The Economy Ministry said Thursday that it would exercise an option by April 15 to repurchase the so-called Brady bonds issued in the 1990's, when Brazil and other emerging markets issued such securities to restructure crippling debts. When the purchase is completed, the government will have retired all outstanding Brady bonds, removing from the market what many consider a reminder of a blot on the country's financial history.
Part of an effort to reduce the foreign debt load amid an increasingly favorable financial climate, the purchase follows a decision in December to pay off Brazil's remaining $15.5 billion debt with the International Monetary Fund and a move earlier last year to buy back more than $1 billion worth of another Brady bond.
The government, which said the purchase would save it at least $350 million in future interest payments, said the buyback would be financed by windfalls from exports in recent years.
Like many developing nations, especially in Latin America, Brazil is enjoying a surge in demand for its commodity-heavy exports, like soybeans, coffee, sugar and iron ore. The export boom is fueling increases in the country's foreign reserves — now $58 billion — which the government is spending to reduce some of its more onerous debt obligations.
"There was a change in the relationship between exports and debt," Treasury Secretary Joaquim Levy told Brazilian television. "We're using the dollars from exports to reduce our debt and — just like a company — clean up our books and grow." Public sector debt in Brazil, however, still totals 51.6 percent of gross domestic product.
Other countries throughout the region have taken similar steps. Mexico, for example, on Thursday said it would buy back as much as $5 billion worth of debt in foreign currencies, financed with a new dollar-dominated bond.
Such financial operations are made easier by the fall of the dollar against many of the region's currencies. The Brazilian real, for instance, was the world's highest climber against the dollar in 2005 — soaring 22 percent — making it especially agile in financial operations with dollar-denominated securities.
Given efforts by developing countries to avoid the credit overloads that roiled emerging markets at the end of the 1990's, governments are likely to continue to take advantage of current conditions to reduce or restructure their debts.
Investors in Brazil welcomed the buyback news. Most Brazilian government bond prices climbed on Thursday and the real continued its ascent, strengthening 0.35 percent to close the day at 2.1335 to the dollar.