BRASILIA (Reuters) - Brazil's finance ministry unveiled on Tuesday its proposal to reduce the burden of states' debt to the federal government, conditioned upon allocating resources to technical high school education.
The move comes after several governors have requested lower charges, arguing that the amount paid in interest is excessively high and hampers investment.
Finance Minister Fernando Haddad, who previously served as education minister in a prior administration of leftist President Luiz Inacio Lula da Silva, met with governors on Tuesday morning to discuss the issue and predicted the draft of a bill on the subject to be ready in about two months.
Speaking with reporters after the meeting, he said that new rounds of discussions will take place with states to reach the bill's final format.
In a presentation released by the ministry's press office, the government said that states joining the program would be able to opt for interest rates of 2%, 2.5% or 3% per year, varying according to the adopted counterparties.
The lowest rate will apply to those who allocate 100% of the savings in debt service resulting from the interest rate reduction to the creation and expansion of enrollments in technical high school education.
According to the finance ministry, states currently owe 740 billion reais ($148.9 billion) to the federal government, with four states - Sao Paulo, Rio de Janeiro, Rio Grande do Sul, and Minas Gerais - accounting for 90% of the total debt.
States that join the initiative will experience a temporary reduction, from 2025 to 2030, in the interest rates applied to debt refinancing contracts.
The goal is to have over 3 million students enrolled in technical high schools by the end of this period, with states that meet their targets within six years enjoying a permanent reduction in interest rates, the ministry said.
Regardless of participation in the program, states can achieve further interest rate reductions of 0.5 percentage point by making an extraordinary amortization of 10% of their debt, or 1 percentage point in case of a 20% payment.
Amortization can be made in assets, including stakes in public companies and mixed economy societies, said the ministry.
($1 = 4.9712 reais)