Brazil Wants Refinancing Plan on Debt

Brazil will resume payments on its massive foreign debt only after creditor banks agree to refinance interest, the finance minister said in an interview published Sunday.

“I only intend to end the moratorium when I refinance the $7.3 billion in interest due in 1987 and 1988 and cut spreads from 1.125 percent to zero,” Finance Minister Luiz Carlos Bresser Pereira told the Estado de Sao Paulo newspaper.

The spread is the difference between the going interest rate and the amount above that Brazil must pay as a high-risk debtor. Creditor banks recently cut Mexico’s spread to 0.8 percent as part of a debt refinancing package, and Brazil hopes for similar treatment.

The finance minister said Brazil would pay private creditors nothing this year but next year would pay “40 or 50% of interest due, or about $2 billion.”

On Feb. 20, President Jose Sarney canceled interest payments on $68 billion the nation owes foreign private banks, saying the country was broke. Hard currency reserves had fallen by about $5 billion to $3.9 billion and the monthly trade surplus dropped from about $1 billion to $200 million.

On July 1, Brazil said it also would suspend payments of principal on $1.05 billion owed to foreign government banks.

Brazil’s total foreign debt is $111 billion, the highest among developing nations.

Creditors have said they won’t negotiate with Brazil as long as the suspension lasts or until the country signs an agreement with the International Monetary Fund.