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Brazil governors plan new proposal for oil royalties

RIO DE JANEIRO -- Governors from 16 Brazilian states plan a new proposal to distribute revenue from oil production that would avoid a legal standoff and return billions in lost revenue to oil-producing states Rio de Janeiro, Espirito Santo and Sao Paulo, the O Globo newspaper reported Wednesday.

During a meeting in Brasilia, governors for the 16 nonoil-producing states came "very close" to a deal, Pernambuco state Governor Eduardo Campos told the newspaper. Under the deal, the federal government would transfer about $2.3 billion from the government' s share of future royalties to nonproducing states. More important, royalties from existing oil production would remain with Rio, Espirito Santo and Sao Paulo states.

The deal would reverse changes implemented last week when Brazil' s Congress voted to overturn a presidential veto of key portions of new oil royalties legislation, equally distributing royalties from existing and future oil production between the country' s 27 states. Rio, Espirito Santo and Sao Paulo, however, plan to fight the changes by filing lawsuits with Brazil' s Supreme Court.

Nonproducing states are concerned the three states will win their cases, overturning the new legislation and leaving the 24 nonproducing states with no piece of the pie, Mr. Campos told O Globo. The proposal will be presented to President Dilma Rousseff at a meeting next week, the governor said.

Dow Jones Newswires



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