GERMAN BANKS SEEK GREATER BRAZIL LINK WITH IMF
West German banks would like Brazil to work
more closely with the International Monetary Fund (IMF) with a
view to seeking a solution to the country's debt problems,
senior West German banking sources said.
    The sources, speaking ahead of a meeting later today
between Brazilian Finance Minister Dilson Funaro and his West
german counterpart Gerhard Stoltenberg, also believed Brazil
should come up with a convincing economic recovery program.
    Their comments echoed those of British Chancellor of the
Exchequer Nigel Lawson, who met Funaro yesterday.
    Funaro is currently on a European trip seeking to involve
governments in negotiations with commercial banks on
rescheduling part of Brazil's foreign debt, which totals some
109 billion dlrs. But Lawson told Funaro Brazil had to solve
its problems with the banks rather than governments.
    Diplomatic sources in Bonn said Funaro would leave early
tomorrow morning for Zurich after meeting Stoltenberg this
evening.
    Funaro has rejected suggestions for negotiations with the
IMF and said there is no question of Brazil agreeing to an
austerity program with the Fund.
    However, the West German banking sources said institutions
here felt it was particularly important that Brazil presented a
credible recovery program and that there be a "rapprochement"
with the IMF.
    "Consultations are the least that can be expected," said one
banker.
    Funaro's trip follows the decision by Brazil 10 days ago to
suspend interest payments on 68 billion dlrs of commercial
debt. It has also frozen bank and credit lines deposited by
foreign banks and institutions worth about 15 billion dlrs.
    One senior banker closely involved in Brazilian debt
negotiation offered qualified support for a call from Funaro
for a change in the structure of the advisory committee of
banks which has coordinated Brazilian debt since 1982.
    Funaro said yesterday that U.S. Banks, holding 35 pct of
Brazilian debt, were over-represented on the 14-bank advisory
committee with 50 pct of the committee seats. He said Brazil
might adopt a different approach to its creditor banks,
involving separate discussions with the regions.
    Such a move would be in Brazil's interest, since European
banks have been more supportive than U.S. Banks of alternative
debt solutions, such as interest capitalisation.
    The senior banker was strongly opposed to a purely regional
approach, saying: "There must be one committee and one solution."
But he added: "There must be an understanding that special
requests from special regions be taken into account."
    German banks had objected to the fact that the idea of
interest capitalisation had been rejected in the committee. It
was imperative that alternative options be considered. "The menu
must become richer," the banker said.
    Banking sources said commercial banks would not be involved
in today's talks with Funaro. A spokesman for the Bundesbank in
Frankfurt said the central bank would also not be represented.
    West German banks have taken a more relaxed attitude to the
Brazilian suspension of interest payments than institutions in
the United States, because of their lower exposure.
    According to Bundesbank data from September last year, West
German bank exposure to Latin America of slightly under 16
billion marks represented less than five pct of all foreign
credit.
 REUTER
