FOCUS-Brazil will honor debts,finmin tells bankers
Reuters, Wednesday, January 20, 1999 at 12:35
By Apu Sikri
NEW YORK, Jan 20 (Reuters) - Brazil will honor all loan
obligations and do its best to contain a domestic financial
crisis that has threatened global financial stability, Finance
Minister Pedro Malan told a dozen top bankers on Wednesday.
"We are not going to have any domestic debt restructuring,"
Malan told reporters after meeting with U.S. banking leaders at
the Federal Reserve Bank of New York.
Brazil owes international banks about $70 billion in
short-term debt, according to bankers, and another $300 billion
to domestic financial institutions. Economists have questioned
the Latin American giant's ability to meet its obligations.
Malan on Wednesday assured bankers -- including Goldman
Sachs co-chairman Jon Corzine, Merrill Lynch chief executive
David Komansky and financier George Soros -- that Brazil will
not intervene in the currency markets to defend its currency,
the real.
Malan called the meeting "constructive." Brazil hopes to
win back investor confidence after a decision last Friday to
float the real -- a move that will help the country preserve
precious foreign exchange reserves.
"It is up to the markets to decide what is the appropriate
exchange rate. We do not have intervention points, virtual
bands, notional bands. And we do not have a hidden agenda,"
Malan told reporters after the meeting.
Brazil has also ruled out adoption of a currency board --
which would link the value of the real to the dollar and take
away most decision-making from the central bank, Malan said.
"We have decided on a floating exchange rate regime and
this is the regime we are going to have," Malan said. "This is
not a criticism of any country that adopts the currency board
scheme."
Brazil's neighbor Argentina has implemented a currency
board deemed successful by most economists.
The real has lost more than a quarter of its value against
the dollar since last week's devaluation and subsequent
abandoning of exchange rate bands.
Bankers have privately asserted that Brazil needs the
support of private lenders to avoid a debt default of the sort
that trapped Russia last year and set off panic in financial
markets.
Official lenders led by the International Monetary Fund and
the United States arranged $41.5 billion in loans to Brazil
late last year to contain financial turmoil that threatened to
infect Latin America and other regions.
Malan was accompanied by Secretary of Economic Policy
Amaury Bier and International Affairs Secretary Marcos
Caramuru.
Copyright 1999, Reuters News Service
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