Raymond Colitt, Anna Edgerton – Bloomberg Business, 12/20/2015
Nelson Barbosa could, of course, turn out to be the man who fixes Brazil’s finances, tames soaring inflation and revives the sinking economy, but investors sure aren’t betting on it.
As word spread across Sao Paulo trading floors Friday that Barbosa would be the country’s next finance minister, replacing the beleaguered Joaquim Levy, markets plunged. By day’s end, the currency was down 2.6 percent, stocks 3 percent. (Markets were little changed early Monday, with the currency swinging between positive and negative territories.)
That harsh reception is the exact opposite of the broad rally that greeted Levy when he took the post a year earlier. Levy, though, was the market’s golden boy, with his University of Chicago-training, asset-manager experience and reputation as a fierce budget cutter. Barbosa, while generally respected by analysts for his technocratic skills, isn’t seen as being quite as tight-fisted on spending, a perception he only reinforced when suggesting Friday that he was amenable to granting subsidies to some industries.
Holly Ellyat – CNBC, 12/21/2015
The resignation of Brazil’s pro-austerity finance minister has left markets on edge as amid concerns over whether his replacement will continue with a program of fiscal consolidation.
On Friday, Brazilian President Dilma Rousseff replaced Finance Minister Joaquim Levy, a fiscal conservative appointed just over a year ago, with a close ally, Budget and Planning Minister Nelson Barbosa, the Brazilian leader’s office said in a statement.
Levy’s resignation was not a surprise to many analysts as his austerity plan had come under increasing criticism, but markets did not take kindly to the news of his replacement with stocks falling 3 percent and the Brazilian real declining 2.6 percent against the dollar.
Bruno Federowski and Bernadette Baum – Reuters, 1/30/2015
The Brazilian real weakened about 2.5 percent against the dollar on Friday after Finance Minister Joaquim Levy suggested the government had no intention of keeping the currency stronger than the market would naturally dictate.
Speaking to investors and business leaders at an event in Sao Paulo on Friday, Levy suggested the real was overvalued and signaled the government will not work to keep the currency from sliding.
The real added to early losses shortly afterward, dropping as low as 2.68 to the dollar.
Alonso Soto – Reuters, 1/13/2015
Any tax increases implemented as part of Brazil’s push to improve the nation’s fiscal accounts will have a “minimum impact” on economic activity, Finance Minister Joaquim Levy said on Tuesday.
Speaking at a breakfast meeting with reporters in Brasilia, Levy said bringing Brazil’s gross debt below 50 percent of gross domestic product was “a positive long-term goal.” He also expressed confidence that the nation’s sovereign credit rating would not suffer a downgrade.
Levy took office this month promising to restore fiscal discipline in President Dilma Rousseff’s second term after warnings from credit rating agencies of a possible downgrade.
Paula Sambo – Bloomberg News, 1/12/2015
Brazil’s real fell the most among major currencies after analysts surveyed by the central bank lowered their growth forecast for Latin America’s largest economy.
The currency slid for the first time in five days, dropping 1.5 percent to 2.6737 per dollar at the close of trade in Sao Paulo. The decrease was the biggest among 16 major currencies tracked by Bloomberg. Swap rates, a gauge of expectations for changes in borrowing costs, climbed 0.1 percentage point to 12.58 percent on the contract maturing in January 2017.
Analysts reduced their forecast for gross domestic product growth in 2015 to 0.4 percent from 0.5 percent, according to the median of about 100 estimates in a weekly central bank survey published today. Evidence of a stalled economy increases the challenges for Finance Minister Joaquim Levy, who has pledged to impose more rigorous fiscal discipline.
Ye Xie and Filipe Pacheco – Bloomberg, 11/24/2014
Whoever is tapped by Brazilian President Dilma Rousseff to oversee the government’s finances in her second term, one thing is clear: There’s plenty of work to be done to win over currency investors.
While the real gained the most in three weeks on Nov. 21 amid optimism the looming cabinet shuffle will help shore up Brazil’s economy, foreigners are betting on more declines after the currency weakened to a nine-year low this month. Overseas holdings of futures contracts wagering against the real have soared 30 percent since Sept. 29 to $31.3 billion as of last week, according to data compiled by the Sao Paulo bourse. That’s just 8.6 percent shy of August’s record high.
A surge in government spending, coupled with Rousseff’s intervention in Latin America’s biggest economy, has left Brazil with its widest budget deficit in a decade and near-zero growth. Options traders are more bearish on the real than on any of its major peers.
Brazil’s deputy Finance Minister Nelson Barbosa, who helped design some of the government’s flagship economic projects, has handed in his resignation for personal reasons and will leave the post in June, the ministry said on Monday.
Folha de S. Paulo newspaper reported his departure over the weekend, citing loss of influence within President Dilma Rousseff’s government as the reason for his resignation.
Folha said Barbosa, once a close advisor to Rousseff, had lost access to the president with the rise of Treasury Secretary Arno Agustin, who is expected to take his place as the ministry’s executive secretary.