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Brazil Faces $89 Billion Time Bomb

Changes in state debt interest calculations threaten to further reduce federal income in crisis-hit Brazil.

By Mario Sergio Lima and Carla Simoes, Bloomberg | Updated on April 12, 2016

Amid the worst political crisis in decades, Brazil’s federal government also faces a spiraling state debt crisis that could cost it as much as US$89 billion in lost revenue.

Brazilian states, hit by a two-year recession that has depressed tax revenues, are seeking to apply simple rather than compound interest on debt owed to the federal government. The change could cost the Treasury 313 billion reais, according to Finance Ministry calculations.

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