The United States sees "no difficulty in issuing $2.8billion in bonds to guarantee a debt-reduction deal for Brazil with commercial creditor banks, said Economy Minister Fernando Henrique Cardoso of Brazil.
Mr. Cardoso told U.S. Treasury Secretary Lloyd Bentsen at a meeting last week in Washington that Brazil is seeking an agreement with the International Monetary Fund as a first step toward rescheduling $35 billion in debt owed commercial banks.
"Mr. Bentsen said that, in that case, no difficulties can be envisioned [for Brazil] to get the necessary support, including the zero coupon bonds," Mr. Cardoso told reporters.
$3.2 Billion in Bonds Needed?
Bankers estimated that Brazil could need to buy up to $3.2 billion in 30-year, zero coupon U.S. Treasury bonds in order to collateralize bonds it hopes to swap for loans on which it has defaulted.
Banking sources said about half the funding would come out of Brazil's foreign exchange reserve's and half would be supplied by the IMF and other multilateral lending agencies.
However, Mr. Cardoso noted that U.S. officials said the Treasury would issue the bonds Brazil needs only if "we have a good program and this program has the IMFS approval."
Market Purchases Rejected
Countering recent speculation that Brazil might use its own reserves to buy Treasury bonds on its own in the free market, Mr. Cardoso told reporters that Brazil is not ready to buy the bonds on its own because it would be too expensive.
The Brazilian official declined to specify dates or an amount of the loan he would seek from the IMF, but he faces a Feb. 20 deadline to clinch a deal with creditor banks on the $35 billion of commercial debt.
Brazil is seeking to exchange about $35 billion worth of commercial bank loans for bonds at a reduction on either interest or principle.
