Brazil government proposes 20-year spending cap to tame public debt

Alonso Soto and Maria Carolina Marcello – Reuters, 06/15/2016

Brazil’s interim President Michel Temer proposed on Wednesday a constitutional amendment to limit public spending growth for up to 20 years, one of the most far-reaching fiscal reforms in decades designed to curb a runaway rise in public debt.

Brazil’s government, including the legislative and judiciary branches, will be obliged to limit annual spending growth to the inflation rate of the prior year if the flagship reform is approved in Congress, according to a Finance Ministry statement.

The move signaled a victory for economic hardliners in the cabinet, led by Finance Minister Henrique Meirelles, who overcame calls from a faction pushing for a shorter cap.

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Brazil Names New Heads of Banco do Brasil and Caixa Economica Federal

Jeffrey T. Lewis – The Wall Street Journal, 05/25/2016

SÃO PAULO—Brazil’s finance ministry named two experienced insiders as heads of state-controlled lenders Banco do Brasil SA and Caixa Econômica Federal, as the new government of acting President Michel Temer continues to put its own people in top positions.

Paulo Rogério Caffarelli was named president of Banco do Brasil, the biggest bank in the country by assets, and Gilberto Magalhães Occhi will be president of Caixa Econômica Federal. Mr. Caffarelli will replace Alexandre Abreu, and Mr. Occhi will replace Miriam Belchior, who had both been appointed by suspended President Dilma Rousseff.

Ms. Rousseff had to step aside two weeks ago to face an impeachment trial in the country’s Senate, and was replaced by her vice president, Mr. Temer, who named a new cabinet and put new people in charge of state-controlled companies including Petróleo Brasileiro SA, or Petrobras, and the BNDES state development bank.

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Brazil’s New Finance Minister Faces a Big Test After Friday’s Rout

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.

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Investors on Edge: Brazil to Scale Back Austerity?

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.

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Brazil’s real drops sharply on Levy comments

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.

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Brazil’s Levy says any tax hikes to have little impact on growth

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.

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Brazil’s Real Drops Most Among Major Currencies on GDP Outlook

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.

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