Earmarked for Interest Payments : Banks Lend Brazil Another $3 Billion

About 100 international banks committed themselves Tuesday to lend Brazil $3 billion one day after America’s 13th-biggest bank acknowledged that the money it has already provided to developing nations will likely not be repaid.

The $3 billion in private money, plus $1.5 billion from Brazil’s central bank, is to be added to the estimated $116 billion that Brazil already owes foreigners.

Fernao Bracher, Brazil’s chief debt negotiator, and William Rhodes, head of the committee of banks negotiating the agreement, signed the deal. The first third of the $4.5 billion should be be disbursed by Dec. 31, the two said.

The rest of the money--$2 billion from the banks and $1 billion from Brazil--will be disbursed sometime next year in accord with an expected agreement covering interest payments through 1989.

A member of the committee said about 100 banks had agreed to join in the lending, and Rhodes said more banks “expressed willingness to join the package.” Among the banks that negotiated the deal were Citibank, Bank of America, Bankers Trust Co., Bank of Montreal, Bank of Tokyo, Chase Manhattan Bank, Morgan Guaranty Trust Co., Credit Lyonnais and Deutsche Bank.

Billions Set Aside

The money will be used exclusively to pay interest on back debt. Brazil has not paid a cent of interest due to commercial banks on medium- and long-term borrowings since Feb. 20, demanding better loan terms in exchange for a resumption of payments.

The South American giant’s moratorium forced creditors around the world to set aside billions of dollars in case the $70 billion in medium- and long-term loans to Brazil are not repaid.

On Monday, the Bank of Boston announced it was writing off $200 million of its $1 billion in loans to developing nations. The bank also put the other $800 million of its loans on non-accrual status. Technically, that means it no longer is counting on interest from the loans, but analysts read it as a sign that the bank had given up hope it will even get back the principal.

The bank’s Third World loans include $260 million to Brazil, $230 million to Mexico and $180 million to Argentina. The private banks lending new money to Brazil are doing it largely because that country’s economy is tottering. Without new loans, Brazilians and private bankers argue, the nation cannot get on a sound enough financial footing to be able to repay old loans.

“The last thing they want to do is have those banks default on those debts,” said Elliott Morss, an economist at Boston University.