BRAZIL IS EMERGING as the world's leading example of an economy jeopardized by the drastic increases in oil prices. Because of the immense loans to Brazil by American and European banks, the threat to Brazil's stability has implications reaching far beyond South America. Brazil seems likely to become the crucial test of the international monetary system's ability to keep its balance amid the very rapid rise in oil bills that began in 1979 and, worse luck, will probably continue this year.
Unlike the other major economies of Latin America -- those of Mexico, Argentina and Venezuela -- Brazil has little oil of its own. More than half of its export earnings now go to pay for imported oil. The inflation rate is running well over 100 percent a year.
Like most developing countries, Brazil got through the first oil crisis, in 1973-74, by borrowing. That enabled it to keep investing, building and expanding its economy at an extraordinarily high rate. Then, when the United States came out of recession in 1975 and began growing rapidly again, its market for other countries' goods strengthened them in turn. Neither of these remedies is going to be available over the next several years.
Brazil's foreign debts have already reached the limit that the country can safely carry -- and may have gone beyond it. When you hear eminent financial people speak solemnly of the possibility of default by a developing country -- a sudden embargo of the foreign exchange to service debts abroad -- the case that they usually have in mind is Brazil. Monetary authorities in other countries have for some time been warning their banks to be extremely cautious in lending more to those developing countries that have no oil to export. At the same time, unfortunately, Brazil cannot realistically expect the stimulus generated by a strong American recovery five years ago.
The Brazilians have embarked on a heavily subsidized import drive. They have imposed fierce restraints on consumption and, they hope, inflation. Their taxes on gasoline are among the highest in the world, and the government is pushing hard to get automobiles running on alcohol fuels made from rapidly growing tropical crops -- another kind of solar energy.
More than economic prosperity alone depends on this venture. Late next year, after nearly two decades of military government, the generals intend to begin holding elections again. The plan is to start with the state governors and most of the congressional seats. An economic collapse would, at the least, throw this prospect into doubt.
As long as Brazil works seriously to balance its accounts and carry its debts, it is entitled to serious assistance from the rest of the world. There is only one source from which that assistance can adequately come, and that is the International Monetary Fund. That's the fund's job -- to protect the stability of the trading world's monetary system with loans providing time and opportunity for hard-pressed countries to adjust to bad news like the current price of oil. Apparently some of the people coming into the Reagan administration are not yet convinced of the usefulness of the IMF to American interests. To resolve any questions in their minds, they might usefully consider the prospect for Brazil.