Brazil to Begin Repaying $8-Billion Interest Debt

Brazil said Monday that it had struck terms with commercial banks to pay $8 billion it owes in interest, ending a two-year standoff between the Third World’s biggest debtor and its commercial lenders.

Acting Economy Minister Joao Maia said Brazil will pay $2 billion this year in cash.

The rest will be paid through 10-year bonds.

Brazil suspended interest payments on its bank debt in July, 1989, saying it had to protect its international reserves. Monday’s pact formally ends the moratorium that Brazil imposed on interest payments for its commercial bank debt, which totals $70 billion.

In the first quarter of this year, Brazil resumed payments, paying 30% of what was due in the quarter.

Maia hailed the latest agreement as “a significant step toward the definitive solution of the problem of Brazil’s external debt.”

Brazil’s total external debt is $122 billion.

In the secondary market, where sovereign debt is traded, reports of the latest agreement pushed the value of Brazil’s debt to nearly 29 cents on the dollar.

Some loan traders in London predicted that the debt’s value could soon top 30 cents on the dollar, its highest value in more than a year. It hit a low of 18 cents last August.

The pact raised hopes that Brazil will strike a new deal for all its commercial debt. Brazil and the banks still have difficult talks ahead on terms for the $70-billion debt.