RIO DE JANEIRO – Brazilian President Dilma Rousseff named a former treasury secretary with a reputation as a fiscal conservative as finance minister on Thursday in a move that’s widely seen as charting a new course for Brazil’s flagging economy and soothing jittery financial markets.
The appointee, Joaquim Levy, is a University of Chicago-trained economist and top executive with the Brazilian bank Bradesco who also has worked at the International Monetary Fund. He helped shore up investor confidence in Brazil as a member of the economic team of Rousseff’s predecessor and mentor, former President Luiz Inacio Lula da Silva. During his 2003-2006 tenure as treasury secretary, Levy helped pave the way toward growth by reducing debt.
He was also part of the economic team of Silva’s predecessor, Fernando Henrique Cardoso.
Nicknamed by colleagues “Scissorhands” for his penchant for slashing costs, Levy has a reputation as a hard worker with an obstinate streak. According to local news reports, during his tenure as treasury secretary Levy once clashed with Rousseff, then minister of mines and energy, so brutally that she threw him out of her office.
The appointment of the 53-year-old Levy is seen as a sign of Rousseff’s willingness to take on the major reforms seen as necessary to jumpstart the sluggish economy.
In a news conference where he was flanked by two other appointees — Nelson Barbosa, who was named minister of planning, and Alexandre Tombini, who stays on as president of the Central Bank — Levy said that lowering public debt would be a top priority and added any measures implemented would be “without great surprises.”
Levy will succeed Guido Mantega, who was appointed to the post in 2006 under Silva and has presided over four years of lacklustre growth as Chinese demand for Brazilian commodities such as iron ore and soy flagged. Brazil’s GDP growth peaked at 7.5 per cent in 2010, but the country fell into technical recession in August.
During her re-election campaign, Rousseff said Mantega would not stay on for her second term. Still, investors overwhelmingly favoured Rousseff’s rival, the centrist Aecio Neves, and Brazil’s currency and Bovespa stock market index have plunged since Rousseff’s narrow Oct. 26 victory.
In Thursday’s statement, Rousseff’s office said Mantega would remain in his role through the end of the transition period.
Alex Augustin, chief economist for the Sao Paulo-based credit rating agency Austin Rating, hailed Levy’s appointment as “extremely positive.”
“Unfortunately Brazil’s credibility among investors and businessmen has deteriorated over the past few years,” he said. “But the appointment of someone like Levy with an orthodox and pragmatic profile who worked in the government in 2004 and improved the country’s public debt profile should start changing things.”
Still, Augustin said investors could sour on Levy if he fails to swiftly deliver reforms.
“They will want to see if he will have the autonomy, the independence, to run the ministry, and if he will be able to make the necessary fiscal adjustments to deal with the fiscal deficit by raising taxes and curbing government spending,” Augustin said.
Announcement of a new financial team had been expected last week and local news media reported the delay was due in part to an internal dispute within Rousseff’s Workers’ Party. Some party officials were said to be opposed to the appointment of a banker seen as a champion of conservative fiscal policy.
Rousseff, a former Marxist guerrilla who was tortured under the country’s military dictatorship, is also regarded as a possible obstacle to a major economic overhaul. Herself a trained economist, Rousseff is known to be heavily involved in overseeing economic policy. She is to be sworn in for her second four-year term in office on Jan. 1.
Associated Press writers Stan Lehman and Adriana Gomez Licon in Sao Paulo contributed to this report.