Brazil Ministers Spar Over Potential Timing of Recovery

Joaquim Levy
Brazil’s Finance Minister Joaquim Levy. Photographer: Michael Nagle/Bloomberg

Brazil’s Finance Minister Joaquim Levy doesn’t expect the economy to recover before 2016, in contrast to Budget Minister Nelson Barbosa’s more optimistic forecast of a comeback in the second half of this year, said a government official with knowledge of Levy’s view.

Levy considers that suggesting a recovery is just around the corner could hinder prospects of Brazil’s congress taking needed fiscal steps to boost growth, said the official, who asked not to be named because the matter isn’t public. Barbosa told reporters Friday that he expects an economic recovery to start in the second half.

President Dilma Rousseff has raised taxes and cut expenses to rein in Brazil’s largest budget gap in 16 years and attempt to hang onto the country’s investment grade rating.

On Friday, South America’s largest economy announced it’s freezing 69.9 billion reais ($22.6 billion) in spending this year, while raising taxes on profits at banks, brokerage houses and credit-card processors to 20 percent from 15 percent.

The pending tax increase sent stocks in Brazil’s largest banks down sharply on Friday. The benchmark Ibovespa index fell 1.3 percent on the day and 5 percent on the week, the worst since December.

Levy considers the budget spending freeze should have been larger for Brazil to achieve its primary surplus target for this year, according to the government official. The finance minister is displeased with ex-President Luiz Inacio Lula da Silva’s criticism of the fiscal adjustment plan, though Levy doesn’t plan to resign in protest, the person said.

Rousseff and Silva are from ruling Workers’ Party, known as PT. Levy is a former president of a division of Banco Bradesco SA, Latin America’s second largest bank by market value.

Press officials for President Rousseff, ex-President Silva and budget and finance ministries declined to comment.

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