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Start Date for Brazil's Levy Delayed by Fiscal Goal Battle

FILE - Brazil's incoming finance minister, banker Joaquim Levy gestures during a news conference in Brasilia, Nov. 27, 2014.

Brazil's new economic team headed by Joaquim Levy will likely take office next week once the dust settles on President Dilma Rousseff's battle to loosen this year's budget targets, a senior government official said on Thursday.

In a heated 17-hour joint session, Congress approved the text of a bill that frees the Rousseff administration from complying with its elusive fiscal savings goal, but it lacked quorum in the early hours of Thursday to decide on a final amendment that will be put to the vote on Tuesday.

Fierce opposition to the bill from her rivals and lukewarm support from her allies highlight the challenges the leftist leader faces as she shifts gear to austerity measures needed to put Brazil's finances in order and revive a stagnant economy.

Its drawn-out approval delayed the swearing in of her new finance minister Levy due to the need to shield him from legal and political fallout from failure to meet the budget target.

Levy will very likely assume as finance minister after conclusion of the budget goal vote “to avoid a legal problem,” the official, who spoke on the condition of anonymity, told Reuters.

The new team, which includes Nelson Barbosa as planning and budget minister, could take office on Thursday or Friday of next week, the official said, and the rest of the cabinet on Jan. 1 when Rousseff's second term begins.

Levy is working out of an office at the presidential palace on plans to increase fiscal revenues that include a mix of tax increases and the elimination of tax breaks, the official said.

Fiscal accounts have deteriorated to the point where Brazil risks ending 2014 with its first annual primary deficit in two decades.

Since narrowly winning re-election in October, Rousseff has vowed more fiscal discipline and picked Levy, who is known to be a fiscal conservative, to regain the trust of investors and avert a credit rating downgrade.

Her government continues to send mixed signals, however. On Wednesday, it approved a 30 billion reais ($11.7 billion) loan to state development bank BNDES, a transfer that has been widely criticized in the past for increasing Brazil's debt burden.

The bill amending the budget law allows the government to deduct infrastructure investments and tax breaks to lower the primary surplus goal to one tenth of its original level.