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Photographer: Lula Marques/Bloomberg Photographer: Lula Marques/Bloomberg

Stephen Jen has a proposal for Brazil to get out of the current economic mess: ask for a bailout from the International Monetary Fund.

Not that Brazil needs the funding, said Jen, a former IMF economist. Latin America’s largest economy holds $371 billion in foreign reserves, almost 10 times the amount of the government’s foreign-currency debt.

But Brazil’s political system is in such disarray that the country can’t push through reforms needed to curb debt, tackle inflation and avoid more downgrades, according to Jen, the co-founder of London-based hedge fund SLJ Macro Partners LLP. Financial aid from the Washington-based IMF would require austerity measures such as tax increases and spending cuts, providing President Dilma Rousseff’s government with the political cover to implement unpopular measures needed to shore up the budget, he said.

“They cannot implement policies,” Jen said. “The whole system needs a cleanse. A quick way to bypass all these is to get the IMF. It’s a little wacky, but I think it makes so much sense.”

Brazil lost its investment-grade rating at Standard & Poor’s on Wednesday, and the ratings company assigned a negative outlook, meaning more cuts could be on the way. It said the political stalemate and repeated reductions in the government’s budget target have undermined the country’s creditworthiness.

IMF spokesman Raphael Anspach and Brazil’s presidential press office both declined to comment.

Rousseff’s popularity is at a record low amid an investigation into corruption at state-run oil company Petroleo Brasileiro SA. Members of the opposition and her critics within the government have rebelled in recent months against proposals to bolster fiscal accounts with tax increases and spending cuts.

Economists surveyed by the central bank expect the longest recessionsince the 1930s and the highest inflation in 12 years. A collapse in commodity prices has helped send the real down 31 percent this year against the dollar, making it the world’s worst-performing major currency.

Brazil last sought an IMF rescue in 2002, requesting $30 billion in aid, as it teetered on the verge of a default. Foreign reserves have since jumped 11-fold.

It would be an unusual move for a country that doesn’t need financial support to seek help from the IMF, said Jen, who worked at the institution in the 1990s. But without creditable outside forces, the world’s seventh-largest economy will deteriorate further, he said.

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“The clear solution in my view is actually an IMF program,” Jen said. “That won’t be bad news. It would be a reason for people to come back to Brazil.”

(Updates with IMF and Brazil declining to comment in fifth paragraph.)