World News

Brazil transfers 12 billion reais to regions in move toward ‘Federative Pact’

BRASILIA (Reuters) – Brazil’s government on Tuesday said it has transferred 11.7 billion reais ($2.9 billion) to local authorities, the ‘decisive first step’ toward the Federative Pact framework of new rules overseeing federal, state and municipal budgets.

The funds are part of the 70 billion reais signing bonus paid to the federal government from the “Transfer of Rights” oil auctions in November, and represent the biggest ever voluntary transfer of resources from Brasilia to the regions, the Economy Ministry said.

“The voluntary transfer of almost 12 billion reais … is a decisive first step towards the government’s proposal for a Federative Pact,” Waldery Rodrigues, special secretary to the Economy Ministry, said in a statement.

Rodrigues said that the funds must be used for social security payments and investment, and not for other purposes such as raising public sector workers’ salaries.

The Economy Ministry has made it a priority to restore the public finances back to health, mainly via severe spending freezes and cuts, and raising revenue via concessions and selling off state assets.

Its most notable achievement in the first year of right-wing President Jair Bolsonaro’s term of office was a sweeping reform of the country’s pension system that will save the public purse over 800 billion reais ($200 billion) over the next decade by raising the minimum retirement age and workers’ pension contributions, and closing loopholes.

($1 = 4.02 reais)

(Reporting by Jamie McGeever; Editing by David Gregorio)

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