HC Deb 18 March 1987 vol 112 cc915-6
5. Mr. Willie W. Hamilton

asked the Secretary of State for Foreign and Commonwealth Affairs what assessment he has made of the implications for diplomatic relations between the United Kingdom and Brazil of that country's decision to suspend interest payments on its overseas debts; and if he will make a statement.

The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Tim Eggar)

I am delighted to have the opportunity to answer the question. Although we have made clear to the Brazilian Government our regret at their decision, this has not affected our generally good relations. My right hon. and noble Friend the Minister of State, Foreign and Commonwealth Office is visiting Brazil this week and will no doubt discuss this subject.

Mr. Hamilton

Does the Foreign Office still accept the opinion that the Under-Secretary expressed in the House a week or two ago that the solution to the problem can be found only by accepting IMF conditions? That would quite clearly be impossible for the very poor people in that country. Does the hon. Gentleman not accept that the poverty of these countries is as big a threat to world peace as any nuclear weapon? Unless the problems are solved, principally, I believe, by the commercial banks accepting lower rates of interest rather than having unacceptable conditions imposed by the IMF, the problem will never be solved. What proposals will the Minister take from banks in this country when she visits Brazil later this week?

Mr. Eggar

We very much regret the decision to suspend payment of interest on commercial debt. However, debt negotiations are a matter for the Brazilian Government to discuss directly with commercial bank creditors. It is not for Her Majesty's Government to interfere, although we obviously hope that negotiations can begin very soon.

Mr. Sayeed

Does my hon. Friend agree that the best way to decrease the debt burden and increase the ability of countries such as Brazil to pay is for the West to reduce interest levels? That will occur only when they have prudently run economies.

Mr. Eggar

I very much agree with the thrust of my hon. Friend's question.

Mr. Tony Banks

Will the Minister confirm that these are strictly commercial loans between British banks and foreign agencies and Governments? Will he give an undertaking to the House that in the event of there being a major default by one of these countries it will be up to the British banks to bear the consequences?

Mr. Eggar

I gladly confirm to the hon. Gentleman that the debts that we are talking about are almost overwhelmingly commercial debts between commercial banks of Western countries and Brazil.

Sir Russell Johnston

Does the Minister agree that unless there is a major initiative by the West on these matters, perhaps based on reducing interest rates and rescheduling debts, we shall face the unpalatable alternative of even more people defaulting, following the example of Brazil and now Ecuador?

Mr. Eggar

The situation in Ecuador is slightly different, as there has been a significant natural disaster there. It is impossible to have a general prescription on this as it is a matter for discussion between the countries involved and those who hold their debts. There are a number of possible solutions and each must be considered on an ad hoc basis.