Rodríguez-Pose A. and Gill N. (2004) Reassessing relations between the centre and the states: the challenge for the Brazilian administration, Regional Studies38, 833-844. Centre- state relations in Brazil have been difficult and have been at the root of many problems since the passing of the 1988 Constitution, which sanctioned an over- empowerment of the states to the detriment of the federal government. As a consequence, the last decade and a half has featured a continuous power struggle between the centre and the states and successive attempts by the former to consolidate its position. The left-wing Partido dos Trabalhadores (PT) administration, which was sworn into office in early 2003 commanding huge popularity and with a previous strong record in local government, is again addressing the issue of forcing more responsibility for spending onto the states. While this may entail further devolution, it would bring about an equalization between spending opportunity and responsibility, and help to minimize the agency problems that stem from the centre-state power struggle that partially underpinned much of the economic turmoil of the 1990s. This paper, however, contrasts this policy priority with one of the central pillars of the new administration's aspirations: the reduction of poverty and inequalities. While greater fiscal responsibility at the state level may well lead to greater macroeconomic stability, it could also set in motion a series of mechanisms likely to engender greater regional disparities, which have been relatively stable in Brazil over the last two decades. The discord between the priority of state debt reduction and that of inequality reduction is therefore likely to emerge as a central policy challenge for the new administration.