government's candidate is likely to lose. Moody's downgraded Brazil's foreign currency bonds to B2 from B1, further increasing fears that the country would have to default on its $287 billion public debt, just as Argentina did in December 2001. The IMF rescue package revived markets only briefly as markets remained convinced the incoming government would be forced to restructure its debts....

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