U.S. working on credit facility for Latam--bankers
Reuters, Wednesday, October 21, 1998 at 01:17
By Apu Sikri
NEW YORK, Oct 20 (Reuters) - The United States is working
with other Group of Seven countries to provide Latin American
countries with between $100 billion and $200 billion in a
backup line of credit that will have some commercial bank
participation, according to senior bank officials in New York.
Bankers said Treasury officials have approached them to
participate in the credit facility which would be led primarily
by the United States and its G-7 partners.
Bank officials, who requested anonymity, said participation
in the credit line by commercial banks would probably be
limited to between $10 billion and $15 billion.
A U.S. Treasury spokeswoman categorically denied that
Treasury was approaching banks to participate in a contingency
fund for Latin America. But bankers in New York said
discussions among senior government officials have continued,
and some banks have been approached for their input.
The credit facility would be a back-up line of credit that
Brazil and other Latin American countries could draw upon in
the event they run out of multilateral funds, bankers said.
Bank officials in New York said details of a credit
facility by the U.S. and others would likely be announced as
part of a broader agreement with multilateral lending agencies,
including the IMF.
Talk of a mammoth credit facility from the Western powers
emerged more than a month ago in the days and weeks after
Russia defaulted on its domestic debt, triggering a financial
crisis. The rumors were discounted by government officials in
most capitals, including Washington, London and Frankfurt.
The U.S. participation would be in the form of a Treasury
swap line, which does not require approval from the U.S.
Congress, bankers said. A similar credit facility was extended
to Mexico after the peso plunged against the dollar beginning
in December, 1994.
On Tuesday, Brazil announced a few details of a fiscal
package under the guidelines of the International Monetary
Fund. The IMF and the Brazil Ministry of Finance said in a
joint statement that Brazil would follow a three-year fiscal
program generating primary surpluses of 2.6 percent of GDP in
1999, 2.8 percent in 2000 and 3.0 percent in 2001.
Brazil experienced a financial crisis after Russia
defaulted on its domestic borrowings in August, killing
investor appetite for the debt of emerging market countries. As
investors backed away from Brazil, they withdrew their dollar
holdings, and taking $20 billion out of Brazil's foreign
exchange reserves.
The government of President Henrique Fernando Cardoso, in
the runup to elections, refrained from making any clear
statements about borrowings from the IMF.
Copyright 1998, Reuters News Service |
