Brazil May Ask U.S. Banks for Debt Leniency

Brazilian officials will meet with the country’s leading bank lenders Sept. 7 in New York in a bid to gain some leniency from creditors in advance of a big interest payment due next month, bankers said Tuesday.

But with no agreement with the International Monetary Fund imminent and Latin America’s most indebted nation vowing not to honor its debt liabilities until it can beef up its foreign exchange reserves, bankers hold little hope that September’s $2.3-billion payment can be salvaged. The money is owed on $68 billion in commercial bank debt.

Brazil’s total debt is about $112 billion, several billion dollars more than that of Mexico, the next largest borrower.

“The meeting next Thursday is expected to be informational,” said one banker who will attend. “There is no proposal that we know of that they (Brazil) have ready.” Other bankers said the meeting is likely to focus on Brazil’s options for resuming payment of the interest owed on its debts.

Delayed Payments

In July, citing concerns about a collapse of confidence in the economy, Brazil delayed payments to the Paris Club of Western creditor nations.

Bankers said Brazil insists that without new loans to bolster its foreign reserves, it will be hard-pressed to resume interest payments.

But there is only a slim chance at this time that banks would be willing to provide debt relief or new loans to a country that is not servicing its existing debt, one banker said.

While Brazil is in talks with the IMF, it is barred from drawing the remaining $450 million from this year’s $900-million standby loan until it has reached an economic understanding for the 1989-90 year, monetary sources said.

“Thus far they haven’t reached a plan,” one source said.

In Brasilia, Marcilio Marques Moreira, Brazil’s ambassador to Washington, said the country has a 50% chance of a provisional IMF accord within a month or so.

“There are a few differences over figures,” Marques Moreira told reporters Monday night. “But there is a 50% chance” of a deal, he said.

A deadlock in talks with the IMF has blocked about $3 billion in loans: $800 million from the fund itself and the rest from Japan, the World Bank and commercial creditors.