BRAZIL · PUBLIC FINANCE
Key Facts
- The country Brazil, Latin America’s largest economy, holds its presidential runoff on Sunday 25 October, and its states borrow with federal guarantees.
- What happened In September the federal government paid R$244.01 million (about US$48 million) on loans of states and cities that it had guaranteed.
- Who drew Rio Grande do Sul accounted for R$237.71 million (about US$47 million), or 97% of the September total.
- The year Through September the 2026 total is R$3.38 billion (about US$669 million), against R$11.08 billion (about US$2.2 billion) in all of 2025.
- The history Since 2016 Brazil’s federal government has paid R$89.90 billion (about US$17.8 billion) and recovered R$6.06 billion (about US$1.2 billion).
- The catch About R$80.09 billion (about US$15.9 billion) of the payments sit in a rescue program that delays repayment by the states.
- Power Index Brazil ranks 1st of 14 in The Rio Times Latin America Power Index, with 75.0 points (October 2026 edition).
Prediction markets · who wins the runoff
Implied chance of winning Brazil’s presidency on 25 October, from traders’ prices.
Polymarket
Flávio Bolsonaro 79.2% · Lula 20.5% (US$184 million traded)
Kalshi (regulated in the US by the CFTC)
Flávio Bolsonaro 78% · Lula 22%
As of 16 October, 3:40 am ET (08:40 Lisbon), updated every 20 minutes. Prices are bets, not polls, and can move fast.
Why we show this: prediction markets turn real-money bets into a live probability that moves within minutes of the news, which is why investors, campaigns and newsrooms in the United States now follow them closely. We show them next to polls and official results, never instead of them.
Brazil’s federal government paid R$244.01 million (about US$48 million) in September on unpaid state loans that it had guaranteed. The National Treasury published the figure on Thursday 15 October, and 97% of it covered Rio Grande do Sul.
For US investors in Brazilian debt, the monthly report shows what states’ missed payments cost the federal budget ten days before the runoff. The total for 2026 has reached R$3.38 billion (about US$669 million) after nine months.
What the Treasury Report Shows
The National Treasury, the arm of Brazil’s finance ministry that manages federal debt, published its monthly guarantee report on Thursday 15 October. It shows the federal government paid R$244.01 million (about US$48 million) in September on unpaid state loans and city loans that it had guaranteed.
Rio Grande do Sul took R$237.71 million (about US$47 million) of the September payments. Rio Grande do Norte took R$6.24 million (about US$1.2 million), and the city of Santanópolis in Bahia R$64,890 (about US$13,000).
September’s payment was below the monthly averages earlier in 2026. Those were about R$343 million (about US$68 million) in January to April and R$441 million (about US$87 million) in May to August.
Conversions in this article use about 5.05 reais to the US dollar, the central bank’s rate of 15 October 2026. Each amount is rounded, and the Treasury’s own tables carry the exact figures in millions of reais.
Which States and Cities Drew on the Guarantee
Rio Grande do Sul, Brazil’s southernmost large state with its capital in Porto Alegre, accounts for 97% of the September total. For the year to September, it has drawn R$1.14 billion (about US$225 million) from the federal guarantee.
Rio de Janeiro remains the largest user in 2026 with R$1.98 billion (about US$393 million), but it shows no payment in September. It signed a new debt agreement with the federal government on 22 June 2026.
Rio Grande do Norte drew R$191.24 million (about US$38 million) this year, and Amapá R$19.55 million (about US$3.9 million). Six cities together drew R$48.07 million (about US$9.5 million), led by Taubaté in São Paulo state with R$29.23 million (about US$5.8 million).
How the Federal Guarantee Works
When a state or city borrows with a federal guarantee, the Treasury promises lenders it will cover any missed installment. Unpaid state loans then become a debt owed to the federal government, which can collect from pledged counter-guarantees.
The Treasury also pays late-payment interest and fines that the loan contracts add. It then updates each honored guarantee daily by the Selic, Brazil’s benchmark interest rate, until the borrower settles.
A state or city that triggers a payment cannot obtain a new federal guarantee for up to 12 months. States inside the fiscal recovery regime are exempt from that ban, according to the report.
Why Unpaid State Loans Rarely Come Back
Since 2016 the federal government has paid R$89.90 billion (about US$17.8 billion) on guaranteed credit and recovered R$6.06 billion (about US$1.2 billion). Recoveries in September were R$6.64 million (about US$1.3 million), mostly from Rio Grande do Norte.
About R$80.09 billion (about US$15.9 billion) of the payments fall under the Fiscal Recovery Regime, a federal rescue program for states with unbalanced budgets. The Treasury pays lenders in full under it but collects slowly, because the state repays a rising share of each installment.
Whatever the state has not repaid at the end is refinanced over up to 360 months, or 30 years. Only Rio Grande do Sul remains in the regime, while Goiás, Minas Gerais and Rio de Janeiro left it through a newer debt program.
Claims Held Up in Court
The Treasury lists R$528.05 million (about US$105 million) that it cannot collect because of court orders. The largest piece, R$346.78 million (about US$69 million), concerns the city of Taubaté and a loan from the Andean Development Corporation (CAF).
It also lists R$77.19 million (about US$15 million) that the Treasury paid the World Bank for Rio Grande do Norte. A Supreme Court order blocked collection from the state until 9 October 2026, the report says.
Caucaia in Ceará owes R$45.93 million (about US$9 million) over a CAF loan, blocked by a federal court order. In São Gonçalo do Amarante, a court returned R$58.16 million (about US$12 million) recovered on a loan from Fonplata, a River Plate Basin development fund.
What It Means for You
For investors holding Brazilian bonds or funds, unpaid state loans are a cost that lands on the federal budget. It comes ten days before the presidential runoff on Sunday 25 October, when the next government will inherit these obligations.
The September payment is modest next to Brazil’s gross debt, which stood at 82.9% of GDP in August. Rio de Janeiro’s exit from the rescue regime is explained in its zero-interest debt deal with the federal government.
Lenders including the World Bank and CAF were paid by the federal government in the cases the report lists. That makes the federal Treasury the backstop for loans made to Brazilian states and cities under a guarantee.
What Is Not Known
The report does not say which lenders received September’s payment for unpaid state loans, nor why Rio Grande do Sul’s installments went unpaid that month. It also gives no forecast for October.
It states that a Supreme Court order blocked collection from Rio Grande do Norte until 9 October 2026, but not what the court decided next. The Treasury has not said how much of Rio Grande do Sul’s R$1.14 billion (about US$225 million) will be repaid, or when.
More: Brazil news in English, every day from The Rio Times.
Frequently Asked Questions
What is a federal guarantee on a state loan?
It is a promise by Brazil’s Treasury to repay a lender if a state or city misses an installment. The borrower then owes the money to the federal government.
Why did the Treasury pay in September?
The Treasury paid R$244.01 million (about US$48 million) on unpaid state loans, mostly for Rio Grande do Sul. The report does not name the lenders paid that month.
Which state has drawn the most in 2026?
Rio de Janeiro leads with R$1.98 billion (about US$393 million) through September, ahead of Rio Grande do Sul with R$1.14 billion (about US$225 million). Rio de Janeiro shows no payment in September.
Does Brazil get this money back?
Only a small part so far. The Treasury has recovered R$6.06 billion (about US$1.2 billion) of R$89.90 billion (about US$17.8 billion) paid since 2016.
Does this affect US investors?
It adds to the federal costs that bond investors track, though unpaid state loans were modest in September. Lenders including the World Bank and CAF were paid by the federal government in the cases the report lists.
Sources: National Treasury (Tesouro Nacional), monthly guarantees report, 15 October 2026; InfoMoney (Estadão Conteúdo), 15 October 2026; Central Bank of Brazil, dollar rate, 15 October 2026.
Editorial responsibility: Matthias Camenzind, Editor-in-Chief · Editorial standards · Report an error
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