The Brazilian state of Minas Gerais has announced an agreement to renegotiate its debt with the federal government, following a moratorium on repayments declared a year ago.

The deal will prevent the state from defaulting on a payment of more than one-hundred million dollars in foreign debt due next week.

The state governor, Itamar Franco, was widely blamed for triggering the devalution of the Brazilian currency, the real, when he defaulted on foreign debt payments last year.

But correspondents say the Brazilian economy has rebounded sufficiently to prevent another default from having any serious effect on investor confidence.

From the newsroom of the BBC World Service