New Debt Suspension Was Feared : Banks Reassured as Brazil Pays Some Back Interest

Brazil paid commercial banks about $530 million in overdue interest Wednesday, reassuring some bankers who had feared that a new debt suspension might be in the offing.

William Rhodes of Citicorp, chairman of the bank advisory committee for Brazil, said the quarterly interest payment on previously restructured debt was originally due Jan. 17. The advisory committee comprises bank officials who oversee the repayment of Brazil’s commercial bank debt.

Brazil, the Third World’s biggest debtor, said last week that a computer problem had delayed the disbursement. But some bankers had feared that the Brazilian government, faced with public discord over its new anti-inflation plan, would find it difficult to justify the payment just as it is proposing to cut thousands of state jobs.

Their fears were aggravated by statements last week from Brazilian Finance Minister Mailson Nobrega that the government would consider a new suspension of interest payments if its international reserves slipped below an unspecified level.

Look for Progress

Bankers said Wednesday that the latest payment was mildly encouraging but they said the crucial test now was whether the government of Brazilian President Jose Sarney would win the support of Congress for his plan to fight inflation.

“We’re pleased to get the payment. But what we really want to see is what the Brazilian Congress does with the Summer Plan,” said one U.S. banker.

The government’s Summer Plan, announced Jan. 15, includes a pledge to spend no more money than it earns in taxes, an indefinite freeze on prices and a 17% devaluation of its currency, the cruzado. So far, public controversy has focused on a proposal to slash about 60,000 public-sector jobs.

Talks Held

Brazil, which announced a moratorium on foreign bank debt payments in February, 1987, restructured some $82 million in debt last year. The nation paid about $14 billion in 1988 to service its $115-billion debt but has said that continuing its status as a net exporter of capital is untenable.

A senior Brazilian official in Washington said recently that Brazil was trying to line up a source of external financing in the event that its reserves are depleted by the new economic program. The official has held talks with the Treasury Department and the Federal Reserve.

Brazil is still unable to get access to $1.2 billion from a 1988 commercial bank package and funds from Japan because of disagreement over a $500-million World Bank loan.

Meanwhile, bankers said that interest payments like the one made Wednesday, which is related to a deposit facility, will be re-timed to fall twice yearly rather than quarterly. The next payment will be due in July, they said.