Crisis-hit Brazil replaces 'Scissorhands' finance minister

Underfire Brazilian President Dilma Rousseff replaced Friday the finance minister dubbed "Scissorhands" for his swingeing spending cuts, after credit raters downgraded the country to junk status in an economic and political crisis.

US-trained Joaquim Levy will be replaced by current Planning Minister Nelson Barbosa, a close ally of Rousseff seen as less free-marketeering in his approach, her office said in a statement.

"The president is grateful for the dedication of Joaquim Levy, who played a fundamental role in tackling the economic crisis," it said.

Levy, 54, formerly worked at the International Monetary Fund and in Brazil earned the nickname "Scissorhands" for tough spending cuts in Latin America's biggest economy.

But the market-friendly politician failed to achieve his goal of rebalancing the public finances in a poor country with a big welfare spending bill.

His departure comes just under a year after he took up the job of finance minister in the recession-hit country under Rousseff's leftist government.

Her leadership is in crisis and she faces calls for impeachment proceedings in a public financing scandal.

The Supreme Court ruled Thursday that Congress must restart the impeachment proceedings from scratch, however, and overhauled the procedure in a badly needed win for the embattled president.

- Deepening crises -
The political chaos is adding to Brazil's economic woes, with GDP down 4.5 percent in the third quarter year-on-year, and the national currency, the real, down one-third against the dollar this year.

Also US-trained and a former rowing champion, Barbosa, 46, is reputed to have a more growth-oriented approach than Levy, closer to the spirit of the governing Workers' Party.

He moved to reassure the country after being named as Levy's successor, promising to work for fiscal stability and growth and lower the inflation rate, which is currently more than 10 percent.

"We will promote fiscal balance, control of inflation and economic growth," he told a news conference.

He vowed also to work for longer-term fiscal reforms and control social spending.

"I have total confidence that the Brazilian economy, which is the seventh biggest in the world, with 204 million in habitants, has the human and physical capital and the expertise to overcome its challenges."

Analyst Andre Leite of consultancy TAG Investimentos in Sao Paulo said: "The market considers him the most normal and likely choice because he is already planning minister" in charge of big public budgets.

"He knows how the machine works. He is a natural choice and the market is viewing him with a certain neutrality."

- Recession, political gloom -
Others had doubts about Barbosa's approach given Brazil's dire economic state.

"I am very concerned about the arrival of the new minister," said Margarida Gutierrez, an economist at Rio de Janeiro Federal University.

"Brazil cannot go for easy solutions like raising spending to boost the economy. That will be shooting itself in the foot."

Brazilian authorities are forecasting the economy will shrink by 3.1 percent this year and 1.9 percent in 2016.

Fitch cut Brazil's sovereign debt rating to junk status on Wednesday -- the country's second downgrade in the current crisis after that of Standard and Poor's in September.

"Brazil's downgrade reflects the economy's deeper recession than previously anticipated, continued adverse fiscal developments and the increased political uncertainty," Fitch said.

Levy had looked increasingly isolated in Rousseff's government during the recession as resistance grew to his tough economic cure.

Ahead of his departure he told reporters that "if we have not finished, at least we intended" to get Brazil's economy back on track. "That gives us some comfort."