BRAZILIANS SEEN TAKING HARD LINE IN DEBT TALKS

BRAZILIANS SEEN TAKING HARD LINE IN DEBT TALKS

Brazil is expected to take a tough line in renegotiating payments on its $115 billion foreign debt, the biggest in the Third World, bankers and officials say.

The Latin American nation suspended most foreign debt interest payments last July to conserve foreign exchange and has accumulated arrears of $5.5 billion.Brazil is due to begin talks with the International Monetary Fund next month about its economy before it begins to tackle terms on its massive debt.

"From their style, I think they will try to impose an especially hard position on the banks," said Jordi Wiegerinck, a manager at the Sao Paulo branch of Nederlandsche Middenstandsbank NV.

Brazilian President Fernando Collor de Mello has earned a reputation for tough economic measures, freezing the equivalent of more than $100 billion in bank deposits to stem an annual inflation rate approaching 5,000 percent.

The program also aimed to cut Brazil's burgeoning domestic debt service costs, which a year ago surpassed interest payments on its foreign debt.

Mr. Collor de Mello's economic team, while revealing little about its debt negotiation plans, has ruled out any debt payments until negotiating new terms. Mr. Collor de Mello has also said that while Brazil will avoid a confrontation with creditors, economic growth is the paramount concern.

"The position of the government is very clear about payment of interest in arrears. Not under any hypothesis are we going to advance any type of payment," said Antonio Kandir, secretary of the economy.

Mr. Kandir said the government is negotiating from a stronger position than prior administrations, since Mr. Collor de Mello was the first democratically elected president since 1960.

He also said the nation's bargaining strength was enhanced by the strong domestic popularity of the anti-inflation program.

Zelia Cardoso de Mello, economy minister, has said that Brazil will limit interest payments to $5 billion a year, or about half of what is due.

Her position was strongly attacked even before it was formally presented to creditors.

"This is not a strategy for debt renegotiation," Lawrence Brainard, an economist of Bankers Trust, one of Brazil's largest creditors, said a month ago on a visit to Sao Paulo.

"President Collor (de Mello) and his economic advisers appear to believe that the requirements of economic growth are in basic conflict with servicing the external debt," Mr. Brainard said.