4 de diciembre de 2014 / 21:34 / en 3 años

UPDATE 1-S&P says Levy appointment signals positive policy shift in Brazil

(Adds comments and context)

By Alonso Soto

BRASILIA, Dec 4 (Reuters) - The appointment of fiscal conservative Joaquim Levy as Brazil’s finance minister sent a stronger-than-expected message of positive policy changes during President Dilma Rousseff’s second term, Standard & Poor’s senior analyst Lisa Schineller told Reuters on Thursday.

Following her narrow re-election victory in October, Rousseff vowed to streamline government spending to regain investor confidence after years of intervention in the economy.

Levy, her pick to head the economic team, has called for more fiscal discipline and credible debt-reduction goals, which Schineller termed positive steps to reverse the deterioration of the once-booming Brazilian economy.

However, S&P’s future credit rating decisions on Brazil will depend on the execution and consistency of the fiscal adjustment, Schineller warned.

“The signaling of policy (change) with this economic team would be somewhat stronger than we had expected,” said Schineller, who is S&P’s lead analyst for Brazil.

“The signaling from the new minister to be is that of changes in policy, but again execution from our point of view is going to be a very important component given the challenging economic environment,” she added.

Sluggish economic growth and rising government spending had prompted S&P to cut Brazil’s debt rating closer to “junk” territory in March.

The rapid deterioration of the country’s fiscal accounts has raised fears that Brazil could lose its coveted investment grade rating and with it billions of dollars in investment in coming years.

Levy, who as treasury chief between 2003 and 2006 was instrumental in helping Brazil reach investment grade, has said cleaning up the country’s fiscal accounts will be his top priority after he takes office in coming days.

However, some investors still doubt Rousseff, a leftist economist who likes to make even the smallest financial decisions, will back deep spending cuts as the economy flirts with recession.

Schineller said a government loan of 30 billion reais to state development bank BNDES and efforts to loosen this year’s fiscal goal were disturbing.

“This sends mixed signals on the future course of policy,” Schineller said. “The question is: Will these practices diminish going forward or will they remain.” (Reporting by Alonso Soto; Editing by Bernadette Baum and Lisa Von Ahn)

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