Brazil's central bank governor, Carlos Langoni, will come to Washington next week to ask the International Monetary Fund for more time to meet some of the economic conditions laid down in the IMF aid program arranged just over two months ago, sources said yesterday.
Brazil is still suffering an acute cash crisis, as commercial banks have failed to come up with all the money that they promised as part of a financial rescue package orchestrated by the IMF. The nation--which has more than $80 billion of foreign debts--has already fallen behind on about $800 million of payments and is likely to build up even larger arrears in coming weeks, sources said.
Its major creditors met in New York yesterday in an attempt to come up with a more "leak-proof" system of providing cash to Brazil, another source said. The nation's liquidity problem has arisen because smaller banks in the United States and elsewhere have failed to lend all the money that was originally promised in the two categories of trade credits and loans to overseas branches of Brazilian banks.
Also, some experts believe that Brazil did not originally ask for enough money to make it comfortably through this year. Some bankers believe Brazil will be forced to ask for a new medium-term loan to cover a financing gap this year of between $2 billion to $4 billion. Brazilian officials have denied this, however.
Bankers are extremely nervous about lending more to the troubled nation, and are worried at the still precarious position of many other Latin American borrowers, including Chile and Venezuela.
Langoni is expected to ask the IMF to allow Brazil to exceed the tight ceilings on public spending and borrowing for the early part of this year, while leaving the annual totals unchanged, a foreign observer in Brazil said. The government has failed to cut the borrowings of Brazil's large state enterprises in line with the original IMF targets, sources say. This has pushed public sector borrowing above the path agreed upon with the fund.
Brazil is due to make the next drawing on its IMF loan at the end of this month. Since it is unlikely to be back in compliance with the IMF targets by then, sources said, it would need special dispensation to get the much-needed money.
Formal approval from the IMF board would be needed for any such modification of the terms of the credit, an international financier said. The key to this approval is likely to be whether the nation can show that it is moving toward compliance and making some progress in cutting the deficit and boosting its trade position.
Brazil has so far been more sucessful than was widely expected in meeting its targets for trade. It is aiming for a $6 billion trade surplus this year and, after dismal performance in January and February, did much better in March and April.
However, the improvement has not yet translated into increased confidence among bankers, and some bankers are skeptical that it will.