“Brazil to help cash-strapped states”
BRAZIL - Brazil’s federal and state governments have reached a deal to alleviate the fiscal woes of cash-strapped states, the governor of Rio de Janeiro, Luiz Fernando Pezão, said on Tuesday after a meeting with President Michel Temer.
Pezão said in exchange for federal help the states are considering budget reforms including a spending ceiling to shore up their finances. He did not detail the measures. Violent protests against an austerity package have rocked Rio’s state assembly house this week, highlighting the woes of Brazil’s third most populated state less than three months after hosting the Olympics.
“We are starting a great federal pact to help state governments,” Pezão told reporters at the presidential palace as the meeting continued between Temer and other governors. He said details of the deal will be announced later by Finance Minister Henrique Meirelles.
The growing financial woes of Brazilian states have added to worries about the strength of a recovery after two years of recession in Latin America’s largest economy.
The state of Rio Grande do Sul earlier on Tuesday declared state of financial calamity after submitting an austerity package to its local assembly to slash payrolls and sell state-run companies to cover its fiscal deficit.
Temer is considering sharing about 5 billion reais ($1.5 billion) in fines from an asset amnesty program with the states to help them pay mandatory year-end bonuses to civil servants and other expenditures.
Soaring payrolls after years of fast economic growth added pressure to the finances of Brazilian states that are barred to issue debt without the green light from the federal government.
The Temer administration fears that anti-austerity demonstrations in Rio de Janeiro could spread to other states and hit the popularity of a president that was officially sworn into office less than three months ago.
Temer took over the presidency after the Senate toppled his predecessor and former running mate Dilma Rousseff on charges of doctoring public accounts to cover a fiscal crisis that has cost the country its coveted investment-grade rating.
($1= 3.3545) (Reuters)