Rio, federal government agree on austerity package for state

SAO PAULO – Brazil’s federal government and Rio de Janeiro state have agreed on a package of austerity measures that will partially plug the financially struggling state’s anticipated $8 billion deficit.

The federal government offered Thursday to defer the state’s debt payments for up to three years, in exchange for spending cuts and tax increases.

Finance Minister Henrique Meirelles told a news conference the measures would yield around $6 billion in total. They include nearly $3 billion in spending cuts.

Rio has been experiencing a serious financial crisis in which thousands of state employees and retirees have not been paid or have been paid months late. Anger over late payments and potential austerity measures led to massive protests last year.

The measures announced Thursday must still be approved by the Rio state assembly.