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Cablegate: Brazil and the Paris Club - Prepayment Or

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS BRASILIA 003346

SIPDIS

SENSITIVE

NSC FOR CRONIN
TREASURY FOR OASIA - DAS LEE, FPARODI, KBERG
STATE PASS TO EXIM
STATE PASS TO FED BOARD OF GOVERNORS FOR ROBITAILLE
USDOC FOR 4332/ITA/MAC/WH/OLAC/JANDERSEN/ADRISCOLL/MWAR D
USDOC FOR 3134/ITA/USCS/OIO/WH/RD/DDEVITO/DANDERSON/EOL SON
STATE FOR EB/IFD/OMA - MOSS AND FORSYTH

E.O. 12958: N/A
TAGS: EFIN ECON SENV PREL BR
SUBJECT: BRAZIL AND THE PARIS CLUB - PREPAYMENT OR
POSTURING?

1. (SBU) The Finance Ministry's Strategic Debt Planning
Coordinator, Anderson Silva, confirmed to Emboff December 21
that the Finance Ministry is studying a proposal to pay off
all of its Paris Club (PC) debt in 2006. According to
Silva, no final decision has yet been made despite press
reports that the GoB decided, at President Lula's end-of-
year stock-taking cabinet meeting on December 19, to pre-pay
its PC debt in the same fashion that it had pre-paid its
$15.2 billion IMF debt. Finance Ministry statistics, which
may well differ from USG and other PC creditor country data,
put Brazil's outstanding PC debt at approximately US$2.5
billion as of September 2005. France and Germany are the
major creditors, each holding roughly a 20 percent share,
while the USG accounts for a 10 percent slice.

2. (SBU) Silva minimized the significance of the December 19
announcement, affirming that most of the remaining PC debt
would be paid of in 2006 anyway. (Note: according to the
press, all but $250 million of Brazil's PC debt will be paid
off by end-2006 under the existing amortization schedules;
the remainder would be paid off in 2007.) Silva also
acknowledged that a prepayment would raise coordination
issues with PC creditors, a matter which had not yet been
addressed. Separately, the German economic counselor has
told us that Brazil's debt to Germany already was scheduled
to be entirely paid off in 2006.

3. (SBU) Comment: Given the maturity profile of Brazil's
remaining PC debt, it appears this announcement -- as
opposed to the more significant IMF repayment -- is more
about posturing than debt management. It is also unclear to
us whether this decision has any relation to the recent
rockiness in Brazil's participation in the Paris Club as a
creditor. One tangential issue this raises is that, even if
the GoB does not prepay its USG debt, there may be very
little debt left to swap under the Tropical Forest
Conservation Act (TFCA). Given holiday staffing at the
finance ministry, however, we don't expect to get a fuller
picture of GoB intentions until January.

CHICOLA

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