Pacheco: State debt relief program a matter for August

Senate President Rodrigo Pacheco told a Supreme Court justice on Sunday that he expects a bill allowing states to renegotiate massive debt with the federal government to be voted on in the first half of August, just after the congressional recess.

Mr. Pacheco, who is also the author of the bill, sent a letter to Justice Edson Fachin as part of an ongoing lawsuit in the Supreme Court. The government of Minas Gerais, Mr. Pacheco’s political home state and Brazil’s second-largest in population, has successfully requested the court to postpone the payment of its debts to the Union twice.

The new deadline for a payment, provided by an injunction, expires on August 20. Back on July 9, the Minas Gerais government asked for a new extension, a petition which is currently being considered by the court.

Mr. Pacheco also introduced his bill on July 9. The draft has not yet been given a rapporteur, a key step for the bill to proceed to a vote.

By March 2024, state governments owed the union a total of BRL 740 billion (USD 135 billion). Minas Gerais, São Paulo, Rio de Janeiro, and Rio Grande do Sul — which are among Brazil’s wealthiest and most populous states — account for around 90 percent of that debt.

Under Mr. Pacheco’s bill, the state governments’ debts would be frozen in real terms if they comply with certain conditions, such as transferring stock in state-owned companies to the federal government. Debt would only be adjusted for inflation. Finance Minister Fernando Haddad has pledged to “review” the proposal.

In late 2023, share prices of Cemig, a Minas Gerais-based power company and one of Brazil’s biggest, took a nosedive as investors grew jittery about the possibility of the company being handed over to federal control.

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