Abstract

This chapter discusses the shifting character of the Brazilian State in several major debt crises throughout this century including its more recent one that started in 1999 and is considered to end in 2005 when Brazil paid in advance its debt with IMF. The intention here is to review the role of the Brazilian State during these debt crises. It is shown that pressures from the international capital market and the country's private sector forced the Brazilian State to assume the debt risk and obligations of the private sector. This process is called “the nationalization of the debt” of the Brazilian external debt. Our major purpose is to see whether the recent debt process (1994–1998) and its repercussion until 2005 shows the same trend as the 1976–1982 period – that is, to see whether the State ended up bailing out the risks of the huge amount of portfolio investment that the country received.

The tendency for external debt “nationalization” is present in the recent external debt of Brazil (1992–1998). But, contrary to the debt cycle of 1967–1982, the external debt “nationalization” of the 1990s follows the pattern similar to the external debt cycle of 1947–1962.

Objective

The objective of this chapter is to analyze the role of the State in the process of the external debt of Brazil. Specifically, our thesis is to find out if historically the State assumed all the risk by “nationalizing foreign obligations” – in which economic losses are socialized while economic gains are privatized – as was the case in the 1982 debt crisis (Cruz 1984).