Jacques de Larosiere, the managing director of the International Monetary Fund, told chairmen of the world's biggest banks yesterday that they will have to lend debt-laden Brazil another $6.5 billion between now and the end of 1984 to keep that country solvent.
All told, de Larosiere said, the developing world's biggest debtor will need $9 billion in additional financial assistance by the end of 1984. A spokesman for the IMF said after the three-and-a-half hour meeting in de Larosiere's office that governments have agreed to grant the additional $2.5 billion as import credits.
Industrial countries, working through an informal arrangement called the Paris Club, also will postpone repayment of $2 billion in official loans they have made to Brazil that come due this year and next.
Top bankers at the meeting included Walter Wriston, chairman of Citibank, Willard Butcher, chairman of Chase Manhattan, and John McGillicuddy, chairman of Manufacturers Hanover Trust. Federal Reserve Board Chairman Paul A. Volcker also attended. None would comment after the session.
But William Rhodes, the Citibank official who heads the bank committee that negotiates with Brazil, said in a statement following the meeting that the 14 banks from the United States, Canada, Western Europe and Japan that make up the committee have agreed to recommend to Brazil's several hundred lenders that they agree to provide collectively the $6.5 billion de Larosiere wants.
But sources close to the meeting said the bankers are not happy with de Larosiere's plan and would prefer to lend Brazil no more than $5 billion or $6 billion. The banks agreed to lend $4 billion in new money to Brazil earlier this year, while the IMF agreed to lend $3.7 billion over three years.
As part of the agreement, Brazil promised to take steps to cut its federal spending and bring down inflation, but fell off course within weeks of signing the loan documents. As a result, both the banks and the IMF stopped lending.
The IMF and Brazil reached a new agreement last week, but IMF money cannot begin flowing to Brazil until the multinational agency's board of directors ratifies the agreement in late November--by which time Brazil should have taken all the steps required by the fund. Banking sources said it is not clear whether commercial banks will start lending before November. Most of the money Brazil will receive will be paid right back to the banks as interest.
Because Brazil is strapped for cash, it is in arrears by $2.5 billion in interest payments (it is not paying principal). Banks are worried that they may soon have to start putting Brazilian loans on "problem" lists and that the continuing deficit in interest payments may hurt bank earnings.
Sources said that de Larosiere told the bankers that Brazil needs $12.9 billion this year, but can come up with only $9.2 billion--including the first $4 billion bank loan, the IMF money and the Paris Club refinancing. Next year it needs $12.4 billion, but can count on $7.2 billion.