This research examines the external debt problems of Brazil. The historical background of the country's external debt, and its approaches to solving the problem are reviewed. A presentation of proposed solutions, and a projection of prob able outcomes conclude the examination.
HISTORICAL BACKGROUND ON BRAZIL'S EXTERNAL
DEBT, AND THE ENSUING ECONOMIC PROBLEMS
The external debt of the developing countries (including Brazil), which is referred to as the international debt crisis, is comprised of loans to both governments and private sector organizations in the developing countries. These loans are extended by governments in the developed countries, by inter national organizations (primarily the International Monetary Fund and The World Bank), and by private sector lenders (pri marily banks) in the developed countries. The International Monetary Fund (IMF), however, plays a special role in this loan activity, because it, for the most part, establishes the rules of the game for all parties, as well as extending loans on its own.1
1R. Grosse, and D. Kujawa, International Business (Homewood, Illinois: Richard D. Irwin, Inc., 1988), 174.
The impetus for the creation of the IMF was provided by events which staggered the international economy from 1929 tothe beginning of World War II.2 Attempting to maintain domestic economic stability and retain international market positions during this time period, most countries engaged in competitive devaluations, foreign exchange controls, and import restrictions.3 The disastrous consequences of these actions resulted in a near universal recognition of a need to establish some sort of mechanism through which international economic stability could be both created and maintained.4
Following international negotiation on such a mechanism during World War II, the Bretton Woods Agreement of 1944 cre ated the I...