States must provide guarantees for any federal aid: Brazilian president

Brazilian President Michel Temer said on Tuesday that the federal government will only render aid to the states undergoing financial crises if they present guarantees.

Temer cited as an example the state of Rio de Janeiro, whose state assembly authorized on Monday the privatization of the state water and sewage company Cedae, a precondition for the state to receive a loan of 3.5 billion reals (1.1 billion U.S. dollars).

"Cedae's privatization stimulates us to try to approve a bill in the Congress through which we will only be allowed to render federal aid if there are guarantees," the president said.

However, there are concerns that a privatized Cedae will stop making efforts to increase sewage coverage in poorer areas and will raise the price of water bills.

In addition, Cedae is the only state-controlled company in Rio which yields a profit, and selling it will not be enough to get the state out of the financial crisis it is in, some analysts say.

Earlier this week, Brazilian Finance Minister Henrique Meirelles said that the government will push a bill in Congress for a new project of financial recuperation for the states in need. However, in order to be qualified for the federal money, those states will have to commit to extensive fiscal measures. Endi