Brazil Supreme Court hands state debt decision over to Congress

The Supreme Court (STF) decided Wednesday (Apr. 27) to put off by 60 days a ruling on the standards to calculate the amount of the states' debt to the federal government, seconding a motion proposed by Justice Luís Roberto Barroso. According to Barroso, instead of being taken up with court, the dispute should ideally be settled between the parties to the case and the National Congress during the adjournment.

“I move for a 60-day adjournment to allow the parties in the dispute to negotiate and proceed to the consideration of the outstanding legislative bill [on the states' debt] pending before the Chamber of Deputies. This should solve this once and for all, rather than issuing separate provisions on simple or compound interest,” Barroso said.

So far, one opinion has been handed down on the case—Justice-rapporteur Edson Fachin moved to charge compound interest on the state debts, and three other justices, Luís Roberto Barroso, Marco Aurélio Mello, and Gilmar Mendes, hinted they intended to follow suit.

But the Supreme Court also sustained injunctions granted to certain states allowing them to use simple interest to calculate their debt amounts.

In a statement, the Ministry of Finance reported that the 60-day adjournment is consistent with the position of the federal government, and especially of the Finance Ministry, which has been negotiating with state governors since December 2015 toward a sound fiscal proposal for the entire Federation.

This proposal is the bill that is currently pending before Congress, whose other points include a 20-year extension in the deadline to pay the debt and an optional 40% rebate in installments for states that agree to commit to an austerity policy.

Translated by Mayra Borges