It seems like economic civil war is about to break out in Brazil, any thoughts by the group as to whether this will tank the market or be dismissed as the normal give and take of Brazilian politics?
Sunday January 17, 5:34 pm Eastern Time
Brazil's rogue state challenges block
on funds
BELO HORIZONTE, Brazil, Jan 17 (Reuters) - A Brazilian state
governor who sparked the country's devaluation crisis by
declaring a debt moratorium said Sunday he would go to court in
a bid to free up state revenues seized by the federal government in
retaliation.
''We have just entered a judicial measure to stop the block on the revenues of Minas Gerais state,''
Itamar Franco, governor of Minas Gerais state told reporters.
Franco, a former president, sent Brazilian markets into pandemonium Jan. 6 when he announced a
90-day moratorium on payments of debt to the federal government.
The turmoil built into a full-scale crisis last week when massive dollar outflows forced the
government to attempt a controlled devaluation and then float Brazil's currency, the real.
The real devalued by more than 15 percent in the week, raising fears that Brazil was plunging into a
Russia-style meltdown and sent shockwaves through the world.
Under the terms of Minas Gerais' debt agreement with Brasilia, the federal government may seize
cash held in the state's bank accounts to compensate for nonpayment.
The federal government did just that a few days after the moratorium was announced, confiscating
11.7 million reais ($8.2 million at the new real rate of 1.43 to the dollar).
Minas Gerais officials said Sunday's challenge was filed with a court in Minas Gerais.
Several opposition state governors were due to meet with Franco in Belo Horizonte on Monday to
discuss their debts with the federal government.
Two left-wing governors, of Rio Grande do Sul and Mato Grosso do Sul states, have asked the
country's courts in the hope of suspending their debt agreements, rather than follow Minas Gerais'
lead with a moratorium.
Related News Categories: currency, US Market News
|
