Is Brazil more like Greece or Japan?

Having identified an unsustainable Brazil's public debt as a core policy problem, it is natural to focus on a sovereign credit event as the primary risk. For Brazil, this is probably not right, or at least, a sovereign credit event will be a low probability event for a considerable time to come. 

Debt dynamics arithmetic can only diagnose the Brazilian (or any other) public debt unsustainability as a long-run, in principle an asymptotic, matter. The public debt cannot rise at its current rate forever, but that does not mean that the end is nigh. 

The net public debt in Japan is now just over 125% of GDP (from about 80% in 2007) and projected (by the IMF) to continue rising over at least the half-decade to come. 

This is not much higher than in Brazil, but that it has risen to levels that would have seemed outlandish in decades past, without triggering economic or financial stress, or even much in the way of market commentary. 

"In this respect, Brazil is more like Japan and the US than Greece or Argentina. The Brazilian nonbank public sector's external debt liabilities are an almost negligible 5% of 2015 GDP and less than one-quarter of the country's international reserves", says Barclays. 

It was a different story in the 2002 crisis, when nonfinancial public sector debt was almost one-fifth of GDP and 2.5 times the country's gross international reserves.