The IMF and the Clinton Administration argued that these packages would strengthen the economies of the afflicted countries, prevent their citizens from suffering undue economic hardship, and prevent the spread of the financial crisis to other countries. The IMF and the Administration were wrong on all counts, however. The global financial crisis continued to expand following the bailouts, undermining world trade and economic growth. The IMF's latest victim is Brazil. This new IMF mechanism is to provide billions of dollars in loans to a troubled country before the onset of a crisis.
Brazil is Latin America's largest economy and the eighth largest in the world.
On January 15, Brazil abandoned all pretense of supporting the real and allowed the currency to float. Brazil's National Congress and state governors enjoy an extraordinary degree of autonomy in dispensing patronage and contracting debt. President Cardoso's promised reforms attacked this system of constitutionally protected political patronage and privilege. Faced with strong political opposition and an IMF package that made his reforms appear less urgent, President Cardoso failed to exercise leadership and force his reforms through an unwilling legislature. In the wake of the real 's collapse, Brazil's government is rushing to enact the reforms President Cardoso pledged nearly three months ago.