Brazil is considering an emergency loan to the cash-strapped state of Rio de Janeiro as it prepares to host the Olympic Games in less than two months, according to two senior government officials familiar with the situation.
The loan would be guaranteed by the state's participation in local companies and could be extended to the states of Minas Gerais and Rio Grande do Sul, which are struggling to pay employees and pensioners as a crippling recession reduces tax revenue.
"These states need cash injection. There is no other way," said a member of the government's economic team who asked for anonymity in order to speak freely.
"These loans will be backed by states' assets such as banks, utilities, gas and sanitation companies."
The three states would transfer their stakes in government-led companies to the federal government, which could in turn sell them to private investors as it did during the last states' debt restructuring in the late 1990s, the source said.