Justice grants Minas Gerais yet another debt repayment deferment

A Supreme Court Justice on Wednesday granted a petition filed by the state government of Minas Gerais to postpone deadlines involving a federal fiscal recovery program, including the payment of debt installments, for 120 days.

Without the decision by Justice Kassio Nunes Marques, the deadline would have expired on December 20, and the state would be ordered to pay BRL 18 billion (USD 3.6 billion) to the federal government in 2024 — a fraction of its total debt, currently estimated at over BRL 160 billion (USD 32.7 billion).

The injunction will be reviewed by the other justices in February 2024.

Since 2018, the government of Minas Gerais — Brazil’s second-most populous state, with around 20 million people — has not paid a single cent of its debt to the federal government, relying on previous Supreme Court decisions to suspend payments.

In July 2022, the state asked to join a fiscal recovery program, the terms of which are still under discussion. Governor Romeu Zema of the libertarian Novo party has recently considered selling assets in key state-owned companies to the federal government, although it is unclear whether those plans will come to fruition.

The Solicitor General’s Office was not opposed to Minas Gerais postponing its adherence to the fiscal recovery program, but wanted the state government to resume its debt payments.

Senate President Rodrigo Pacheco, who also represents Minas Gerais, has proposed an alternative plan to the fiscal recovery program, putting himself at odds with Governor Zema. Mr. Pacheco has proposed that compensation paid by mining companies for environmental damage in the state should go to the federal government instead.

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