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Mac Margolis

Brazil's Little State That Could

Surrounded by dysfunction, the fourth-smallest state has avoided red ink and prison riots.
Order and progress can be hard to find.

Order and progress can be hard to find.

Photographer: Miguel Schincariol/AFP/Getty Images

Success stories are hard to come by in Brazilian public service these days. Hardly a news cycle passes without a new tale of fiscal profligacy, white elephants or elected officials with their hands in taxpayers' pockets. A toxic combination of public overspending, early retirement and tumbling revenues has left state and municipal governments bereft. Soaring state debts, in turn, have become a political battleground, as local leaders shake down the unpopular stand-in government of President Michel Temer for indulgences in exchange for political support.

So what to make of Espirito Santo? Brazil's fourth-smallest state, with 2 percent of national population, also is one of the country's most fiscally fit. While others padded the bureaucracy, it shed jobs and slashed spending by 8 percent in 2016, finishing the year with manageable debt, a modest primary surplus (coming off a deficit in 2014 and breaking even in 2015). Espirito Santo was one of three states to merit a "B" credit rating from the national treasury last year, trailing only Para, which earned a B+.