NEW YORK — Brazil and a group of negotiators from 14 of its leading creditor banks have approved what one banking source called a "rough outline" of a plan to defer as much as $14 billion in payments on its foreign debt for up to seven years.
The plan includes a renewal of $16 billion in short-term bank loans for the Latin American country, the largest debtor among Third World nations. The short-term loans had been due to expire last Friday.
The source said the agreement is designed to give Brazil more time to get its economic house in order before entering into a major multiyear debt restructuring.
Some Issues Undecided
Work on the latest agreement proceeded over the weekend in meetings here among representatives of 14 banks serving as an advisory committee, but negotiators left some major issues to be decided. The committee is responsible for negotiating on behalf of all banks that have outstanding loans to Brazil.
Sources close to the committee said one of the major issues remaining is the interest, or "spread," to be charged on the renewed loans. More meetings are set for next week in New York.
Once a tentative agreement is reached, its terms will be sent for approval to the roughly 700 banks that have outstanding loans to Brazil. Negotiators hope to have the terms established in time to send the agreement out by March 15.
The weekend's talks produced an outline calling for a seven-year deferral of $6 billion in principal payments that came due in 1985 and a deferral to 1987 of $8 billion in principal due this year. Brazil's total outstanding foreign debt is about $100 billion.
Like other debtor nations, Brazil is trying to balance the insistence of lenders that it bring down its high inflation rates through an austerity program against the need to avoid politically unpopular economic measures. Bankers hope the latest outline will give the Brazilian administration some breathing room to manage the economy without having to negotiate deferral of the 1985 and 1986 principal payments again next year.
Postponed Until 1987
So far, Brazil has refused to enter into an agreement with the International Monetary Fund on monitoring its economic program.
Upon his return from New York, Fernao Bracher, president of Brazil's central bank, announced in Rio de Janeiro the progress toward an agreement. Bracher said long-term refinancing of the Brazilian debt would be postponed under the agreement until 1987, after parliamentary elections this November.
Ultimately, Brazil and its lenders hope to reschedule much of the nation's debt in a long-term agreement like those reached by Mexico, Ecuador and Yugoslavia last year.
"The idea is to build a bridge to a multiyear agreement," one banking source said. But he added that Brazil's politicians and its banks agree that the country's economy is not now strong enough to justify such an act of faith by the banks. "Some economic progress would be useful," he said.
Times staff writer Juan de Onis, in Rio de Janeiro, contributed to this story.