December 4, 2014 / 7:19 AM / 4 years ago

Brazil's Levy aims for fiscal credibility with new estimates

BRASILIA (Reuters) - The Brazilian government aims to bolster its fiscal credibility using more moderate economic growth estimates to set future savings goals, a government official briefed on the decision told Reuters on Thursday.

Brazil's President Dilma Rousseff speaks during a meeting with leaders of the Allied Base of parties in the Senate and House of Representatives at the Planalto Palace in Brasilia December 1, 2014. REUTERS/Ueslei Marcelino

President Dilma Rousseff’s government used estimates from private economists to set its primary surplus goals for the next three years, according to the new 2015 federal budget guidelines. It slashed its 2015 growth estimate to 0.8 percent from 3 percent.

Incoming finance minister Joaquim Levy pushed for the use of private economists’ estimates, said the official, in a major shift for an administration that had previously adopted rosy forecasts to calculate fiscal targets.

“These are not magic numbers that we just pulled out of a hat,” said the official, who requested anonymity to speak freely. “These are numbers from the market to show everyone that we are working with credible goals.”

Levy will likely take office next week once the dust settles on Rousseff’s battle to loosen this year’s budget targets, another senior government official said earlier on Thursday.

In a heated 17-hour joint session, Congress approved the text of a bill that frees the administration from its elusive fiscal savings goal, but it lacked quorum in the early hours of Thursday to decide on a final amendment that will be put to a vote on Tuesday.

Fierce opposition to the bill from her rivals and lukewarm support from her allies highlight the challenges the leftist leader faces as she shifts gear to more austere policies needed to put Brazil’s finances in order and revive a stagnant economy.

The drawn-out approval delayed the swearing in of her new finance minister Levy due to the need to shield him from legal and political fallout from failure to meet the budget target.

Levy will very likely assume the position of finance minister after the budget goal vote “to avoid a legal problem,” the official, who spoke on the condition of anonymity, told Reuters.

The new team, which includes Nelson Barbosa as planning and budget minister, could take office late next week, the official said, and the rest of the cabinet would arrive on Jan. 1 when Rousseff’s second term begins.

Since narrowly winning re-election in October, Rousseff has vowed more fiscal discipline and picked Levy, who is known to be a fiscal conservative, to regain the trust of investors and avert a credit rating downgrade.

Additional reporting by Brian Winter and Alonso Soto; Editing by Chizu Nomiyama

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