Supreme Federal Court Lifts Block On Rio's Public Funds - plus55


The Supreme Federal Court unfroze 192 million BRL in public funds for the state of Rio de Janeiro to pay public servants and services
Brazil Business

The head of the Supreme Federal Court (STF), Cármen Lúcia, granted an injunction to unblock Rio’s public funds. The STF had blocked 192 million BRL for the state’s 2017 budget. The amount represents Rio’s debt to the Bank of Brazil, incurred between March and June 2016 due to administrative irresponsibility.

The STF received the request to reverse the fund freeze from Rio’s General Prosecutor’s office. Head Justice Lúcia expressed her concern over Rio’s “exceptional situation of financial calamity”. In addition, Lúcia called on the STF to take cautionary measures to ensure the “provision of essential services to the public”.

In addition to the fall of petrol prices, which caused Rio to lose 1 billion bRL in royalties, the state has made innumerable poor financial decisions. Not only are multiple ex-governors either in jail or under investigation for political corruption, but even the capital’s mayor has had his accounts frozen.

Rio de Janeiro’s mayor Eduardo Paes illegally waived permits and handed out tax cuts to make the 2016 Summer Olympics happen. Paes also invested money in development projects where money didn’t exist. Furthermore, the state also waived $58 billion in tax exemptions for different industry sectors between 2007 and 2015.

The state government’s poor financial decisions have fallen on the shoulders of its public employees. Civil servants have protested for months due to unpaid salaries and are even lining up for food handouts. Since the STF decided not to block Rio’s accounts, civil servants who hadn’t seen their salaries since November should finally start receiving payment in a series of installments this month.

States in need

Of the 12 states that ended 2016 in debt, Rio de Janeiro is among the deepest in bankruptcy. President Temer vetoed Congress’s bill for an 11 billion BRL bailout but allowed for debt renegotiations. The proposed sanctions could allow states up to 20 years to pay off their debts. In return, states would need to reduce public salaries, reverse tax incentives, and increase income tax.