Campos Says Brazil Needs Long-Term Fiscal Strategy After S&P Cut

Brazilian presidential hopeful Eduardo Campos said the country needs to reassess the political role of the Mercosur trade group, devise a long-term strategy for fiscal policy and avoid fighting inflation with measures he described as a “handbrake.”

Campos, the governor of Pernambuco state, used a speech at an American Society event in Sao Paulo today to criticize President Dilma Rousseff’s management of the economy, saying there’s a confidence crisis in the country that’s holding back investments needed to spur growth.

The two main goals of his plan are to increase productivity and improve security, transportation and education in urban centers, Campos said. When asked whether he would make the central bank independent, Campos said he personally thinks it makes sense and will try to include it in his political plan.

“We’ll have a long-term narrative of the behavior of the national debt and the primary surplus” with the aim of attracting investment that can revive growth, Campos said in a press conference following his speech at the American Society-Conference of the Americas event. “The government needs to meet its fiscal goals without artificial tools.”

Campos, a former science and technology minister, emerged as one of the top three candidates in the October presidential election after surprisingly winning the backing of former presidential candidate Marina Silva.

While support for his candidacy is relatively low in opinion polls, political commentators at the event including Eliane Cantanhede from Folha de S.Paulo newspaper and O Globo’s Merval Pereira said the scenario is fluid and could change after the campaign starts in full force in July.

Mercosur Stance

Campos would get 7 percent of votes in the first round of elections, according to an Ibope survey of 2,002 voters on March 13 to 17. The poll had a margin of error of two percentage points. Rousseff leads the race with 43 percent of intended votes, according to the poll.

Campos said in the press conference that Standard & Poor’s downgrade of Brazil’s credit rating yesterday will open the way to rebuild investor confidence now that the cut is in the past. S&P said sluggish economic growth and President Dilma Rousseff’s expansionary fiscal policies are fueling an increase in debt levels. S&P downgraded the country one step yesterday to BBB-, its lowest investment-grade rating, with a stable outlook.

Campos called on Brazil to revisit the role of Mercosur so the values of democracy, free expression and human rights are appropriately defended. The Mercosul group comprises six nations in South America and is currently chaired by Venezuela.

Internal Affairs

While Rousseff said last month she would support a Brazilian student who was arrested for joining protests against the Venezuelan government, she said Brazil would not take a position on the internal affairs of another country and said the Mercosur stance would be Brazil’s. The U.S. and Panama have condemned Venezuela’s arrest of students and opposition politicians.

The Brazilian economy will grow 1.7 percent this year, according to a central bank survey of economists released this week. Policy makers have raised the target lending rate by 75 basis points this year to 10.75 percent, the largest increase among major economies after Turkey. Inflation accelerated in the 12 months through mid-March to 5.9 percent.

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