June 14, 2017 / 12:12 PM / 3 months ago

Temer hints BNDES to refinance Brazil state debt, source says

RIO DE JANEIRO, June 14 (Reuters) - President Michel Temer has signaled his support for a plan to refinance 50 billion reais ($15 billion) in debt owed by Brazilian states to the development bank BNDES, a person with direct knowledge of the matter said on Wednesday.

He told a dinner of Brazilian state governors in Brasilia late on Tuesday that he wished to find a solution as soon as possible to the mounting debt burden of regional governments, according to the person, who requested anonymity to speak freely about the matter.

The person said the refinancing of 20 billion reais of that amount is “just a step away” and could be finalized by September because of legislation that facilitates the renegotiation of state liabilities with the bank.

The remaining amount may depend on an executive decree, said the person. Temer’s office did not immediately comment.

Several states have struggled to pay salaries for police and doctors and to keep hospitals stocked with medical supplies. Their finances have been squeezed by a steep decline in commodity prices, a prolonged recession and years of budget mismanagement.

Since taking office a year ago, Temer has offered states some debt relief without undermining his vow to narrow a record high budget deficit.

Still, economists such as Insper professor Marcos Lisboa warned Temer could water down his austerity plan to drum up political support as the president faces a corruption probe.

$1 = 3.3157 reais Writing by Guillermo Parra-Bernal; Editing by W Simon

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