Government of SC studies proposal from the Ministry of Finance to reduce state debt with the Union – OCP News

A proposal to reduce the states’ public debt with the Union was presented to the governors who are part of the South and Southeast Integration Consortium (Cosud), in a meeting this Tuesday morning, 26, in Brasília. Vice-governor Marilisa Boehm and secretary Cleverson Siewert (Finance) participated in the meeting at the Ministry of Finance, representing governor Jorginho Mello.

Santa Catarina residents followed the details of the Interest for Education program, an initiative that will reduce interest rates for states that triple the number of places offered in Technical High School.

Like other states, the vice-governor and secretary returned to Santa Catarina with a commitment to analyze the Union’s suggestion.

“The agreement is that, every three weeks, secretaries and governors who are part of Cosud meet to study the proposal and suggest changes. The objective is to seek a consensus that meets the demands of the states and renegotiate the interest on the public debt with the Union, guaranteeing fairer rates for the payment of this bill”, said the vice-governor about the meeting with ministers Fernando Haddad (Finance) and Alexandre Padilha (Institutional Relations).

For Secretary Cleverson Siewert, the Federal Government’s project should only be seen as a starting point, as it creates a series of obligations so that states can reduce the interest applied by the Union when collecting public debt installments. “The Ministry of Finance’s initial proposal is an important step forward because it demonstrates the Union’s willingness to put the matter up for discussion. Now it is up to us to analyze and seek convergence towards a model that benefits the States and consequently the population”, said the secretary.

According to secretary Vânia Franco (National Articulation), who is also following the matter in Brasília, the final proposal should be finalized within two months. “From there, the project is taken to the National Congress, where it may undergo further changes. We will monitor and work with parliamentarians so that the project benefits the population of Santa Catarina in the best possible way.”

Debt

The States’ debt to the Union is currently around R$740 billion. Santa Catarina took out loans totaling R$5.42 billion, paid R$16.5 billion by December 2023, but ended the third quarter of last year with a public debt of R$10.98 billion with the Federal Government. Reviewing the methodology used in the calculation is necessary to reduce the bill that still needs to be paid.

Until 2013, public debt was calculated using the IGP-DI index, plus 6% to 9% – which did not give states the opportunity to amortize amounts. The Federal Government partially gave in and adopted a new indicator, which is the Monetary Update Coefficient (CAM) plus 4% per year, resulting in the merger of the old model and which benefited all States (Federal Decree 8,616/2015).

The proposal currently defended by the South and Southeast is to recalculate, for the period from 2013 to December 2023, the outstanding balances of the contracts and cause the CAM to be calculated according to the monthly variations of the IPCA plus 4% per year and SELIC, applying the lowest result. In this scenario, Santa Catarina would save R$1.3 billion. For the future period, the proposal is to apply simple interest of 3%, without monetary restatement — which would result in a reduction of R$17 billion in debt service by 2048 (out of a total of R$29 billion if the model were sustained).

Schedule

After the meeting at the Ministry of Finance, vice-governor Marilisa Boehm and secretaries Cleverson Siewert and Vânia Franco attended a public hearing held at the Senate’s Economic Affairs Committee (CAE). The meeting discussed the proposal that creates mechanisms for reducing debts owed by states and municipalities to the Union. One of the alternatives is the Complementary Law Project (PLP) 35/2022, which authorizes state and municipal governments to invest their own resources in works and services linked to the Federal Government and reduce debt amounts owed to the Union.

State Attorney General, Márcio Vicari highlighted that the PLP guarantees the necessary legal adjustments so that new agreements between states and the Union can be made official without prejudice to either party. One of the examples cited was the cooperation signed in 2021 between the Federal Government and the Government of Santa Catarina, which resulted in the investment of R$384 million in Santa Catarina resources in four BRs: 470, 285, 280 and 163.

“It is necessary to avoid the appropriation of values ​​by one entity in relation to another that is justified momentarily and circumstantially, but that needs to be compensated to avoid unjust enrichment”, assessed the attorney general when citing the peculiarity of the agreement of cooperation.

Director of the State Treasury, Clóvis Renato Squio explained at CAE that the agreement signed between Santa Catarina and the Federal Government was approved into law in the Legislative Assembly and that determined the use of R$465 million from state funds in works on four sections of highways federal. “R$384 million were spent, which is more than 1% of the State’s net tax revenue. Everything invested according to DNIT measurements. This amount is close to the R$550 million that we pay annually in court orders”, argued Squio.