Embattled Brazilian finance minister Guido Mantega will miss
the IDB meeting that is being held in Costa de Sauipe, Bahia,
as Brazil tries to pick up the pieces from this weeks
Standard & Poors downgrade and amid fierce criticisms
of fuel subsidies that crippled the finance of Petrobras, an
oil company that Mantega also chairs.
S&P downgraded Petrobras along with several banks this
week, while Brazil was assigned a BBB- rating on Monday. These
came as relations between the financial markets and Mantega,
who officially becomes the longest serving Brazilian finance
minister in modern history, have become increasingly sour due
to his interventionist style.
Brazil will be represented at the development bank meeting by
Miriam Belchior, the planning minister who is the IDB governor,
and the president of the central bank Alexandre Tombini.
Mantega attended previous IDB meetings in Brazil in 2006 (just
after his appointment) and in 2002 (when he was the
oppositions economics spokeman).
Mantega is a political survivor (he was first appointed in 2006
by the former president Lula and he has piloted the Brazilian
economy through the global financial crisis and beyond), but
his longevity does not necessarily denote strength.
His long presence at the helm goes along a strong
perception of deterioration in recent years, which is now
reflected in the S&P decision, said Paulo Sotero,
director of the Brazil Institute at the Woodrow Wilson Center
in Washington, DC.
The rating agencys latest move came as a cold shower
after recent efforts by Brazilian officials to regain
credibility. Mantega himself had recently announced a primary
surplus target of 1.9% of GDP and pledged not to use creative
accounting tricks anymore, while announcing budget cuts of 44
billion reais (around $19bn).
But Mantega was quick to criticize the downgrade, which
he called inconsistent with the conditions of the
Brazilian economy and contradictory compared to the
strength of its fundamentals.
Their decision was announced very quickly after their
visit to Brazil 10 days ago. It seems they were not ready to
listen. It is like the decision had already been taken,
said a person close to Mantega.
With the left being in power for more that 10 years in Brazil,
Mantega has epitomized the transition from an orthodox economic
policy model to a development-led approach, which has often
taken investors aback. There is a noisy section of the
financial market that does not like such a development profile,
which consists in boosting production rather than pleasing the
financial markets to make a quick buck, said an
The problem is that Brazil failed to deliver the projected
economic growth in recent years while inflation remained around
The divorce between Mantega and the markets generally stem from
the perception of public expenditures. When the government says
it is going to cut spending, the markets do not take anything
for granted. They would rather wait and see when officials will
Two examples of this will come today (Thurday) with the release
of the February fiscal numbers and the social security
deficits. At the moment Mantega is considered quite a
weak minister because his credibility is low. He always
announces optimistic scenarios that never come to pass,
says David Fleischer, a political scientist in Brasilia.
Even last week, he had a meeting with bankers in
Brasilia, and they left very unhappy. They wanted a more
pragmatic discussion, but they were unable to get it because of
this blatant optimism.
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