The Brazilian Federal Supreme Court (STF) has reached a majority consensus in favor of São Paulo regarding the validation of its debt refinancing contract with the federal government through the debt restructuring program known as Propag (Full Payment Program for State Debts). This decision is pivotal as it allows the state to adhere to new terms of the negotiation, which are expected to result in significant savings. According to the São Paulo government, this agreement will enable the state to save around R$ 1 billion every month, thereby improving its financial health.

In the ruling, five ministers sided with the case's rapporteur, André Mendonça, who had previously issued a preliminary injunction favoring the state back in January. The justices voting in support included Alexandre de Moraes, Luiz Fux, Dias Toffoli, Cristiano Zanin, and Edson Fachin. However, two ministers, Flávio Dino and Cármen Lúcia, partially diverged from the majority opinion. They agreed on prohibiting the state's registration in default lists and imposing penalties; however, they opposed the validation of the contract due to the incomplete legal formalities.

With two votes still pending, the case's judgment is scheduled to conclude in a virtual plenary session by midnight on Tuesday. This ruling could set a significant precedent for state-federal debt negotiations in Brazil and might influence the fiscal strategies of other states facing similar financial challenges. The implications of these decisions will be closely watched as they could shape the future of state financing and fiscal responsibility in Brazil.