Márcio G . P . Garcia , joint with Tatiana Didier Very High Interest Rate and the Cousin Risks : Brazil During the Real Plan

We compute and estimate the two risks that keep Brazilian interest rates extremely high: the currency and country risks. The Brazil risk is directly measured from fixed income instruments and derivatives, while the currency risk is estimated via Kalman Filter. Results identify a few important components of the Brazil risk, as the convertibility risk and the international financial markets conditions, measured by a credit derivative spread. Preliminary results indicate that the current high domestic interest rates are associated with the uncertainty concerning the current account sustainability. Therefore, export growth is fundamental to achieve lower real interest rates.