"We owe so much that we can't afford not to borrow more." That is the paradoxical explanation offered by one Brazilian banker here for Brazil's mounting foreign debt, which is emerging as an increasingly important factor in economic relations between the United States and Brazil.
With over $31 billion in loans and credits now outstanding, one third of them with U.S. private banks, Brazil has the largest foreign debt of any devloping country. Its international liabilities have more than doubled in the four years since the onset of the energy crisis and are continuing to rise. By 1979, just servicing its debt will cost Brazil $8 billion.
This growing indebtedness was termed "an area of stress" in U.S.-Brazilian relations by a House Banking and Finance Committee delegation that met with Brazilian Finance Minister Mario Henrique Simonsen in Brasilia earlier this month. It has also been cited as one of the reasons behind a recent suggestion by the comptroller of the Currency that restrictions be placed on American private bank lending overseas.
But to Brazilian bankers and government officials, the size of their country's debt is less worrissome than the possibility that the U.S. may actually act to limit lending abroad. These economic specialists argue that any such action would hamper their long-term strategy aimed at turning Brazil into a major industrial power and liquidating its debts by the middle of the next decade.
The Brazilian foreign debt began its rapid upward spiral in 1974, when the Brazilian government adopted a "borrow now, pay later" strategy to keep its booming economy from losing momentum during the worldwide recession brought on by the energy crisis. Brazilian economic planners calculated then that the debts incurred could be paid off by increased exports and an import substitution program once the recession lifted.
As a result of this policy, Brazil now owes an estimated $2.5 billion just to Citibank serving as that organization's largest single overseas sourves of revenue. In addition, Brazil owes $1.7 billion to the Export-Import Bank, and is the largest single borrower from international lending institutions such as the World Bank and the Interamerican Development Bank.
But so far, the scenario the Brazilians hoped for seems to be developing as anticipated. Brazil's gross national product has been growing by an average of about 6.5 percent a year since 1974, reaching the $140 billion-mark last year. While imports have been held steady at about $12 billion annually for the last four years, exports have doubled, topping $12 billion in 1977.
Brazil thus has closed the deficit in its balance of trade, and actually registered a $139 million surplus last year - due in large part to record earnings of more than $2.6 billion from coffee. In addition, Finance Minister Simonsen last week announced that Brazil's international monetary reserves are at an all-time high of $7.2 billion.
For most of Brazil's creditors, these figures more than offset whatever concerns they may have about the extent of Brazil's foreign debt. "It's not the size of the foreign debt that counts, but the way it's managed," says an American banker here, "and the Brazilians are doing a damn good job of it."
Brazil's economic performance also won high marks from U.S. Assistant Secretary of Treasury for International Affairs Fred C. Bergsten during a visit here in December. Bergsten praised the Brazilians for the "skillful management" of their foreign debt. He pointed out that "Brazil has actually reduced the payments deficit in its current account" since absorbing the initial shock of higher oil prices.
Brazil's current account payments deficit, which measures both trade and services, has failen from $7.4 billion in 1974 to just under $3.9 billion. In addition, Brazil's overall deficit figure includes the estimated 5 billion that U.S. and European companies have pumped into their subidiaries here.
Bergsten also indicated that he saw "no major problems" with the current level of U.S. private bank lending to Brazil. But he cautioned that Brazilian authorities must continue to "maintain a very close watch" on their country's foreign debt and balance of trade situations.
Brazilian officials say that they will continue to need large infusions, of fresh capital if the Brazilian economy is to continue to grow at its current rate. They thus forsee more, rather than less, indebtedness for the next three of four years, as the principal and interest on old loans is paid off and new development projects are undertaken.
In what it seen here as an attempt to head off American nervousness over Brazil's indebtedness, Planning Minister Joao Paulo dos Reis Velloso announced last week that he will visit the U.S. in February. His "specific purpose," he said, "is not to obtain loans, but merely to show U.S. bankers the Brazilian economic situation" and acquaint them with the "remunerative results" Brazilian policies have achieved.
Brazil now is also moving to distribute its obligations more evenly by negotiating more long-term loans. Instead of acquiring five-year loans, as it did back in 1974 and 1975, the Brazilian central bank now prefers loans with limits of eight to ten years.
For these funds Brazil pays what is said to be the highest interest "spread" in the world - up to 2.25 percent over the basic London rate. But by staggering its debts, Brazil hopes to avoid the "bunching" problem encountered by Peru, Zaire, and other borrowers who have apparently overextended themselves in the international money market.