Rescuing Brazil: Why the US Has Big $Takes for US Investors and Traders, Brazil Is an Economic Domino That Can't Be Allowed to Fall. the US May Give Assistance

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Mention Brazil, and many Americans think Amazon River, the girl from Ipanema, and Ronaldinho, the boy from the soccer field.

But, in the wake of the global economic crisis, many also now know that the United States has become a major player in Brazil's economy - and is expected soon to become a major financial supporter to protect Brazil from the worst effects of that crisis.

The future of this giant market of 160 million people means more to the economic well-being of the US than does Malaysia, Indonesia, or even Russia, which has an economy about half that of Brazil. Such facts explain reports that Washington is planning several billion dollars in aid or loan guarantees as part of an international program that could reach $30 billion. With many economists saying much of the world's economic expansion over the coming decades will be in large markets like Brazil, the stakes for the US are clear. More than 211,000 high-skilled US jobs are supported by exports to Brazil, according to the American Chamber of Commerce in Sao Paulo. In trade, investment, and other economic activities, Brazil is the US's largest developing-world partner, even surpassing Mexico in many categories. Three years ago President Clinton designated $20 billion in US funds to rescue Mexico's economy. Jose Pena Garcia, chief economist with BankBoston in Sao Paulo, says all he heard during a recent trip to New York was how, if Brazil became the next domino to fall to the international financial crisis, the US would hear this crash much more quickly and loudly. BankBoston is an example of a US services company with high stakes in Brazil. About 20 percent of the bank's revenues come out of Latin America, with Brazil representing about half of that. The bank has doubled its branches in Brazil since 1994, and now has 3,800 Brazilian employees. A financial collapse in Brazil would send giant shock waves through BankBoston, as in much of the US banking sector, which generally has a much broader exposure in Latin America than in Asia or Russia. Like many economists, Mr. Pena is pretty confident this is not going to happen now - as long as Brazil "does its homework." That means quickly implementing fiscal reforms to signal to the world that Brazil is serious about cutting a deficit that is nearly 8 percent of gross domestic product. President Fernando Henrique Cardoso is expected to announce this week the measures he wants Brazil to take to trim about $25 billion in spending. With even some of Cardoso's congressional allies already showing resistance, the big question now is whether Brazil's legislature and the big-spending states will go along. "We may have very little or no growth next year, but interest rates {now at a whopping 50 percent} should be falling by the end of the year," says Pena. "Something over 400 of the top 500 US companies have some kind of operations in Brazil," says Pena, "so that gives an idea of why interest in Brazil is not limited to a few international economists. …


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