Brazil wants to resume interest paymentson its medium- and long-term foreign debt as soon as possible
and is willing to discuss ways of softening the impact of the
payments suspension on bank earnings, central bank governor
Francisco Gros said.
    Gros, speaking to reporters yesterday after his first
meeting with Brazil's bank advisory committee since he was
appointed last month, also promised a clear statement of
Brazil's economic policy would be made in the next few days.
    But bankers who attended the meeting with Gros said it was
inconclusive.
    The bankers also expressed disappointment Gros could not
give assurances as to when interest payments on the 68 billion
dlrs of medium- and long-term debt would restart.
    "It was all very tentative. You can't expect to get very far
at the first meeting," one banker said.
    The meeting took place on the eve of the annual meeting
here of the Inter-American Development Bank.
    The most urgent item on yesterday's agenda was the need for
a legal rollover of some 16 billion dlrs in trade and interbank
credit lines extended to Brazilian banks which expire at the
end of March.
    Brazil has already frozen the lines to ensure it has enough
credit to finance its day-to-day trade and commerce, but needs
to request a formal extension of the commitments to head off
possible lawsuits from disgruntled creditors.
    The issue is whether the 14-bank steering committee will
endorse Brazil's request to the 700 creditor banks worldwide or
simply relay it without comment.
    This delicate question was not resolved at yesterday's
meeting, but lawyers from both sides will try to draft suitable
language for a telex by midweek, Gros and the bankers said.
    Gros said he will also formally ask the banks for a 90-day
rollover of some 9.6 billion dlrs of debt which originally
matured in 1986 and is now due to be repaid on April 15.
Bankers said the request is a legal nicety since the money is
subject to the moratorium.
    Once interest on Brazil's debts becomes more than 90 days
overdue, U.S. And Canadian banks must put the loans on
non-performing basis and may book payments only as and when
they are received instead of accruing the interest in advance.
    Citicorp has estimated its profits for the first quarter
would be cut by 50 mln dlrs if it put Brazil on a cash basis.
Other U.S. Banks have also warned of earnings setbacks.
    Gros said he wished the 90-day rule was more flexible and
said he would be willing to sit down with the banks to see if
there was a way round the problem.
    He did not elaborate. But, asked whether a bridge loan
might be arranged to pay the interest, he said, "It could
happen."
    Bankers said this possibility had not been raised at the
committee meeting and dismissed it as inconsistent with
Brazil's determination to find a long-term solution to the
problem of servicing its 110 billion dlr foreign debt.
    Gros himself said pushing the problem away for 90 days at a
time is not very useful. Only if Brazil has access to new loans
can it grow, export and pay its debts over the longer term.
    "If the flow of funds dries up, a country like Brazil can't
meet all its obligations," he said.
    Gros defended Brazil's recent economic record, noting
inflation slowed in February, the trade surplus rose and the
public sector budget was in operational surplus.
    But he said there was a need to spell out government
policy, especially on prices.
    "It's necessary to clarify policy for internal and external
reasons," he said, but declined to say what economic measures
might be introduced.
    Once policy is in place, Gros said financing talks with the
banks are likely to be tough and protracted, a sentiment echoed
by the country's creditors.
 REUTER
