Finance Minister Joaquim Levy gestures during a breakfast with journalists at the Economy Ministry in Brasilia, yesterday.

Reuters
Brasilia

Brazilian Planning Minister Nelson Barbosa may replace Joaquim Levy as finance minister, three government sources said yesterday, as speculation grows about imminent changes to President Dilma Rousseff’s economic team.
Barbosa, who has kept a low profile in recent months, has the backing of several government insiders and advocates tempering an austerity drive on which Levy has staked his reputation, one of the sources said.
A senior member of Rousseff’s economic team, who requested anonymity, said Levy’s departure could take place in the coming days. In newspaper interviews published yesterday, Levy hinted at his own exit.
Another government source with knowledge of the matter said many in Rousseff’s administration were pushing for Barbosa to replace Levy, “but the president has not yet decided.”
Speculation about Levy’s possible resignation has increased this week since Fitch became the second ratings agency to strip Brazil of its coveted investment grade.
The decision, though widely expected, marked the sharp reversal in the fortunes of Latin America’s largest economy.
Levy has suffered a series of defeats since he took office this year and tried to implement an aggressive fiscal adjustment plan to head off a widening deficit that could reach 10% of gross domestic product in 2016.
Barbosa, a former finance ministry official during Rousseff’s first term, pushed for more flexible budget targets as the economy fell into recession, although he has reiterated Brazil should take measures to stabilise its growing public debt.
To try to calm financial markets, Rousseff’s chief of staff, Jacques Wagner, told journalists yesterday the president was the ultimate arbiter of economic policy. He said he did not know whether Rousseff had decided to replace Levy or if she had candidates for the post.
Brazil’s Bovespa stock index slid more than 2% in early trading on speculation of Levy’s impending departure and concern about the ongoing impeachment process against Rousseff on charges of breaking spending rules to secure her re-election last year.
An interview with Levy yesterday fanned speculation about an imminent cabinet change.
Asked when he planned to leave, Levy told newspaper O Estado de S. Paulo: “I’d say the end of the legislative year (this week) gives me more options.” He added that his path now is one of “inner peace.”
In a separate interview with newspaper O Globo, Levy again mentioned that the legislative year was ending and said he would stay in the ministry as long as the government signals it will implement needed economic reforms.
“It is evident my permanence will depend on an indication of reforms, or an indication of willingness to do them,” O Globo quoted Levy as saying. “That is very important.”
Brazil’s overall budget deficit soared to 9.5% of GDP in October from 5% in the same month a year ago. That compares with a deficit of 4% in Mexico.