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BRASILIA, Nov 27 (Reuters) - Brazil's next finance minister, banker Joaquim Levy, is expected to explain his plans for fixing a stagnant economy after President Dilma Rousseff appoints him to head her economic team on Thursday.
Investors eagerly await Levy's first comments to see whether the respected Bradesco executive will introduce more business-friendly policies in Rousseff's second term that starts on Jan. 1.
Rousseff will also name former Deputy Finance Minister Nelson Barbosa as her new planning minister in charge of the budget, government officials told Reuters. Levy could take over from outgoing Finance Minister Guido Mantega before Jan 1.
Known as a fiscal hawk, Levy's most urgent challenge will be to staunch the bleeding of government accounts that threaten Brazil's coveted investment grade credit rating in coming years.
Levy was instrumental in helping Brazil obtain that credit rating when he was the head of the Treasury between 2003 and 2006 and few know Brazil's public finances like he.
However, his success will depend on how much freedom newly reelected Rousseff gives him to dictate policy.
A tough manager who likes to make even the smallest of financial decisions, Rousseff clashed with Levy in 2005 when as chief of staff of then-President Luiz Inacio Lula da Silva she called his fiscal adjustment plan "rudimentary."
A market rally after local media first reported his appointment suggests that investors are betting Levy will succeed in pushing through some of the painful fiscal adjustments needed to recoup confidence in Brazil.
"We see the decision to nominate Levy as a political signal for a faster and deeper adjustment," Nomura Securities' analyst Tony Volpon said in a note to clients on Wednesday.
A paper written by Levy and several other economists in August calls for the next president to meet fiscal targets without "tricks," openly criticizing Rousseff's use of alternative accounting methods to bolster savings.
The essay also calls on the next administration to seek a free-floating exchange rate and bring inflation back to the center of the official target, two factors that many economists say are crucial for Brazil to recover solid growth. (Reporting by Alonso Soto; Editing by Cynthia Osterman)