BRASILIA (Reuters) – Brazilian Treasury Secretary Mansueto Almeida is to step down, news that roiled financial markets on Monday as investors worried that a country reeling from pandemic and recession was losing a leading advocate for fiscal discipline.
Brazil’s real fell as much as 3%, one of the world’s worst-performing currencies against the dollar, as stocks slid and interest rates spiked higher against a backdrop of global fears over a second wave of COVID-19 infections.
Economy Minister Paulo Guedes confirmed to Reuters on Monday that Bruno Funchal, currently director of programs at the ministry, will replace Almeida no later than July 31.
Rumors have swirled for some time that Almeida, 52, was close to leaving. He confirmed on Sunday evening that he was doing do, without giving reasons.
A technocratic public finances expert and holdover from Brazil’s previous market-friendly government, Almeida has been a key architect of fiscal policy behind Guedes. He has a long track record of pushing to shrink Brazil’s gaping public deficit.
His departure stoked investor concerns about President Jair Bolsonaro’s government at a precarious time.
Brazil has passed every country but the United States in confirmed coronavirus cases and related deaths, while its economy hurtles toward what could become its worst crash ever.
“If his departure represents a change in the government’s economic policy, the risk of fiscal indiscipline may return and worsen the ‘Brazil risk’ and outlook for long-term interest rates,” said Rafaela Vitoria, chief economist at Banco Inter in Belo Horizonte.
The Bovespa stock index and real pared losses on Monday afternoon, and the interest rates curve eased back a little <0#DJI:> in afternoon trading as Wall Street bounced back into positive territory.
Funchal has big shoes to fill, analysts said.
Almeida not only holds trust in financial markets, he commands respect across the political spectrum in Brasilia, playing a critical role in selling the government’s economic reform agenda and getting Congress to approve a landmark 1 trillion reais ($200 billion) pension reform last year.
“His departure is definitely a major loss for the economic team. However, his legacy for having had a major role in the reshaping of fiscal institutions in Brazil will outlive him,” said Carlos Kawall, director at Asa Bank in Sao Paulo and also a former Treasury Secretary. “Men go, institutions last,” he said.
(Reporting by Jamie McGeever; Additional reporting by Rodrigo Viga Gaier in Rio de Janeiro and Marcela Ayres in Brasilia; Editing by Brad Haynes, David Gregorio and Rosalba O’Brien)
