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Luiz Inacio
Lula da Silva |
The magnitude of the problems facing Brazil is clear from
JPMorgan's list of country spreads in its EMBI+ bond index. Its
spread is 838 basis points over treasuries, roughly the same as two
countries only just coming out of default: Pakistan and Ukraine. It
is 186bp wide of Turkey, 263bp wide of Russia and 565bp wide of
Mexico or South Africa. It is 650bp wider than Poland, a country
that has completely turned the tables on it, repaying $2.5 billion
in bilateral obligations dating back to 1970s, when Brazil helped
out Poland with export credits.
Clearly the financial markets have relatively little faith in
Brazil's long-term prospects, despite their love affair with its
present economic team.
To some extent the issue is geographical. Poland has benefited
greatly from bordering on the EU and from its aspirations to join
that union, and Mexico, with Nafta, has...
