In February, the National Treasury paid R$ 1.341 billion in overdue state debts. Of this total, the largest part, R$847.66 million, is related to late payment in Minas Gerais. Then came debts of R$ 193.42 million from the state of Rio de Janeiro and R$ 76.74 million from Goiás.
The Union also covered the debts of the following states: R$ 61.3 million from Rio Grande do Sul, R$ 44.71 from Maranhão, R$ 44.26 from Piauí, R$ 41.38 from Pernambuco and R$ 31.54 from of the Holy Spirit.
The data are in the Report on Guarantees Honored by the Union in Credit Operations, released this Tuesday (7) by the National Treasury Secretariat. The guarantees are enforced by the federal government when a state or municipality defaults on a credit operation. In this case, the Treasury covers the default, but withholds transfers from the Union to the debtor until the difference is paid, charging fines and interest.
In the first two months of the year, the Union settled R$ 2.249 billion in arrears from subnational entities. Of this total, R$ 1.036 billion went to Minas Gerais, R$ 372.04 million to Maranhão, R$ 300.43 to Rio de Janeiro, R$ 164.38 million to Piauí and R$ 155.03 million to Goiás.
decrease
The number of states with arrears covered by the Treasury increased from seven in January to eight in February, with the inclusion of Espírito Santo, which was not part of the list. In 2022, in addition to the states above, they had guarantees honored by União Alagoas and Rio Grande do Norte.
With regard to municipalities, the Treasury did not cover overdue debts from city halls this year. Last year, the Union honored R$ 32.06 million in guarantees from the Municipality of Taubaté (SP).
The guarantees honored by the Treasury are deducted from Union transfers to federated entities – such as revenues from participation funds and Tax on Circulation of Goods and Services (ICMS), among others. Overdue obligations incur interest, late payment and other operating costs related to the period between the maturity of the debt and the effective honoring of the amounts by the Union.
Tax Recovery Scheme
In recent years, decisions by the Federal Supreme Court (STF) have prevented the execution of counter-guarantees by several states in financial difficulty. Subsequently, the court mediated negotiations for the inclusion or continuity of state governments in the fiscal recovery regime (RRF), which provides for the installment and staggering of debts with the Union in exchange for a spending adjustment plan. In recent years, Goiás, Rio de Janeiro and Rio Grande do Sul have signed agreements with the federal government.
At the beginning of the covid-19 pandemic, the court granted an injunction to suspend the execution of guarantees in several states. Some counter-guarantees from Minas Gerais were also not enforced because of injunctions granted by the STF.
With the adhesion of the state of Rio de Janeiro to the RRF at the end of 2017, the state was able to contract new credit operations with a guarantee from the Union, even though it was in default. At the end of 2020, Minister Luiz Fux, of the STF granted an injunction keeping Rio de Janeiro in the tax recovery scheme. In June of last year, the state, in settlement mediated by the Supreme Courtconcluded negotiations with the Union to continue in the RRF.
Also in June 2022, the Rio Grande do Sul closed an agreement with the Union and had the tax recovery plan approved. The plan allows the state to repay, in a staggered manner, the Union’s debt, whose payment had been suspended by an injunction from the Federal Supreme Court since July 2017. In exchange, the government of Rio Grande do Sul must implement a fiscal adjustment program that provides for privatizations and reforms to reduce local spending.
In May 2020, the STF authorized the Goiás government to join the fiscal recovery package in exchange for the adoption of a state spending ceiling. In December 2021, Goiás signed the adhesion to the RRF, which allows the suspension of debt payments to the Union in exchange for a spending adjustment plan.
The only indebted state that has not joined the RRF is Minas Gerais. In July last year, Minister Nunes Marques, of the STF, granted an injunction that allows the state to negotiate an adjustment plan with the Union without the approval of the Legislative Assembly. In the same month, the National Treasury published an ordinance authorizing the government of Minas Gerais to draw up a proposal to formalize entry into the program.
