Brazil offers debt relief to state governments

© Ricardo Moraes
Brazil has agreed to provide its state governments $15 billion (50 billion reais) in emergency debt relief. The state of Rio de Janeiro will receive an $850-million loan ahead of the Olympics.

State governments will get a six-month grace period on their debts to the federal government, the country's Finance Minister Henrique Meirelles told Reuters.

The financially strapped states will not have to pay interest and amortization charges on their debts. The deferral will be followed by 18 months of reduced payments.

The state of Rio de Janeiro will get an $850-million emergency loan to prepare for the Olympics, a source close to the issue told the media. Initially, Rio appealed for twice that amount.

Last Friday, Rio de Janeiro officially announced a state of financial emergency and asked for extra funds to provide public services during the Games and to finish a tube line needed for transporting fans to Olympic sites.

Meirelles said the governors of other states aren't planning to declare a financial emergency following Rio’s suit.

The debt relief aims to ease heavily indebted states currently struggling to pay public service sector workers and maintain social programs.

The plan will cost the federal government about 20 billion reais this year and 15 billion reais in both 2017 and 2018, according to Meirelles.

Brazil is suffering its deepest recession since the 1930s with its former president Dilma Rousseff suspended from office to face a Senate trial on charges of breaking budget rules, an accusation she denies.