By Alonso Soto and Luciana Otoni-BRASILIA (Reuters)
Brazilian President Dilma Rousseff is struggling to keep allies on her side as she faces accusations of doctoring fiscal accounts, calls for her impeachment, and record-low approval ratings.But her finance minister, in an interview, professed his confidence in her ability to ride out this political storm and the talked up the prospects for a fiscal austerity plan aimed at keeping Brazil’s investment grade credit rating.
“The ratings agencies themselves aren’t concerned with something that’s a flash in the pan, they’re worried about whether we’ll have growth,” Finance Minister Joaquim Levy told Reuters at his office in Brasilia.
Levy dismissed the chances of impeachment for Rousseff, saying it was “an absolutely remote hypothesis… I don’t see anything that justifies the start of that process.”
A severe economic downturn and widening corruption scandal that involves dozens of lawmakers has undercut confidence in Rousseff’s leadership and raised public support for her impeachment just six months into her second term. These political tensions have dragged the Brazilian real to its weakest in more than 12 years against the U.S. dollar and prompted doomsday warnings from big investors.
Levy, a former banking executive and known fiscal hawk, is seen as the force behind Rousseff’s shift to adopt more market-friendly policies to regain the trust of investors in the once-booming economy. Levy, an economist educated at the University of Chicago, which is known for its neoclassical, free-market stance, tried to calm markets by warning investors who fret over political noise and leave Brazil may well end up losing money.
“I have seen other sell-offs in Brazil. In general they pass and who stays ends up winning,” Levy said.
He acknowledged that some recent defeats in Congress, which this week approved a bill to raise government wages, have complicated his efforts to re-balance the public accounts. However, Levy said the government will take “necessary measures” to reach its future fiscal targets. He expressed confidence the government would meet its reduced primary (before paying interest) surplus target for this year.
He conceded, for the first time, that the government could consider a rule to limit the annual increase of obligatory expenditures, which make up about 90 percent of all budget spending.
“We need to maintain our dialogue with Congress… with patience and perseverance,” Levy said. “Like in every Congress there are moments of more or less effervescence.”
(Reporting by Alonso Soto; Editing by Christian Plumb and Eric Meijer)</