Political Risk Latin America Blog @PolRiskLatam

Brazil’s economics team promises austerity, but will it deliver?

Posted in News and Articles, Political Risk by politicalrisklatam on November 25, 2010

by Jonathan Weathley for Financial Times – Beyond Brics, November 24th, 2010.

So it’s confirmed: Alexandre Tombini will be the next president of Brazil’s central bank and Guido Mantega will stay put as finance minister.

Mantega and Tombini, alongside Miriam Belchior, also named as planning minister, gave a press conference this afternoon in Brasília. The message was clear: no change to economic policy and greater fiscal austerity from next year.

Just what markets wanted to hear, then. But will they deliver?

Mantega, known as a tax-and-spend “developmentalist”, came across as a fiscal hawk. He promised to cut spending from next year, especially on running costs. All ministries would have to do their bit. Efforts would be made to increase public sector savings. Cutting spending would help to bring interest rates down (this is news; he only recently denied any link between fiscal policy and interest rates).

Belchior was right with him. More, she promised, could be done with less money. (continue reading… )



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