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Brazil’s Public-Sector Debt

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The Achilles heel of sustained economic prosperity in Brazil—Latin America’s biggest economy and the twelfth largest in the world—is the nation’s public-debt burden. High and still-growing levels of debt increase Brazil’s chances of defaulting on its obligations, either by repudiating its contractual commitments or through inflation and currency depreciation. These prospects cause investors to demand a risk premium, which raises real interest rates in Brazil and reduces its investment, employment, and growth.

Suggested citation: "Brazil’s Public-Sector Debt," Federal Reserve Bank of Cleveland, Economic Trends, no. 04-02, pp. 08, 02.01.2004.

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