New Brazil finance minister promises fiscal tough line

[BRASïLIA] Brazil's new Finance Minister Joaquim Levy on Monday targeted fiscal discipline and spending cuts to return the world's seventh largest economy to growth and attract faltering investment.

"Possible adjustments to some taxes will be considered, especially those which allow increasing domestic spending," Levy told reporters on the day Brazil posted its first annual trade deficit in 14 years with imports outstripping exports by US$3.9 billion.

Levy stressed that "fiscal balance and meeting fiscal targets in 2016 and 2017 ... will be the foundation of a new cycle of growth" and said the process was already under way.

US-educated Levy is a 53-year-old former treasury secretary who comes to the post from Bradesco Asset Management, part of Brazil's second-largest private bank.

The liberal and orthodox economist, nicknamed "Scissorhands," is the key new face in President Dilma Rousseff's new cabinet as she seeks to revitalise an economy which fell into recession last year.

Rousseff said ahead of her New Year's Day investiture that she would cut public spending, yet without harming millions of Brazil's poorest who rely heavily on extensive state welfare programs.

But with growth having shrivelled from 7.5 per cent in 2010 to near zero last year, and inflation hitting a government ceiling of 6.5 per cent, Levy must restore confidence already sagging in the wake of a kickbacks scandal at state oil firm Petrobras.

He insisted he was optimistic "In the coming four years, one way or another our economy will be transformed," said Levy, saying his policies would help attract private investment.

Francisco Pessoa of LCA consultancy in Sao Paulo said Levy was well regarded by the market - but not necessarily by Rousseff's own Workers Party (PT).

"Levy is there to show he intends to pursue more orthodox policies and he really must improve the fiscal climate," said Pessoa.

But he warned that some sections of the PT "very much oppose this kind of economic policy."

AFP