Brazil Has No Room for Errors, Finance Minister Says

Brazil Has No Room for Errors, Finance Minister Says

Government has run out of quick fixes for its economy, Levy warns

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Brazilian Finance Minister Joaquim Levy said the government has run out of quick fixes for the country’s economic problems. PHOTO:AGENCE FRANCE-PRESSE/GETTY IMAGES

By

LUCIANA MAGALHAES And JEFFREY T. LEWIS/WSJ

March 30, 2015 3:08 p.m. ET

SÃO PAULO—Brazil’s policy makers have run out of quick fixes for the country’s economic problems and the government has no room for mistakes as it implements new policies to get its budget in order and spur growth, Finance Minister Joaquim Levy said Monday.

During President Dilma Rousseff’s first term in office, the government used a series of so-called anticyclical measures including targeted tax cuts and subsidized credits for many types of purchases to try to keep consumers spending and companies investing.

“We have to recognize that the scenario has changed,” Mr. Levy said at a conference Monday. “The capacity for anticyclical [measures] has been used up.”

Mr. Levy has begun to roll back many of those measures, and has announced tax increasesand spending cuts to reduce the government’s budget deficit, keep the national debt under control and maintain the country’s investment-grade credit ratings.

The finance minister, who has held that job since early January, said Brazil’s public debt is relatively high compared with its peers and needs to decline for it to hold on to its current ratings.

Mr. Levy’s efforts are already having some success. Last week Standard & Poor’s Ratings Services left its ratings for Brazil in investment-grade territory with a stable outlook. Finance ministry officials have met with analysts from Fitch Ratings in recent weeks, along with S&P analysts, but Fitch hasn’t announced its decision yet.

The commodities boom that until recently fueled economic growth in Brazil and helped swell government coffers has ended, and the country’s leaders need to adapt to the new reality, Mr. Levy said.

As part of that effort, the government is making a strong effort to make social spending more sustainable while ensuring it has adequate revenue, he said. With all the changes the government is making, as long as it avoids making mistakes, the country’s economy should start to recover soon, Mr. Levy said.

“If we avoid risks, I’m certain that we’ll get through the adjustment phase rapidly,” he said. “We’re going to have new conditions in a period of significant growth.”

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