Brazil’s floating exchange rate, high foreign-exchange reserves, strong commodity exports, and debt denominated predominantly in its own currency reduce its exposure to a balance-of-payments crisis. Nonetheless, continued fiscal deterioration under President Luiz Inácio Lula da Silva will carry high domestic costs.
LONDON—Brazil has an unfortunate habit of disappointing. Despite the country’s exceptional natural-resource endowment, its growth trajectory resembles what Brazilians call the flight of a chicken (voo de galinha): a brief flutter followed by an inevitable fall back down to Earth. President Luiz Inácio Lula da Silva’s surprise re-election raises the risk of another letdown.
