Brazil’s Rousseff says opponents lack legal basis to impeach her

Mr Barbosa was appointed by left-leaning president Dilma Rousseff on Friday (18) to replace Joaquim Levy, a University of Chicago-trained fiscal hawk who resigned after disagreement within the government and Congress thwarted his attempts to conduct an austerity programme.

“The change of ministers will not alter the goal of balancing the economy and restoring growth”, Rousseff said at the swearing-in of Barbosa.

He said the government will move on reforms to limit expenditures, starting with a proposal to set a minimum age for retirement in order to cap a surge in social security spending. While Rousseff says she backs measures to raise taxes and cut spending, her allies are reluctant to tighten the belt amid surging unemployment and shrinking wages.

Inflation is expected to reach 10.61 per cent this year, before falling to 6.8 per cent in 2016. Gross domestic product will shrink 3.5 percent this year and 2.5 percent next.

On December 16, those concerns were obviated when Fitch Ratings cut Brazil’s credit rating to junk status, following Standard & Poor’s, which in September removed the investment grade it awarded the country in 2008.

Barbosa made the comments while seeking to reassure skeptics that the country’s economy would reverse a slide that has been complicated by impeachment proceedings against the president as well as the Petrobras corruption scandal. “Our focus remains on fiscal adjustment and reducing inflation”, said the 46-year-old ally of embattled leftist President Dilma Rousseff.

A ruling by Brazil’s Supreme Court last week improved Rousseff’s chances of surviving the impeachment process that has created political uncertainty and deepened a recession.

“The problem was not so much what he said, but what he didn’t say”, said Paulo Celso Nepomuceno, a strategist at Coinvalores brokerage.

Levy had trouble persuading Congress and Rousseff’s cabinet to adopt large parts of his austerity plan, which he said was key to reviving investor confidence and stimulating growth.

But he immediately promised to maintain fiscal efforts and make the country’s economy grow again in 2016, despite predictions of another year of recession.

There has been pressure from market players to rescue the company, which has been the subject of a political scandal, as well as slumping world oil prices.