Levy Says Work Remains After $22.4 Billion in Brazil Cuts

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Brazil’s government must go beyond its spending freeze to shore up public accounts, Finance Minister Joaquim Levy said.

“There are people who think everything is solved -- it isn’t,” he told reporters in Brasilia Monday before entering a meeting with President Dilma Rousseff. “We still have work to do.”

It was the first time Levy has publicly discussed the government’s decision to freeze 69.9 billion reais ($22.4 billion) of spending in this year’s budget. Budget Minister Nelson Barbosa made the announcement to the press on May 22.

Barbosa said at the time that Levy was too ill to attend the press conference, raising speculation that the finance minister had wanted deeper cuts. Levy has been a leading voice in President Dilma Rousseff’s administration demanding action to shrink the deficit through higher revenue and reduced spending.

The real depreciated 1 percent to 3.1267 per U.S. dollar at 11:22 a.m. Sao Paulo time amid concern the freeze won’t be enough to help the government meet its fiscal goals.

Levy told reporters the size of the cuts were “appropriate.” He has pledged to reverse last year’s budget deficit with a surplus equal to 1.1 percent of gross domestic product in 2015 and 2 percent in 2016, excluding payments on interest. Analysts surveyed on May 22 by the central bank forecast he will fall short in both years.

Show Restraint

The spending freeze, which doesn’t require approval from lawmakers, focuses on cutting current expenditures, discretionary spending in Congress and some infrastructure programs, Barbosa said May 22. Levy also is trying to push through the legislature proposals to boost corporate-payroll taxes and cap benefits for workers and retirees.

Levy said the government must show restraint in boosting levies after newspaper Estado de Sao Paulo reported on Monday that the ruling party will propose new taxes on dividends and personal wealth.

“It’s not as if new taxes are going to save the Brazilian economy,” he told reporters.

GDP will fall the most this year since 1990, according to analysts surveyed by the central bank. A government official with knowledge of Levy’s view said last week the minister doesn’t expect the economy to recover before 2016, in contrast with Barbosa’s more optimistic forecast of a comeback in the second half.

“What’s interesting is what’s to come, what we’re doing,” Levy said Monday.