This paper shows that the rules established to control state and municipal debt in Brazil are inefficient. They cannot prevent the excessive growth of the debt nor avoid the approval of loans that have a negative benefit-cost relation. The paper uses theoretical models to show that the federal...

The use of privatization revenues to reduce the public debt aims to refrain an excessive accumulation of the latter, preventing that fiscal unbalances might push the debt too much, while the government implements the necessary measures to a long-lasting fiscal adjustment. The timing is...