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MSRM Students See a More Resilient Future for Brazil

NYU Stern MSRM students

“Brazil has experienced many ups and downs in its economic history,” noted Rodrigo Figueroa, a student in NYU Stern’s MS in Risk Management program. “Our team wanted to examine the data rigorously to determine the country’s resiliency to shocks.” A key component of the MSRM program is the strategic capstone project. Students tie together the substantive content and practical case work taught throughout the year in a concrete risk analysis presented at the culmination of the program. Rodrigo was a member of a capstone team seeking to determine Brazil’s capacity to service its external debt in the event of changes in the global economic environment. He worked with teammates Caio Banti, Angelica Sakurada, Enrico Sanches, Ignacio Saralegui, and Daniel Vieira, all of whom have ties to Brazil.

Brazil has defaulted five times in its history, twice in the 20th century. The country appeared to be on an upward trajectory during a period of debt-fueled economic growth in the 1970s but suffered a severe financial crisis after the second oil shock in 1979, leading to the country’s most recent default, in 1983, and a “lost decade” of hyperinflation and successive crises. The students wanted to determine if the country was destined for a similar fate again or if the economic trajectory was more stable this time.

“We were able to pull a great deal of data from the IMF, World Bank, and Central Bank of Brazil to use in our risk analysis,” reported Ignacio. The team also drew from Stern’s resources. “Our project mentor and advisor, Professor Thomas Pugel, challenged us to get the right data and identify key risk indicators, and Professor Ingo Walter taught a framework in his class that was exactly what we needed to structure our project,” recalled Rodrigo. “Once we had our data, we used a scenario analysis technique to test how Brazil would fare in a wide variety of economic situations.”

The students’ comprehensive research indicated that Brazil is “significantly more resilient” than in the past, and therefore equipped to sustain sizeable external shocks without falling back into default within the next five years. Rodrigo noted, “We wanted to have something useful and tangible for anyone with investments or interest in investments in Brazil.” So far, the students have seen initial interest in the report from several parties. Daniel said, “We recently spoke to the CEO of a global risk management services firm, and he was very interested in our report because he gets these specific questions from investors.”

According to Ignacio, “The capstone project’s greatest value is that it allowed us to apply what we learned in class to something that was functional in the real world.” Another aspect of the project that was particularly rewarding for the team was the optimistic analysis: “As a Brazilian, I was delighted to reach a positive conclusion with so much certainty,” said Daniel. Angelica added: “Most of us in the group grew up in a time that was very tough economically in Brazil. It’s great that we can see through our analysis how much more resilient the external accounts are doing now.”

Written by Anna Christiensen