Rio De Janiero: Brazil's federal government is likely to agree debt relief for the state of Rio de Janeiro worth about 50bn reais ($16bn) to help pull it out of a crippling financial crisis, said two officials close to the negotiations.
The official, who asked not to be named because the negotiations remain ongoing, said the government would suspend for three years debt payments worth about 27bn reais owed to the national treasury.
In exchange, the state would cut expenditure and raise revenues through increased pension contributions and early retirement for about 3,000 employees, among other measures, the official said.
Some of those austerity measures would need to be approved by the state assembly. The deal would serve as an blueprint for other cash-strapped states seeking help from the federal government after two years of recession dragged down revenues while expenditure continued to rise.
Finance Minister Henrique Meirelles earlier this week said that although the debt relief would be immediate, it too would need to pass through Congress.
The state, a favorite with tourists, has delayed payments to police, doctors and teachers due to a lack of funds, sparking violent street protests. Crime is mounting and dilapidated hospitals have been running out of supplies.
