Brazil's Levy to Stay Despite Complaints Over Allied Attacks

  • Real plunged 3.2 percent on reports minister would resign
  • Ministry says Levy never wrote letter of resignation

Brazil’s Finance Minister Joaquim Levy complained to President Dilma Rousseff about his treatment among political allies, but fell short of stepping down.

He said during a meeting with his boss that attacks from her supporters are making his job difficult, according to a government official with direct knowledge of the discussion, who asked not to be named because the conversation was private.

Joaquim Levy

Photographer: Guillermo Gutierrez/Bloomberg

The Finance Ministry’s press office told reporters that Levy never wrote a letter of resignation and will stay on in Brazil’s top economic post. The real closed down 3.2 percent to 3.92 per U.S. dollar on speculation the minister would quit.

Levy’s complaint highlights a rift within the government as the minister’s push to cut spending and shore up fiscal accounts rankle some of Rousseff’s closest allies. Newspapers Folha de S. Paulo and O Globo reported this week that her mentor and predecessor, Luiz Inacio Lula Da Silva, wants a new finance minister who would focus more on reviving the economy and less on austerity.

"It’s Lula’s political support versus Levy’s credibility with the market," said Andre Cesar, founder of Brasilia-based political consulting firm Hold. "It’s a tough one I don’t know how she’s going to solve."

Credit Downgrades

Levy’s resignation would be a blow to Rousseff’s efforts to shore up fiscal accounts and stem declining investor confidence in her economic policies. He joined the administration in November with a reputation for cutting costs that he earned as a state finance secretary and treasurer during the Lula administration.

In recent months allies in the ruling coalition have stepped up criticism of Levy for his failure to pull Brazil out of recession. He faced a setback in September when Standard & Poor’s took away the investment-grade rating it awarded Brazil in 2008. Fitch Ratings this week downgraded the country to the cusp of junk, citing a deepening contraction, growing budget deficit and mounting uncertainty in Congress.

Lula may be able to ease the political crisis engulfing Rousseff by using his contacts and negotiating skills to solidify support among coalition members. That will become important if the opposition succeed in opening an impeachment process against the president in Congress.

Rousseff will have to talk to Lula and ask him to tone down the rhetoric against Levy, considering she has limited options to replace the minister, Hold’s Cesar said.

Still, Levy’s "departure seems a matter of time," Cesar said.

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