Brazil, Bank Panel Agree on Debt Plan

Brazil, Latin America’s biggest debtor, reached agreement with a crucial commercial bank committee Sunday on a $31-billion refinancing package that significantly lowers the level of interest rates it must pay.

The agreement follows Brazil’s announcement Friday of a far-reaching program designed to reduce inflation, which in recent months reached a rate of 400% a year. It also comes amid growing demands by Latin American governments for interest-rate concessions to enable them to meet payments on the region’s $370-billion debt.

The agreement refinances $6 billion in debt that matured in 1985 and $9.5 billion that matures in 1986 and provides about $15.5 billion of trade and other financing. The bankers agreed to lower the interest rate on the $15.5 billion of maturing debt by nearly 1 percentage point, which will save Brazil about $150 million a year, officials said.

Brazil, which had pressed its creditors to lower their interest-rate spreads, or markups, during the monthlong negotiations, was given the more favorable financing terms by the 14-bank advisory committee as a reward for managing its finances better, the committee said.

The agreement with Brazil was seen by bankers Sunday as an endorsement of the way the creditors are handling the debt problem.

The agreement announced Sunday reflects “significant progress by Brazil over the past few years on its external financing accounts,” said William R. Rhodes of Citibank, the committee chairman.

The proposal will go to the 700 international creditor banks involved with Brazil’s debt for their approval. An agreement is expected to be signed by June, Rhodes said.

Brazil owes commercial banks about $66 billion of its $102 billion in total foreign debt.