Brazil's options

Brazil, after agreeing (to) a program with the International Monetary Fund, has got itself into a mess. Its defense of the Real peg failed. So too its attempt at controlled devaluation. The government must now try to rebuild credibility, so that interest rates can fall from unsustainable levels. It needs a new plan, and soon. This should include additional fiscal measures, a reaffirmed commitment to privatization, and a new anti- inflationary anchor. With these elements in place, it should also involve continuing IMF support.

To ensure there is no return to the bad old days, Brazil needs a monetary anchor. One option is a currency board. The other is a transparent inflation target, with the central bank charged with its delivery. Whichever the government chooses, there is no time to waste.

-- The Financial Times, London