Brazilians clamor for 'moratorium' on paying off huge debt

How do you cope with a whopping $90 billion foreign debt? The question gnaws at Brazil - and its creditors. Many creditors think Brazil will have to go further into debt simply to pay off interest on the debt.

Moreover, Brazil, whose debt is larger than any country in the developing world, is already $2 billion behind in payments this year.

Just this week, it temporarily suspended some payments on $8 billion of debt to 14 Western creditors. International lenders, including United States bankers, are beginning to lose confidence in Brazil's ability to bail itself out.

The International Monetary Fund (IMF), however, tentatively approved a loan and credit agreement this month that will permit Brazil to bridge over its debt crunch at least to the end of the year.

The IMF stamp of approval, giving Brazil the opportunity to seek additional loans and to help stimulate its economy, is significant, as was a US Export-Import Bank $2 billion loan guarantee to Brazil.

But there are doubts in international lending circles that these steps will be enough to lift Brazil out of its dilemma.

The issue prompts an increasing number of Brazilians to wonder whether a moratorium on debt repayment might be the best solution.

A moratorium would prevent Brazil from going into default on some of the loans, but it could cast Brazil something of a pariah in lending circles. After all, banks survive on interest payments. Already many US banks are worried that they could be in serious trouble if Brazil were to default or to declare a moratorium.

Yet the moratorium concept is winning support among Brazilians from virtually every political faction in the country - from Marxists to conservative businessmen. It also appears to have the support of Vice-President Aureliano Chavez, whose political role has become increasingly important as he fills in for ailing President Joao Baptista de Oliveira Figueiredo.

But General Figueiredo is scheduled to return to office at the end of the month - and he opposes a moratorium. So also do his top financial advisers, Planning Minister Antonio Delfim Netto and Treasury Minister Ernane Galveas.

As Brazil enters its fourth year of recession, however, both Mr. Delfim and Mr. Galveas are under increasing public attack for failing to solve Brazil's economic troubles. Many Brazilians tend to support just about anything they oppose. Underlying this carping is a national preoccupation with the debt issue. It is on everyone's tongue, and it is the major issue in Brazilian newspapers.

Much of the story has centered on Brazil's efforts to negotiate the IMF loan. These talks have been long and difficult. But the tentative agreement, approved this month, is not likely to win full IMF approval before mid-October. Brazil may have a tough time getting through until then.

Moreover, to get the IMF bailout, Brazil has agreed to cut public spending by several billion dollars, to limit wage increases under the ''indexing'' system to only 80 percent of the cost of living, and to begin an all-out effort to reduce inflation by 5 percent a month. The inflation rate now is about 11 percent a month.

In the final analysis, however, Brazil probably is a good credit risk. Its economy is essentially vibrant, despite the debt, and its potential is regarded as even stronger. It is in a rapid industrialization and has a limited, but real social mobility. The debt is widely viewed as a short-run problem. Many, however , wonder just how short-run.

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