BRAZIL DEBT SEEN PARTNER TO HARD SELL TACTICS Brazil's recent announcement of a suspension in interest payments on 68 billion dlrs of foreign debt gave the banking system the jitters and confirmed views among many international economists and commodities analysts that Brazil will continue to flex its trading muscles in 1987. The developing world's most indebted nation is also its most prolific exporter of agricultural commodities such as coffee and soybeans, and might maximize foreign exchange revenue by selling hard on world markets, economists said. "That sounds like a reasonable strategy. But there is no way they can trade their way out of this situation," Aldo Roldan, Vice President for International Services at Chase Econometrics, said. Roldan told Reuters that Brazil not only had to tackle the problems of satisfying domestic demand and competing on glutted world markets, but also had to work to make its position on foreign exchange markets more profitable. "Domestic costs have increased (due to inflation) and exporters have not had the same offsetting movement in exchange rates," Roldan said. The Chase economist also said commodities markets were depressed and generally did not appear very promising for a country like Brazil, where pure commodities account for some 50 pct of exports and in 1986 had a total value of around 23 billion dlrs. But he added: "They are always pretty aggressive and they have good foreign marketing channels." Analysts said a key factor in Brazilian trade will be coffee, and even without background pressure from foreign creditors the world's largest producer was expected to hit the market this year with a vengeance. Negotiations between International Coffee Organization (ICO) members to re-establish producer export quotas broke up earlier this week with major producers and consumers accusing each other of intransigence. "Brazil would not tolerate a change in ICO regulations, which others wanted changed," one senior coffee dealer said. The dealer, who declined to be named, said Brazil wanted to preserve its market share. At the end of the talks, he said Brazil hinted it could sell more than anyone else and others would suffer. Brazil will be an aggressive seller under any scenario but as yet there is no sign of unusually heavy Brazilian sales, the dealer said. "If they do come into the market at this level it will go lower and you could breach a dollar, ninety or eighty cents," he said. New York coffee futures for May delivery settled 2.29 cents lower Thursday at 104.68 cents a lb, while more distant deliveries fell the six-cent maximum trading limit. President of the Brazilian Coffee Institute, Jorio Dauster told a press conference in Rio de Janeiro today that Brazil has no set target for its coffee exports following the breakdown of the ICO talks on export quotas. Many economists and analysts believe soybeans could be the focus of possible stepped-up Brazilian marketing efforts. "They will be more aggressive this year than they have ever been," according to Richard Loewy, analyst for Prudential-Bache Securities Inc. Loewy believes the foreign debt problem, a good crop, plus difficulties with storage would help motivate selling of the Brazil soybean crop. "Brazilian farmers also need cash flow and they can't afford to store the crops," he said. The Chicago soybean complex has been nervous for some time about large South American crops developing under near ideal conditions towards record yields. "We are going to see a very rapid decline, earlier than usual, this year in our (U.S.) exports," Loewy said. Tommy Eshleman, economist for the American Soybean Association (ASA), said this year's Brazilian soybean harvest could total 18 mln tonnes, versus 13.7 mln last year. Marketings will be very aggressive this summer when prices are usually high relative to the rest of the year due to the vulnerability of the U.S. crop to bad growing weather. Another incentive to sell might be trade anticipation of a reduction in the U.S. government soybean loan rate, offered to farmers who give crops as collateral, Eshleman said. He said there has been some uncertainty this year about the soybean loan rate, which acts as an effective floor for prices by keeping supplies away from the free market. Farmers can forfeit their beans to the government rather than repay the loan. "We're getting into a period when they (Brazil) are starting to harvest and starting to export," Eshleman said. But he added it will be a while before U.S. exports fall to below 10 mln bushels a week from around 20 mln bushels currently. Jose Melicias from the research department of Drexel Burnham Lambert said Brazil would be trying to export as much as it can this year because of its economic situation. He said the debt situation was a major consideration. "The Brazilian government also does not have enough money to pay for storage," he added. Asked if a return to an inflationary environment in Brazil would make farmers inclined to hold onto crops, Melicias said it would not make a big difference. On other commodity markets, Brazil's selling impact may be muted no matter its need to generate capital. Brazil is faced with a poor 1986/87 sugar harvest, which could limit exports to the world market, analysts said. The country may have oversold and be unable to honor export commitments, and this plus higher domestic demand caused by consumer price subsidies on ethanol and refined sugar, will give it little room to stretch exports, they said. Brazil's other major crop, cocoa, is in its third year of surplus. "Cocoa consumption is basically flat and last year it fell, so I don't think they can start throwing out cocoa and find many more markets for it," one analyst said. "If they come out as aggressive sellers, the market would collapse and they can't afford to do that," she added.