Brazil is hurtling toward an economic crisis that has little to do with whether a leftist gets elected president in October or the size of its standby credit announced Aug. 7 with the International Monetary Fund.
Except in the most implausible of positive economic circumstances, Brazil's foreign debt is simply unsustainable in the years ahead. The debt must be restructured, stretching out the repayment schedule to ease the burden on the Brazilian economy. The IMF deal and the political leanings of the man who becomes Brazil's next president may affect the timing of the coming crack-up and the policy nuances of dealing with it, but he can't avoid the train wreck.
U.S. Treasury Secretary Paul O'Neill's soothing comments during his recent visit to Brazil were a long overdue U.S. effort to calm skittish international financial markets. But now it's time for O'Neill to turn his tough-love rhetoric on Wall Street. Never one to mince his words with improvident borrowers, O'Neill now needs to be equally tough on improvident lenders.