Brazil’s Joaquim Levy resigned as Brazil’s finance minister on Friday, after less than a year in the post, president Dilma Rousseff announced. Nelson Barbosa, minister of budget and planning, will replace Levy in the post.
| Brazilian finance minister Nelson Barbosa Source: Geraldo Magela/Agencia Senado | ||
At a press conference on Friday, Barbosa said he would make striking a fiscal balance a central point of his tenure, adding that cutting public spending, debt and inflation were top of the agenda. But observers took the statements with skepticism.
Capital Economics analysts said they expected Barbosa to take a less aggressive stance on fiscal retrenchment than Levy did: “Mr. Levy had won plaudits on Wall Street as a fiscal hawk, but struggled to push his agenda through Brazil’s increasingly fragmented congress. According to reports, Mr. Barbosa has raised concerns in private that an overly aggressive pace of fiscal consolidation will plunge Brazil’s economy deeper into recession.”
Goldman Sachs analysts anticipated a negative market reaction to the replacement, “both because the administration loses a talented minister, and also because his departure could signal a shift back to fiscal heterodoxy”.
The new finance minister is likely to favor a slower path to fiscal adjustment, analysts at Goldman Sachs wrote on Friday. “We see this as a risky strategy given that, in our assessment, fiscal consolidation remains front and center on the needed macro rebalancing agenda and the quintessential pillar to restore confidence and stabilize the economy.” LF