Brazil’s new government warns of measures to tackle economic woes

Brazil’s new government has warned that it will have to take tough new measures to pull the country out of its longest recession in decades.

It also hinted that suspended president Dilma Rousseff may have hid the true state of the damage her policies caused to the public accounts.

In his first press conference since taking over control of Latin America’s biggest economy, new finance minister Henrique Meirelles said an audit might be required to get a clear picture of the country’s finances.

“I am the first who wants to know how long it will take to know the real size of the problem,” he told reporters in Brasília.

His comments reflect the belief of many economists in Brazil that Rousseff’s administration resorted to creative accounting in order to hide the true extent of the damage her policies caused.

A recent report commissioned by the respected Estado de S Paulo newspaper estimated that Brazil's federal government will need to find between €60 billion and €150 billion to fix the hole in the public sector caused by Rousseff's policies.

Tax burden

The estimates include cash to recapitalise state banks, the state oil giant Petrobras and the power sector, all of which have been left financially weakened following strong interference by the Rousseff administration.

Meirelles said the principal task now was to halt the growth of Brazil’s debt to GDP ratio which has spiked as a result of increased borrowing to cover a budget deficit hovering around 10 per cent of GDP.

He vowed to tackle profligate public spending and, while admitting Brazil’s tax burden was already high, said new taxes might be necessary to do so.

“The priority today is fiscal equilibrium. If it is necessary, a new tax will be applied, but temporarily,” he said when asked about a financial transaction tax that Rousseff attempted to implement last year to shore up the public accounts but which lacked the support in congress to pass the necessary legislation.

Acting president Michel Temer has sought to convey a sense of urgency in tackling the economic crisis which has left 11 million Brazilians unemployed even as he faces claims that his government is illegitimate from Rousseff’s Workers Party, now back in opposition after 13 years in power.

Yesterday morning Temer held his first cabinet meeting since taking over on Thursday, when the country’s senate voted to suspend Rousseff ahead of an impeachment trial.

Public scepticism

As well as Workers Party hostility the new president must also overcome public scepticism – even among those voters who wanted Rousseff removed – after he nominated several ministers who face investigation for corruption.

There was also anger that he named the country’s first all-male cabinet since the early 1980s.

Speaking after the cabinet meeting Temer’s chief of staff Eliseu Padilha told reporters: “We tried to find women in various ways, but for various reasons it wasn’t possible.”