Nearly every international economic development went Brazil's way in 1986, yet the largest debtor nation fell into a severe economic crisis mostly because of its economic policies, experts say.
In 1985 and 1986, Brazil, like Mexico in 1984, appeared to be emerging from the ravages of the debt crisis.
But by late last year, crippling inflation had returned to Brazil with a vengeance and a two-year economic boom had sputtered into recession.
Brazilian President Jose Sarney, in an apparent attempt to boost his popularity and that of his party, kept a price freeze in effect too long on an overheated economy. His party won the elections, but his popularity plunged when, a week after the balloting, he took overdue and unpopular steps to reduce demand.
The cruzado plan, introduced Feb. 28, 1986, temporarily halted inflation -- which had been raging near 300 percent a year -- by imposing a broad freeze on the nation's prices and wages.
But because a large wage increase was granted as part of the freeze, consumer demand, already at a high level, continued to climb.
Brazilian industry ran out of its capacity to produce, and Brazilian exports -- which only a year before were the wonder of Latin America -- declined. So did the country's ability to service its more than $100 billion in foreign debt.
Last February, Sarney imposed a moratorium on interest payments to its commercial banks, an action most observers feel was taken to whip up popular nationalist support for Sarney and deflect attention from his policies.
Although Brazil continues to confront its banks, the country has proposed an economic package designed to reduce its inflation and return the country to stable rate of growth.
Sarney also wants to borrow $5 billion from its bank lenders, who are angry over the interest moratorium, and wants to do it without an imprimatur from the International Monetary Fund, which has supervised most debtor nation economic policies.