Brazil, Foreign Banks OK Loan Rescheduling Plan

Brazilian officials have concluded negotiations with foreign bank lenders on a massive $62-billion rescheduling agreement, Finance Minister Mailson Nobrega said Tuesday.

“It is the best debt agreement ever negotiated by Brazil or by any other country in the Third World,” Nobrega told reporters.

Aside from rescheduling most of Brazil’s $76-billion commercial debt, the accord will provide the country with $5.2 billion in fresh loans.

Brazil, whose $121-billion foreign debt is the largest in the Third World, became a pariah of sorts after it suspended most interest-rate payments to banks in February, 1987.

Nobrega said Brazil would be paying interest at a rate of 0.81% over the floating London Interbank Offered Rate, half the interest rate spread over the rate Brazil was scheduled to pay in its last agreement with the banks.

Political analysts said the accord with the banks should be a boon for Nobrega, whose stringent economic policies have come under serious attack at home.

In an effort to win the confidence of foreign creditors, Nobrega is trying to limit Brazil’s public spending deficit this year to 4% of gross domestic product. His austerity program is unpopular, and a two-month pay freeze he imposed on federal workers in April was ruled unconstitutional by the Higher Labor Court on Monday.

Further details of the accord will be released simultaneously today by the Brazilian government and the advisory banks committee.