Newspaper article The Christian Science Monitor

The Money Brazil Won't See

Newspaper article The Christian Science Monitor

The Money Brazil Won't See

Article excerpt

Many Brazilians probably thought Christmas came early this year after learning that, with American encouragement, the International Monetary Fund (IMF) had just approved a loan of $30 billion for Brazil. Reading in the press about all this money raining down, it seems as if Brazil must be awash in dough and getting ready to throw one of its famous big parties.

But news - financial news - has a perverse way of not being what it seems to be, especially lately. So let's examine the facts.

The IMF and the Inter-American Development Bank, a kind of mini- World Bank for the Americas, will make $7 billion available to Brazil by the end of the year. The rest will be available only if Brazil behaves itself.

Why is Brazil being given money in the first place? President Bush and Secretary of the Treasury Paul O'Neill have made it very clear all along that they don't believe in bailing out countries a la Clinton. To them, this is against the basic rules of capitalism, and it increases irresponsible financial behavior, both on the part of debtor countries and financial investors who would borrow and lend without measure, counting on international assistance when crunch time came.

But the money being provided to Brazil will not be in Brazilian hands for long, if at all. Brazil will have access to these funds to pay its creditors - primarily international banks, and, high among them, American banks. Brazil already has a huge external debt of $264 billion, of which $25.6 billion is owed to American financial institutions - close to $20 billion to Citigroup and FleetBoston combined.

In addition, American car manufacturers have billions of dollars invested in Brazil, and if the country's international credit is impaired, they will be on the front lines of those affected. It is easy to imagine that interested parties, who also happened to be generous campaign contributors, helped modify the no-bailout administration stance.

Once again, the champions of capitalist rhetoric have fallen short. Those who want the profit from capitalism but not the risk have gotten the upper hand. …

Author Advanced search


An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.