Brazil's new economic team headed by Joaquim Levy is expected to take office sometime in the next few days after the ruling coalition of President Dilma Rousseff finally managed Congress to approve a loosening of this year's budget targets including the crucial primary budget.
At the end of last week Brazil’s congress passed a measure that allows the government to miss its primary budget surplus target for this year, but the vote came after lawmakers were forced by protests to suspend a session followed by 18 hours of debate.
With the measure passed, the government is freed from its obligation of generating a primary surplus of at least 49.1 billion Reais (19.2 billion dollars) in 2014. The full target for 2014 was for a primary surplus of 116.1 billion Reais, but the government could have legally cut that to the smaller number even without a change in the law.
Opposition parties were fiercely against the measure and spent most of two days obstructing the vote. The measure was finally passed on Thursday by a joint session of both houses of congress.
The government of President Dilma Rousseff set the target in Brazil’s 2014 budget law. The primary surplus, which is revenue minus noninterest spending, is a measure of the government’s ability to save. If the target set in the law wasn’t met, the president could be subject to an escalating series of penalties, up to and including impeachment, according to congressional aides.
If the law hadn’t passed, the government would have had to cut spending in various areas to meet the target. Among the cuts would have been spending on projects earmarked by congressman and senators for their districts, congressional aides said.
Ms. Rousseff and her administration have been criticized for letting government spending get out of control amid slow economic growth and declining tax revenue, putting Brazil’s investment-grade debt rating at risk.
Ratings firm Standard & Poor´s downgraded Brazil´s sovereign debt to triple-B-minus, one notch above junk, in March, citing the nation’s deteriorating fiscal situation. Moody´s Investors Service currently rates the country at its second-lowest investment-grade level.
According to political sources in Brasilia the new team headed by levy which includes Nelson Barbosa as planning and budget minister, could take office on Thursday or Friday and the rest of the cabinet on Jan. 1 when Rousseff's second term begins.
Levy is working out of an office at the presidential palace on plans to increase fiscal revenues that include a mix of tax increases and the elimination of tax breaks, the official said.