Riggs National Corporation & Subsidiaries (f.k.a. Riggs National Bank and Subsidiaries) - Page 5

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          B.  Foreign Loans and the Brazilian Economy in General                      
               In 1974, Brazil incurred a trade deficit of $4.7 billion as a          
          result of higher prices charged for oil due to the energy crisis.           
          At that time, a trade deficit of this size was large for Brazil.            
          After 1974, Brazil greatly increased its reliance on foreign debt.          
          Its foreign debt increased dramatically from 1974 to 1983, and the          
          ratio of Brazil's total foreign debt to its foreign currency                
          reserves grew larger.  The Brazilian Government sought to reduce            
          Brazil's trade deficit by decreasing imports, increasing exports,           
          and encouraging foreign borrowing for internal domestic                     
          development.  It hoped to increase the country's productive                 
          capacity by stimulating greater investment in steel, oil, pulp and          
          paper, aluminum, petrochemical products, fertilizers, capital               
          goods, and other capital items.                                             
               Brazil's currency, the cruzeiro, was not convertible to                
          foreign currency in international markets.  Although the cruzeiro           
          was freely tradeable, as a practical matter, foreign parties                
          outside of Brazil would not accept payment in cruzeiros.                    
              Brazil needed to maintain adequate foreign currency reserves           
          to engage in international trade to finance its trade deficit.              
          During 1974 through 1975, the Brazilian Government sought to                
          maintain a foreign currency reserve of about $6 billion for this            
          purpose.                                                                    
               During 1974, Brazilian borrowers generally were reluctant to           
          take out foreign loans because the Central Bank required a minimum          




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