Brazil unveils fiscal balance deal

Brazil's federal and state governments announced on Tuesday that they have reached a fiscal balance deal designed to restore fiscal discipline in the South America's biggest economy.

The deal was agreed upon earlier in the day after a meeting held in Brazil's capital Brasilia, which gathered President Michel Temer and several governors and ministers. It is expected to be fully concluded by next week.

Under the deal, the federal government will give the states a larger share of the repatriated funds collected in the past few months. In return, the states will be committed to making a fiscal adjustment in their accounts, which include an increase in the social security contribution of public servants - a measure which has caused uproar and protests after being announced by Rio de Janeiro state.

The repatriation of funds was a move taken by the federal government to collect income taxes. People and companies who had money abroad undeclared to the Federal Revenues Secretariat were allowed to repatriate the funds by paying a fine and income tax, through which they can avoid being sued for tax evasion and capital flight.

The deadline for the repatriation was the beginning of November. The Brazilian government has managed to collect 46.8 billion reals (14 billion U.S. dollars) in income tax and fines with an idea to give the money to state administrations before the end of the year.

The money will not be enough to solve states' financial problems, but will help states make the "transition to the new fiscal regime," Finance Minister Henrique Meirelles said. Endi