Brazil’s crisis is bad – but its state finances are even worse

Brazil’s recession is bad,-- but its state finances are even worse
Public servants protest austerity measures. Photo: Tomaz Silva/ABr

In early October, protestors from workers’ unions gathered in central Rio de Janeiro. They hoped to highlight their opposition to the privatization of Brazil’s state-owned energy company, Eletrobras. But for many Brazilians, this is just the latest in a series of privatizations debated in Congress as the country tries to curb its debilitating federal and state deficits.

Brazil’s state deficits are no secret: the overwhelming majority of its states owe the federal government billions of reals, without having sufficiently productive economies to repay their debts. Just before last year’s Olympic Games, Rio de Janeiro became one of three states...

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