Brazil’s Supreme Court Suspends City of Rio’s Debt to BNDES

RIO DE JANEIRO, BRAZIL – Justice Luiz Fux of the Federal Supreme Court (STF) has suspended the payment of Rio de Janeiro’s debt to the Federal Government on Thursday, April 2nd.

In a request brought to the Court on Wednesday, April 1st, the Rio de Janeiro city government claims it cannot honor payments to BNDES (National Bank for Economic and Social Development) because of the measures it has been implementing to fight the novel coronavirus.

The debts were incurred with BNDES to enable works for the 2014 World Cup and the Rio 2016 Olympics.

Between April and September this year, Rio would have to disburse R$563.1 (US$104) million. Delays in payment could lead to credit restrictions.

Justice Fux grqnted the petition and ruled that the funds should be fully invested in actions to tackle the novel coronavirus.

“We must not forget that measures to contain Covid-19 consist of public policies whose implementation requires budgetary resources, which must be secured with the utmost urgency, to justify, exceptionally, the intervention of this Court,” said Fux in the ruling.

In the petition, the city of Rio stated that the resources will be reallocated to structural measures to meet the demand caused by the crisis.

Among the projected measures are the acquisition of 20,000 basic food baskets (R$2.5 million) and 14,000 hygiene kits (R$418.3 thousand), in addition to the opening of 500 beds in shelters to serve the homeless (R$10.5 million).

“It is reasonable for the City of Rio de Janeiro to decide the allocation of the resources released for the funding of prevention, containment, fighting and mitigation actions of the coronavirus pandemic,” says the Justice.

Petitions such as that made by Rio de Janeiro have already been granted by the Court. Justice Alexandre de Moraes has suspended the payment of debts of the states of São Paulo, Bahia, Maranhão and Paraná to the federal government.