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Brazil's top court to rule on effort to spread oil wealth

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Ricardo Moraes/AP/File

(Read caption) In this file photo, workers walk in front of the P-51 oil rig of Brazil's state-run oil company Petrobras, in Angra dos Reis, Rio de Janeiro.

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• A version of this post ran on the author's blog, bloggingsbyboz.com. The views expressed are the author's own.

Most of Brazil's oil output benefits the states of Rio de Janeiro, Espirito Santo, and São Paulo. Brazil's Congress voted to spread an increased amount of oil royalties across all the other states, raising the amount from 7 percent to 21 percent, cutting royalties to the three states and the federal government in the process. Presidenet Dilma Rousseff issued a partial veto so that the law would only affect new production, but the Congress overturned her veto last week. The law will now go to the Supreme Court to determine if it is constitutional.

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As I wrote last year, this is a different take on the local vs. national debate that is seen throughout the region. Should oil and mineral wealth go to the local communities, the federal governments, or be spread around to the entire country's population?

It's different due to the scale and importance of the regions involved. The three states mentioned above, Rio, Espirito Santo, and São Paulo, have a combined population of 60 million people.

The Rio state government has suspended all payments other than salaries in protest of the dispute. The government is making a threat, with a bit of hyperbole, that the loss of funds threatens the city's ability to complete the construction it needs to host the World Cup and Olympic games.

– James Bosworth is a freelance writer and consultant who runs Bloggings by Boz.