Debt Management in Brazil: Evaluation of the Real Plan and Challenges Ahead
AbstractThe Brazilian domestic debt has posed two challenges to policy-makers: it has grown very fast and its maturity is extremely short. This has prompted fears that a default or a compulsory lengthening scheme would be imposed. Here, we analyse the domestic public debt management experience in Brazil, searching for policy prescriptions for the next few years. After briefly reviewing the recent domestic public debt history, we decompose the large rise in federal bonded debt during 1995-2000, searching for its macroeconomic causes. The main culprits are the extremely high interest payments--which, until 1998, were caused by the weak fiscal stance and the quasi-fixed exchange-rate regime; and since 1999, by the impact of the currency depreciation on the dollar-indexed and the external debt--and the accumulation of assets of doubtful value, much of which may have to be written off in the future. Simulation exercises of the net debt path for the near future underscore the importance of a tighter fiscal stance to prevent the debt-GDP ratio from growing further. Given the need to quickly lengthen the debt maturity, our main policy advice is to foster, and rely more on, inflation-linked bonds. Copyright @ 2002 by John Wiley & Sons, Ltd. All rights reserved.
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Bibliographic InfoArticle provided by John Wiley & Sons, Ltd. in its journal International Journal of Finance & Economics.
Volume (Year): 7 (2002)
Issue (Month): 1 (January)
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Web page: http://www.interscience.wiley.com/jpages/1076-9307/
Other versions of this item:
- Bevilaqua, Alfonso S. & Garcia, Marcio G. P., 2000. "Debt management in Brazil : evaluation of the Real Plan and challenges ahead," Policy Research Working Paper Series 2402, The World Bank.
- Afonso S. Bevilaqua & Márcio Gomes Pinto Garcia, 1999. "Debt management in Brazil: evaluation of the Real Plan and challenges ahead," Textos para discussÃ£o 408, Department of Economics PUC-Rio (Brazil).
- E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
- H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
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