Brazil told bankers and international financiers meeting in New York this week that it has reached informal agreement with the International Monetary Fund that should clear the way for a renewal of lending to the nation, senior bankers said yesterday.
The cash-short nation has been blocked from borrowing from banks and the IMF since late May, when the IMF said Brazil was not living up to its commitments on economic policy. Sources say the Latin American nation is now desperately short of cash and in arrears of close to $2 billion.
This week's meetings centered on the outlines of a Phase Two financial rescue package for Brazil, which will involve new commercial bank loans, a resumption of lending by the IMF, a stretch-out of loans from other governments to Brazil, and increased government-to-government finance in the form of export credits, bankers said. Central bankers from the United States, Britain, Germany and Japan, were reported to have attended the New York meetings, along with Brazilian central bank governor Carlos Langoni.
"For the first time in two months, there is a genuine feeling that work can proceed" on a financial package that will take Brazil through to the end of 1984, one banker said yesterday. He described the atmosphere at the meetings as "very encouraging."
Brazil has painstakingly negotiated a new agreement with the IMF that involves substantial real wage cuts and further cuts in public spending and borrowing this year and next.
However, banks have been waiting for IMF managing director Jacques de Larosiere to give his approval to the package before they get down to negotiating with Brazil.
Formal IMF approval of the package will likely not come until a board meeting in later October, monetary sources say. But bankers now hope for de Larosiere's agreement in the next two weeks, sources said yesterday.
The first Brazilian rescue package that was put together by late February this year fell apart only a few weeks later as regional banks failed to come up with all the money that they had promised, and Brazil did not carry out the painful economic measures that the IMF wanted.
The second phase of debt negotiations will involve both commercial and official finance for Brazil with very close cooperation between banks, international agencies and governments, one banker said.
The U.S. Export-Import Bank has already said that it plans to guarantee up to $1.5 billion of export credits for Brazil as part of a multinational fundraising effort among governments.
From the banks, Brazil is asking for a sizable amount of new money--reported yesterday at $6 billion to $6.5 billion, although earlier estimates put it higher--for both 1983 and 1984; the stretch-out of debt repayments due before the end of 1984; conversion of short-term trade finance into 360-day commmitments; and the conversion of very short-term money market credit lines of $6 billion into 360-day commitments, one banker said.
The last category--called Project 4 in the first phase of the Brazilian negotiations--has caused the most problems in the last six months, as smaller regional banks in the United States and elsewhere drew down the money market lines that they had out to Brazilian banks and drained out cash that the nation was relying on to meet interest payments and pay for imports. The amount in Project 4 has been stable at about $6 billion for some months now, and this week is $6.1 billion, Bankers Trust said yesterday.
Langoni told the bankers in New York that Brazil had reached agreement on a stretch-out of its official debt, owed to other governments, that would save the nation $600 million this year and $1 billion next year. One banker said that Brazil wanted to put off 90 percent of the interest and principal payments due to governments through the end of 1984.
The nation earlier had announced that it was going to ask for a rescheduling of its official debts through the "Paris Club," a group that meets in Paris to negotiate stretch-outs of government loans to indebted nations. Brazil has stopped making payments on these official debts since about the beginning of this month, a Washington source said.