The Provisional Measure that expanded the limit of debt for the host cities of the 2014 World Cup, signed last week by the Brazilian President Luiz Inácio Lula da Silva, shall not be enough to help São Paulo. This municipality is the only one that cannot take on any more debts, having already exceeded the limits of the Tax Responsibility Law. With negative debt, the city of Porto Alegre is in the best situation among all the host cities of the 2014 World Cup.
According to the most recent figures as available, referring to last December, the net debt of São Paulo City Hall was almost double the current net income (CNI). Indeed, the debt of the city came to R$ 45.5 billion (€ 20.13 billion), compared with a net income of R$ 21.9 billion (€ 9.69 billion), giving a relationship of 207.9%.
According to the Tax Responsibility Law, the net current debt of the municipalities may not exceed 120% of CNI. In 2001, the Brazilian Senate established a calendar for a transition period so that the level of debt could go back to the levels as established by Law up to 2016. In the case of São Paulo, the limits of the transition should have been 154.06% last year and 149.19% this year, less than the level recorded at the end of 2009.
To gain access to credit lines to carry out building work for the 2014 World Cup, São Paulo City Hall shall need the help of the State Government. According to data released by the National Treasury, the São Paulo Government may expand the debt by up to R$ 45.5 billion (€ 20.13 billion) without exceeding the limits set by the Tax Responsibility Law.
With the provisional measure signed last week, the municipalities that refinanced their debts with the Brazilian Union at the end of the 1990s had their level of debt readjusted to 120% of net income, the same as in the Tax Responsibility Law. Due to renegotiation, these City Halls were subjected to an even lower limit, 100% of real net income.
Out of all the host cities, Curitiba, Fortaleza, Manaus and Porto Alegre did not participate in the renegotiation process which meant that they could already take on debts up to a limit of 120% of RCL.
Porto Alegre
Out of all the cities that shall be hosting the matches of the 2014 World Cup, the capital of Rio Grande do Sul is the city in the most favorable condition for the promotion of work. The municipality is the only one that owes less than it receives.
According to data released in April of this year, the level of debt of the Porto Alegre city hall is negative by 1.96% of RCL. After the capital of Rio Grande do Sul, the lowest levels of debt are those of Rio de Janeiro, with a positive level of debt of 4.72%, and Curitiba, whose net debt comes to 5.75%.
The cities with the greatest level of debt, after São Paulo, are Salvador (65.40%) and Cuiabá (48.85%). As a Unit of the Federation, the Federal District follows the rules of the states and may take on debts of up to 200% of the current net income. According to the most recent figures released in December, the net debt of the Brazilian Federal District was 17.33%.
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12/01 | News
