U.S. bank loans to Latin America rose more than 9% last year, for the first increase in eight years, according to Federal Reserve Board data.
Total outstanding loans in the public and private sectors increased by $3.2 billion to $38.8 billion.
Bankers said the increase does not represent a return to the practices that led to the Third World debt crisis of the 1980s.
A Third of Former Level
For one thing, the total outstandings are much lower now - about one-third the level at the height of the debt crisis.
Several Latin American countries have lowered their debt loads through Brady plan restructurings, which should enhance their ability to repay the loans.
In addition, bankers said much of the increase consists of short-term loans to private borrowers - a contrast to the long-term, high-rate lending to sovereign borrowers that made up the bulk of the loans on which Third World countries defaulted.
"I do not believe any of us are doing [longer-] term lending in any significant way," said Brian O'Neill, senior vice president for Western Hemisphere corporate finance at Chase Manhattan Corp.
According to the Fed, loans maturing in less than a year to Latin and Caribbean countries that produce no oil rose 26% to $18 billion last year. Loans with terms of one to five years rose 13% to $4.6 billion. Longer-term loans were unchanged.
But the new lending, particularly by regional banks, has Lawrence Cohn, an analyst at Paine-Webber Inc., worried.
"We think the fact that regional banks have expanded their activities in more distant markets a little ominous," Mr. Cohn said.
Regional banks, for example, he pointed out, increased outstanding loans to Brazil by 80%, from $718 million in 1991 to $1.293 billion last year.
Fresh Risks Cited
Mr. Cohn brushed aside bankers' statements that economic reform in the countries and short-term lending strategies protected them from new risk.
"I remember vividly talking to banks about their [Third World] exposure prior to the 1982 crisis," he recalled. "What was short term in nature suddenly became long term and what was private-sector debt suddenly became public-sector debt."
Most of last year's lending went to Mexico, Brazil, and Argentina, already the biggest borrowers.
Total loans by U.S. banks to Mexican borrowers rose 5% to $14.5 billion, loans to Brazil increased 7% to nearly $7 billion, and loans to Argentina rose 36% to $4.7 billion.
Top Eight Take Lead
Nearly half of the $3.2 billion increase in Latin lending came from the eight biggest U.S. banks, which had around $31 billion in outstanding loans.
Citicorp remains the one of the largest lenders to Latin America.
The bank was one of the few U.S. financial institutions that agreed to advance new money to Latin borrowers as part of large refinancing packages with countries like Argentina, Venezuela. and Mexico.
At yearend, Citicorp had $3.4 billion in loans on its books to Mexican borrowers, up from $2.9 billion in 1991 and $2.4 billion in 1990. Its loans to Brazilian borrowers rose to $2.2 billion from $1.7 billion in 1991. The 1992 total was still below the $3.2 billion in 1990.
William Rhodes, Citicorp vice chairman, said the bank has further increased loans to Mexican borrowers since the start of the year by "a couple of a million," much of which was extended to finance trade.
He said Mexico has adopted stringent economic policies aimed at boosting investments, reducing the government's budget deficit, and maintaining a strong peso.
"The Mexicans have put their external debt problems behind them and opened the economy," Mr. Rhodes said.
Bank of Boston Active
Among large regional banks, Bank of Boston Corp. was the biggest lender.
The bank, with a large local network in Latin America, sharply increased outstanding loans to developing countries by $1 billion last year, to $2.2 billion, it said.
That included $940 million to Argentina, up from $535 million at yearend 1991; and $560 million to Brazil, up from $305 million. Lending to Chile doubled to around $400 million.
The bank however noted that about 40% of its loans to Argentina were funded in dollars. It added that the majority of its loans to Brazil were short term and trade related.
"Based on our operations and knowledge of large corporations, we're very comfortable with our cross-border and indigenous exposure and continue to grow them in 1993." said Constantin Boden. executive vice president at Bank of Boston.
Mr. Boden said that the bank's lending in Brazil has flattened out since the start of the year but has continued to increase in Argentina. He added that the bank is also concerned it would get frozen out of loan syndications in rapidly growing markets in Latin America if it did not participate now.