Brazil’s Loss Is Levy’s Gain as Cut to Junk Favors Austerity

Brazil’s return to junk may be exactly what Finance MinisterJoaquim Levy needed.

Standard and Poor’s dressing down of Latin America’s largest economy on Wednesday could finally convince lethargic policy makers to revive the economy and close the biggest budget deficit in at least two decades.

“The downgrade creates a more favorable environment for approving measures because leaders realize when something needs to be done,” said Congressman Ricardo Barros, sponsor of the 2016 budget bill in the lower house.

The bad news for the government is that President Dilma Rousseff probably will pay the bulk of the political price for the belt tightening. The president will have to confront lawmakers who are reluctant to back tax hikes and would rather she cut spending and dismantle welfare programs that have been a hallmark of her party’s 12 years in power.

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