Brazilian President Dilma Rousseff on Friday vetoed part of a bill approved by Congress that would give non-oil producing states a greater share of the country's oil royalties, the government announced.
Rousseff rejected an article that set a new royalties share-out plan from 2013, because it would be violate contracts signed before the bill was approved, presidential chief of staff Gleisi Hoffmann told a press conference.
The measure would cut the federal government's share of the royalties from 30 to 20 percent, and that of producing states from 26 to 20 percent.
And non-producing states in turn would see their oil royalty revenues rise from seven to 21 percent by 2013, and up to 27 percent by 2020.
Rousseff had until Friday to rule on the measure. She had come under intense pressure from Rio de Janeiro state officials who warned that the new scheme would cripple their finances and jeopardize the financing of the 2016 Rio summer Olympics.
"The veto safeguards the contracts already signed," said Hoffman, who was flanked by Energy Minister Edison Lobao and Education Minister Aloizio Mercadante.
Lobao made it clear that the veto was not meant as an affront to Congress but aimed to protect existing contracts.
Rousseff's decision maintains the previous share-out plan that favors oil-producing states, mainly Rio de Janeiro, Sao Paulo and Espiritu Santo, but establishes the new royalties distribution rules for future contracts.
Oil-producing states anticipate higher revenues from the so-called "pre-salt," deep-water reserves discovered in 2007 off Rio de Janeiro state.
The huge pre-salt reserves could hold more than 100 billion barrels of high-quality recoverable crude and turn Brazil into one of the world's top exporters, according to the National Petroleum Agency.
Monday an estimated 2000,000 people joined a Rio rally called by state governor Sergio Cabral and Rio Mayor Eduardo Paes to press Roussefff to veto the legislation.
Cabral and Paes said the new scheme would deprive Rio state of $1.7 billion as early as next year, and $24 billion by 2020.