Brazil's Finance Minister
Brazil’s New Finance Minister: A Step in the Right Direction
December 2, 2014
Primary Article Contributors
Tom Jones - Industry Analyst for the Latin America Region
Editors
Omar Mashnuk - Team Leader
Victoria Bikowski - Political Analyst
Following President Rousseff’s narrow win in Brazil’s recent presidential elections, it became evident that changes were necessary to improve Brazil’s stagnant economy. One change made by Rousseff has been to appoint former treasury secretary Joaquim Levy as Brazil’s new finance minister. This announcement has increased confidence among investors and ratings agencies, who are now hopeful that are now hopeful that there will be economic growth during Rouseff’s next term.
Investors are hopeful to see Levy become finance minister because while he was treasury secretary he helped Brazil gain investment-grade status that turned Brazil into an “emerging market powerhouse”. After Levy was announced as minister he laid out hopeful predictions and promising initiatives for the future with his main objective being to restore fiscal responsibility and reignite the economy.
Rousseff and Levy have sparred in the past over the Brazil’s economic policies and the amount of power that Levy will have will be left up to the discretion of Rousseff. One of the first challenges Levy must address is to clear up the accounting tricks that Rousseff’s government has used to flatter the national accounts, such as transfers from a sovereign wealth fund to meet fiscal projections. This will be difficult for Levy since Rousseff has history of being a micromanager with a command-and-control approach to policy making. However, Levy’s appointment exemplifies Rousseff's recognition that she needs a minister who can stimulate the economy. If Rousseff follows through with Levy’s plan, however, then she will face opposition from both her party and the constituents who support her.
Rousseff’s leftist Workers party will be heavily critical of Levy’s actions since much of the party is disdainful of the technocratic and financial expertise that Levy represents. If Rousseff gives Levy the power he needs to repair the Brazilian economy she alienates herself and risks losing the support which allowed her to win the election. Rousseff won her election on a platform of full employment and the continuing increase in real incomes, which is in direct opposition to Levy’s proposed budget cuts and reduced tax breaks. One solution to this is to garner public endorsements from former president Luiz Inácio Lula da Silva, Ms Rousseff’s mentor and pragmatic predecessor, a man loved by the Brazilian people and a man whose support could allow Rousseff to allocate power to Levy.
Levy’s appointment could be promising for a future return to fiscal responsibility and economic growth in Brazil. However, we will have to wait until January to see if Rousseff is willing to alienate herself and risk losing support by allowing Levy to take actions to repair the economy.
