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Brazil's Levy Vows Fiscal Discipline, Names Team

Brazil’s new Finance Minister Joaquim Levy listens to guests attending his swearing in ceremony at the Brazilian Central Bank, in Brasilia, Jan. 5, 2015.

Brazil's government must focus on making difficult fiscal adjustments in order to get economic growth and investment back in gear, the country's new Finance Minister Joaquim Levy said on Monday.

At his swearing-in ceremony in Brasilia, Levy said the process will require the participation of society as a whole and will involve changes to taxes and spending, without resorting to accounting shortcuts.

“Fiscal balance is indispensable in order to continue granting opportunities to our people,” Levy said, adding that the country would see benefits such as greater business confidence, better-developed credit markets, higher levels of entrepreneurship and greater foreign investment.

Levy also named his policy-making team at the event, tapping former finance ministry official Marcelo Barbosa Saintive to replace Arno Augustin as Treasury Secretary.

Tarcisio Godoy, a Banco Bradesco executive who worked previously with Levy in government, will take the No. 2 position at the finance ministry.

President Dilma Rousseff appointed Levy, a former banker, in an attempt to calm investors worried over her administration's heavy intervention in the private sector and the nation's deteriorating economic fundamentals. Levy is a fiscal conservative known for slashing spending during his 2003-2006 stint as treasury chief.

The administration has already announced cuts in subsidies to public banks, higher interest rates at state development bank BNDES and limits to pension and unemployment benefits.

On Monday, Levy made the case that adjustments will be done with an eye toward preserving social welfare and advancement programs, but could involve some unpopular measures.

One is the adjustment of tax policies to better line up with the government's fiscal goals, rolling back a recent policy of granting special tax benefits to specific sectors.

Still, many investors remain doubtful Levy will have the autonomy to implement the full set of changes needed to improve the government's accounts.

New Planning Minister Nelson Barbosa on Saturday publicly recanted his comments that the government planned to modify the minimum wage adjustment formula. Local news outlets reported that Rousseff asked Barbosa to change his stance given past promises made to union leaders.