Alan Riding, “Brazil Debt Agreement is Reached”. The New York Times, February 29, 1988.

Summary by Alison Cozby

Main Point: Brazil has agreed to end its moratorium, returning to orthodox debt management, with a temporary agreement between officials and creditors.

Summary:

After two months of negotiation Brazilian officials and a 14-back advisory committee came up with a provisional agreement that would provide Brazil $5.8 billion to cover interest payments due in 1987, 1988 and part of 1989. Brazil agreed to make an interest payment of $700 million, which brings it to date with interest payments on its $70 billion debt to commercial creditors. Brazil’s total foreign debt is the largest in the world at $113 billion.

Normalization Stressed

Brazil’s new Finance Minister, Nobrega, has stressed it eagerness to normalize relations with the international financial community. Brazil insists that its agreement with its creditors is not linked to any accord with the I.M.F., but that an agreement might be completed by the time a medium-term commercial package is made final.

‘Early Participation Fee’

Brazilian official had hoped to pay a better interest rate than that of Mexico and Argentina, but agreed to pay the same spread of 13-16ths of 1 percent. At the same time, Brazil has agreed to an ‘early participation fee’ of up to 3/8^th of 1 percent as an encouragement to join the new package.

The agreement is seen as significant because the west’s eighth-largest economy returns to orthodox debt management. Brazilian official said that they were hoping an end to the moratorium would help them gain access to other foreign credits from the I.M.F, the World Bank, and also from the foreign governments belonging to the so-called Paris Club.