Some remarks on the debts of the states to the federal government:
1) The total is about R90 billion, including the debt of Rio de Janeiro, which is still being renegotiated. The debt of Rio de Janeiro is about R20 billion.
2) About half of the total is owed by Sao Paulo. The recently elected governor of Sao Paulo, Mr. Mario Covas, is a staunch supporter of President Cardoso, and will not ask to renegotiate the debt or enter a moratorium.
3) The federal government has collateral for the debt, including the transfers mandated by the constitution from the federal government to the states.
4) The renegotiation was extremely favorable to the states, which were supposed to pay inflation + 6% per year, which in the current zero inflation environment is far below market rates.
5) The states in the Northeast, which are poor but politically powerful, strongly oppose any additional renegotiations, which are seen as subsidies to the richer states, like Sao Paulo, Minas Gerais, Rio de Janeiro, and Rio Grande do Sul. The President of the Senate, Mr. Antonio Carlos Magalhaes, represents Bahia, a Northeastern state.
6) Mr. Franco, the governor of Minas Gerais, belongs to the PMDB, one of the parties in the Cardoso coalition, but he has not been considered a reliable ally. He may be a presidential candidate in 2002. |
