Brazil woos nervous US banks

Brazil's economy is suffering because overseas banks are cutting off loans or tightening their credit terms due to fears that Brazil may default on its foreign debts after the October presidential election.

"There's a lot of pressure because banks are reluctant to finance exports because they're losing money," said President Fernando Henrique Cardoso.

He said the delegation to New York would be led by Brazil's finance minister, Pedro Malan, and Arminio Fraga, president of the country's central bank.

Extra help

The president also announced $2bn (£1.3bn) of financial support from Brazil's central bank to help firms buy foreign goods, many of which are needed to maintain their own output.

To reassure financiers, the Brazilian president on Monday hauled in candidates for his job to publicly back the terms of a bail-out from the International Monetary Fund (IMF).

Earlier this month, Brazil was promised a loan of $30bn (£20bn), the biggest the IMF has ever granted.

The loan is designed to help Brazil avoid a repayment crunch on foreign debts of $250bn, staving off the risk that it might follow Argentina into default.

Political nervousness

But the near-certainty that the next president will be a left winger has worried foreign bankers and investors.

Analysts said investors had given a cautious welcome to promises from the two front-runners that they would continue with the policy of running budget surpluses - a condition of the IMF loan.

The mission to American banks, which is likely to take place next week, will be hosted by the US Federal Reserve.

US banks with significant exposure to Brazil include Citigroup, JP Morgan Chase and FleetBoston Financial.

A big Spanish bank, Santander Central Hispano, said on Tuesday it would be continuing to provide credit to its Brazilian customers.

Foreign banks' exposure to Latin American companies takes two main forms - direct loans and export credits.

Export credits are granted to firms in the developing countries to give the a breathing space to pay for goods exported to them.

Recently, the repayment times given to firms who ask for export credits have been getting shorter, according to credit ratings agency Fitch Ratings.