Levy reaffirms strategy to make fiscal adjustment

Finance minister Joaquim Levy announced Tuesday (Sep. 29) that to ensure fiscal adjustment and the expenses reduction will be the government's first strategy to tackle the current crisis. In a lecture to businessmen in São Paulo, for handing out an award to the most efficient and advanced Brazilian companies, Levy declared that fiscal adjustment will create a favorable environment so that the industry can safely start investing again.

To the minister, while the fiscal adjustment is not achieved, it will be very difficult to lower interest rates and inflation. "By taking this risk, the economy can relax" he said. Levy noted that other developed countries that also faced economic difficulties employed the same strategy.

In a second stage, after the market is stable before the fiscal adjustment, the government bets on extended credit. Levy believes that the country "will being to reap the benefits of rebalancing." He believes that the business sector waits for the end of the "turbulent" period to resume the recovery of investment.

The government's next step will be to implement structural reforms and to address the issue of demand quantity restriction, which ends up stunting growth. "The problem is that, at the moment economy resumes [growth], one must be prepared not to hit that wall," he declared.

The fiscal adjustment proposed by the government forecasts spending reduction and increased revenue like bringing back the Temporary Contribution on Financial Transactions. The government also announced measures to reduce the tax expenditure, by reducing or removing tax breaks for companies.

Translated by Amarílis Anchieta

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