NEW YORK ( TheStreet) -- When it comes to economic development, Wall Street prefers going private to dealing with a government. But that can be a big mistake, as Brazil is now proving.OGX, a huge energy balloon in Brazil blown up by a man named Eike Batista, has come crashing down and may take a lot of Wall Street money with it. Big names such as BlackRock ( BLK) and Pimco are on the hook for billions of dollars in bonds that now look worthless. Both those companies are on the OGX creditor committee. PBR) was broken in 1997, explorers armed with new technology have been finding vast pools of oil off the country's southeast coast. There's now a promise of even more on the northeast coast. Brazil needs U.S. technology to tap the oil. Wall Street wants to protect its investment, but doesn't trust the government. Enter Eike Batista. Batista founded OGX in 2007 to tap the oil. It quickly found a big pool about 50 miles off Rio de Janiero, an area called the Campos Basin. Other companies found more, and there was soon talk of Brazil joining OPEC. OGX' Waimea field was producing at a rate of 12,500 barrels per day early last year, with the promise of more to come.
They may not be. Batista is trying to move his natural-gas production into a company he partially controls, along with Germany's EON. Just before declaring bankruptcy, OGX sold its only producing field. All this is happening amid the backdrop of an inflationary spiral that is raising Brazilian interest rates and may cause economic collapse. Protests that rocked soccer's Confederations Cup this year could now turn violent as next year's World Cup is played out against the backdrop of national elections. Follow @DanaBlankenhorn This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.