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By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL –Rio de Janeiro’s already critical financial situation suffered another blow on Monday, November 7th, with the news that the federal government was freezing all of the state government’s bank accounts until the R$170 million debt the state has with the Union is paid off. By blocking bank accounts, all revenues coming into the state go directly to the Union, with no money to pay salaries, pension or social programs.

Brazil, Rio de Janeiro,Rio's  Luiz Fernando Pezão announce measures to ease state's financial crisis
Rio’s Luiz Fernando Pezão announce measures to ease state’s financial crisis, photo by Carlos Magno/Imprensa RJ.

“I’m going to Brasília to negotiate,” said Rio’s governor, Luiz Fernando Pezão on Monday during a press conference. “The drop in revenues has caused us to infringe the (country’s) Fiscal Responsibility Law.” According Rio’s Finance Department, the state will be unable to make any payment to its employees until the debt with the Union is paid.

Facing one of the worst crises in its history, state officials had already announced very drastic measures to be taken to try to improve Rio’s finances, including increasing employees’ social security contribution (active, retired and those normally exempt from discounts) to thirty percent for the next sixteen months, doing away with social programs and government agencies.

In June 2016, less than two months before the start of the 2016 Olympics, Rio de Janeiro’s acting governor, Francisco Dornelles, alarmed international media by declaring a financial emergency in the state. A few weeks later the federal government authorized an R$2.9 million-worth aid package to help the state pay for security during the event.

Rio has been one of the states most affected by the recent significant decline in petroleum prices, since a big chunk of the state’s revenues comes from petroleum royalties.

At the end of the day on Monday, Globonews reported that Rio officials hoped to pay off the debt by Wednesday, November 9th.

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