Refinancing of Brazilian Debt Stalled by IMF

Finance Minister Ernane Galveas of Brazil said Friday that problems with the International Monetary Fund over Brazil’s inflation make it impossible to complete refinancing of $45 billion in debt with international banks before the present Brazilian government ends its term March 15.

“Final agreement with the banks and with the International Monetary Fund on a revised standby agreement will have to be signed by the incoming government of President-elect Tancredo Neves,” Galveas said.

Neves, a civilian, will take office March 15 after 21 years of military-backed regimes led by army generals. The outgoing regime leaves a legacy of inflation that raised prices 227% last year, along with a huge fiscal deficit for this year.

Galveas acknowledged that a 36% expansion of Brazil’s monetary supply in December had violated an agreement with the IMF on reducing inflation. He said Brazil is seeking a “waiver” of the agreement for the December violation in order to continue to receive access to IMF standby loans. He said limits on Brazil’s spending for the first quarter of this year will also have to be renegotiated with the IMF.

Until negotiations with the IMF are completed, an agreement with the international creditor banks cannot be put into effect. Galveas said this process will require so much time that it will fall to the new administration to complete agreements.

Before coming here for a meeting of 11 Latin American debtor nations, Galveas was in New York, where negotiations on refinancing almost half of Brazil’s foreign debt of $100 billion have been under way since November with a steering committee of 12 major banks.