Brazil's Rio Governor-Elect Says No New Debt Issues -Estado
Dow Jones Newswires
SAO PAULO -- In a possible show of support for the federal
government's austerity plans, the newly-elected governor of Brazil's Rio de
Janeiro said Thursday there is no chance the state will default on its debt
with the federal government, the Estado news agency reported.
At a conference to discuss fiscal reform, governor-elect Anthony
Garotinho said that one of his first orders of business when he takes office
in January will be to suspend the issue of state debt bonds, noting that his
policy will be to retire debt "as much as possible."
President Fernando Henrique Cardoso has placed much of the blame for
Brazil's fiscal woes on states. A group of recalcitrant governors, with
Garotinho at the head, has voiced opposition to federal efforts to reign in
state spending.
After he was elected last month, Garotinho, a member of a leftist labor
party, said that states may need to renegotiate debt payment terms agreed
to with the federal government over the past two years.
States participating in the debt restructuring currently pay between 11%
and 15% of revenues monthly to the federal government.
Between 1996 and 1998, the federal government assumed state debts
totaling over $60 billion, charging favorable interest rates of 6% and 7.5%
a year. Rio's debt was transferred to the federal government in mid-1998
following almost two years of difficult negotiations.
Garotinho said Rio de Janeiro will provide tax incentives to attract
companies to the state, a practice frowned upon by the Cardoso
administration.
The government has condemned this so-called fiscal war, charging that the
states have sacrificed significant potential revenues as a result of the
practice.
Garotinho said the state will develop an economic development program to
attract company investments, with tax holidays of up to five years and low
interest rates of 5%-6% after that.
The governor-elect also said a final decision on the fate of state water utility
Companhia Estadual de Aguas e Esgotos, or Cedae, will be made after he
takes office.
As reported, the company's privatization has been suspended several times
due to an unclear definition of whether state or municipal governments own
the concession in metropolitan Rio de Janeiro.
Last week, the state government set a new auction date of Nov. 30. The
minimum asking price will be 1 billion reals (BRR) ($1=BRR1.19), down
from the original minimum bid of BRR4.88 billion.
Cedae, the first major water utility scheduled to go on the auction block in
Brazil, is the country's second largest water and sewage disposal company.
Garotinho, in a departure from earlier statements, said Thursday he isn't
planning to return already-privatized assets to state control.
Rio de Janeiro is Brazil's third most populous state with 24 million
inhabitants. |
