Banks Warn Brazil About Delaying Interest Payments

From Reuters

Creditor banks have warned Brazil that they would not take kindly to any proposal to delay 1988 interest payments until a medium-term financing package is reached, bankers said Wednesday.

Brazil, which has a foreign debt totaling $113 billion, resumed talks on a medium-term deal with its bank advisory committee here on Tuesday after a three-week break. The start of negotiations was not auspicious, bankers said.

The meetings began 1 1/2 hours late, and when central bank President Fernando Milliet did arrive, he spoke for 40 minutes and then said he would take questions for only 10 minutes because he had another appointment, bankers said.

"Milliet received a stern message. The committee feels that, if the mood is to improve, it would be a lot better if non-payment of interest was not used as a leverage point. The disposition of the committee would be a lot better," said one banker.

Banks Not Paid

Although Brazil has resumed 1987 interest payments under an interim deal agreed last November, it has not paid banks any 1988 interest on medium- and long-term loans.

The interim agreement envisioned that Brazil would keep current on interest payments from Jan. 1, 1988, banks say.

Banking sources said U.S. banks have begun quietly pointing out that Brazilian loans may be downgraded by American regulators if this situation persists.

"The trigger has already been cocked. It only needs to be pulled," said one U.S. banker.

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