The Real ‘Contagion’

What happened in Brazil in the late nineties is something the Brazilians can’t be held fully responsible for. The contagion was so severe that policy makers were forced to react in a way that left the country in the midst of a crisis. A series of events, ranging from the Mexican peso devaluation, the Asian financial crisis and the Russian debt default, made the emerging economies, a risky asset class in the portfolio of investors. Very soon, capital migrated out of Brazil and the government had to increase interest rates; an obligation which the country could never honour; and Brazil did a sovereign default.

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Source IIPM-Editorial,2006