Latin America Advisor

Latin America Advisor

A Publication of The Dialogue

Can Brazil Get State Debt Burdens Under Control?

Brazil’s finance ministry, led by Fernando Haddad, last week unveiled a proposal to reduce the debt burdens of the country’s states. // File Photo: Brazilian Government.

Brazil’s finance ministry last week announced a proposal to reduce states’ debt burdens to the federal government, conditioned on states’ allocation of resources to technical education for high school students. What are the main reasons behind debt burdens of Brazilian states? What is the legislation to provide debt relief for states likely to accomplish? What impact is states’ growing debt having on Brazilians and the services that their states provide?

Anabel Teixeira, senior associate for Brazil and the Southern Cone at McLarty Associates: “Brazilian states’ longstanding debt to the federal government is an issue that originated in the 1970s due to Brazil’s highly centralized fiscal management. Over time, it has hindered states’ ability to generate tax revenue independently, leading to a reliance on federal loans. After yet another round of negotiations with the indebted states, the finance ministry introduced a proposal conditioning debt reduction on states investing saved funds into technical secondary education through the Interest Rates for Education Program (Programa Juros por Educação). Participating states can choose lower interest rates of 2 percent, 2.5 percent or 3 percent, with the lowest rate contingent on allocating 100 percent of savings to investments in secondary technical education by 2030. Finance Minister Fernando Haddad, formerly the minister of education during President Lula’s first and second terms, aims not only to alleviate fiscal strain but also to…”

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The Inter-American Dialogue publishes the Latin America Advisor every business day for a distinguished membership of informed corporate leaders, scholars, and government officials invested in Latin America’s development and future. The Advisor‘s highly regarded Q&A section covers questions submitted by subscribers themselves. Commentators regularly include heads of state, business leaders, diplomats, economists, analysts, and thought leaders from around the world. Many of the world’s largest and fastest-growing companies subscribe to the Advisor. To subscribe, click here. For terms and conditions, click here. For more information, contact Gene Kuleta, editor of the Advisor, at

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