Brazil Puts Off Payment of $1.05 Billion to Paris Club

Brazil, whose $111-billion foreign debt is the biggest of any developing country, said Wednesday that it suspended repayment of $1.05 billion of principal due this year to the Paris Club group of official creditors.

A Finance Ministry spokesman said the move was taken to “defend the country’s international reserves and does not represent an aggressive attitude toward our official creditors.”

The spokesman said interest on loans from the Paris Club, a group of Western creditor nations, would be paid normally.

Neither bankers nor official sources in Europe said they were surprised by the move, although official notices still have not been received by the Paris Club or its members.

Bankers in London said that under an agreement reached with the Paris Club in January, payments due this year were temporarily rolled over until June 30. Any further rollover was to be contingent on a satisfactory review of the country’s economy under the International Monetary Fund’s periodic consultations.

“Brazil’s move only suggests that the report will not be satisfactory, and so they did what would be expected,” one senior banker said.

One British official, who requested anonymity, said that Brazil had been expected to begin resuming principal payments as of Wednesday.

“What the news suggests is that they intend to continue with things as they were,” he said.

The Paris Club loans are distinct from the $68 billion Brazil owes foreign commercial creditor banks. Interest payments on those loans were suspended Feb. 20 after the country’s trade surplus dipped sharply.

The suspension of principal repayment involves debt with official Paris Club government lending agencies which finance imports and exports. The move does not involve Brazil’s obligations to intergovernmental agencies such as the World Bank or International Monetary Fund, the spokesman said.

Officials in London said it is likely that the move will be discussed at the next meeting of the Paris Club on July 20, although so far it is not formally on the agenda.

Brazil’s debt with the Paris Club totaled $5.44 billion on June 30, 1986, Central Bank figures show. The $1.05-billion suspended payment represents a portion of the debt due in the first and second halves of 1987.

The Brazilian government plans to resume negotiations on its total commercial and government-owed foreign debt with overseas officials and private creditors later this month.

Finance Minister Luiz Carlos Bresser Pereira told the Brazilian Chamber of Deputies Tuesday that government-owned export/import banks had not honored an agreement made in January to renew credit flows to Brazil.