• Several of his recent fiscal propsals have been blocked
  • Setbacks are said to have soured morale at Finance Ministry

Brazilian Finance Minister Joaquim Levy’s strength and patience is growing thin with the lack of support within the Rousseff administration for more aggressive measures to put the country’s public accounts in order.

Levy, a University of Chicago-trained economist who bolstered investor optimism when he took office in January, is weakened, discouraged and worn out by friendly fire within the ruling coalition, according to two officials who regularly speak with him and requested not to be named because the matter is private.

Several of Levy’s proposals to hike taxes or cut spending in recent weeks have been blocked either by his colleagues, President Dilma Rousseff or congressional leaders, forcing the government to cut its primary budget forecast for next year from a surplus to a deficit. Levy’s setbacks have soured the morale among Finance Ministry staff, the officials said, and fueled speculation that he could abandon his post.

"His situation increases the noise, headlines saying he can’t get anything approved and questioning whether he’ll stay," said Jankiel Santos, chief economist at BESI Brasil. "The impact of a departure depends on his substitute, but the concern is if Levy couldn’t do it, why should anyone else?"

The Finance Ministry declined to comment when asked whether Levy was
discouraged and worn out.

Levy, known as “Scissorhands” for his cost-cutting ways, has been surprised by fast-shrinking revenues and stiff opposition to austerity measures. In the latest of a string of setbacks to its economic plan, the government over the weekend scrapped efforts to revive the so-called CPMF tax on financial transactions following opposition by congressional leaders.

Economic forecasts for this year have plummeted to a contraction of 2.3 percent from 0.5 percent growth in January, according to the latest central bank survey of analysts. The budget deficit has widened to 8.8 percent of gross domestic product from 3.6 percent a year earlier.

If Levy decided to leave his post, a natural substitute would be Planning and Budget Minister Nelson Barbosa, who favored more modest spending cuts, according to the two officials.

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