Brazil Seeking Bridge Loan to Pay Foreign Debt Interest

Brazil will pay the back interest due on its huge foreign debt if it gets a $500-million short-term “bridge loan” from foreign government treasuries, the finance ministry said Monday.

Finance Minister Mailson da Nobrega is in Europe negotiating the loan with Western official creditors, and an announcement was expected by week’s end, ministry spokesman Geraldo Moura told the Associated Press.

If Brazil gets the loan, the government will use its hard-currency reserves to complete the interest due for June and July, Moura said. He said the total due was “about $1 billion.”

Brazil’s foreign debt is put at $121 billion, the largest in the developing world.

The financial press here said the payments could include August interest and total $1.8 billion, but Moura said talks only involved arrears for June and July.

Nobrega, in a speech to the Brazilian Chamber of Commerce in London, said Brazil was close to lining up a $500-million short-term loan from the Bank of International Settlements to tide the nation over until an International Monetary Fund loan is made later this year.

Nobrega left London late Monday for Paris, where he was to meet with French bankers before journeying to Rome and Frankfurt.

“There is no use denying the difficulties the Brazilian economy is facing now,” Nobrega said in his speech.

“But I can assure you the government is trying to correct the imbalances of the economy and to normalize the relations with Brazilian creditors.”

Brazil’s currency reserves are a closely guarded secret.

In March they were calculated at some $3.9 billion but are believed to be higher now, bolstered by healthy trade surpluses averaging more than $1.8 billion a month.

Brazil has not fully paid all the interest it owes for 1987.

Those arrears are dealt with in a $62-billion rescheduling package that Nobrega is touring world financial centers to promote.

In June, Brazil reached an agreement with private foreign creditors for $5.2 billion in loans this year and in 1989.

The government is to pay back the money in 12 years, with a five-year grace period.

Brazil also agreed to repay $1.7 billion of the principal, or actual amount owed, in three installments between 1991 and 1993.

About $70 billion of the total debt is owed to hundreds of foreign private banks.

In early 1987, Brazil stopped paying interest on that part of the debt, but lifted the moratorium at the end of the year.