Brazil’s federal government on Monday night signed a sweeping debt rescheduling agreement with all 27 of the nation’s state administrations. Under the agreement, the states will gain a six-month moratorium on payments of principal to federal agencies. Payments of principal will resume on a sliding scale basis at the beginning of 2017 and will normalize in July of 2018. The federal government will temporarily forego receipt of some R$50 billion in principal payments during the two-year period. As part of the deal, the state governors agreed to support a proposed constitutional amendment that would put a cap on federal spending. The cap would limit increases in annual spending to previous-year inflation. Brazilian state government debts total over R$500 billion.
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