Stung by S&P Downgrade, Brazil Leaders Play Blame Game in Public

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(Bloomberg) -- It didn’t take long for two of Brazil’s most powerful policy makers, the finance minister and lower house chief, to trade barbs over the country’s most recent downgrade.

After Finance Minister Henrique Meirelles told Bloomberg the decision reinforced the need for Congress to pass pension reform, lower house chief Rodrigo Maia fired back. "The reaction from some in the government certainly doesn’t help," Maia said in a WhatsApp message on Friday. "Trying to transfer the responsibility isn’t fair to a Congress that approved important bills. This doesn’t help."

Much of the spat represents the two men’s efforts to claim the center-ground of Brazilian politics as their own ahead of October’s presidential elections. Amid a crowded field of hopefuls, led by leftist former President Luiz Inacio Lula da Silva, both Maia and Meirelles nurture ambitions to run as pro-market reformers. The S&P downgrade, while largely expected by financial markets, marks a significant blow to Meirelles, whose ambitions depend on continued economic recovery.

Of the two possible candidates, Maia appears to be gaining an advantage, according to David Fleischer, professor emeritus of politics at the University of Brasilia. "Meirelles has zero charisma and doesn’t understand politics," he said. "Maia does have charisma problems but he’s better than Meirelles."

S&P on Thursday cut Brazil’s debt rating to BB-, citing delays to the approval of austerity measures aimed at taming debt levels. The move came after the government delayed until February congressional votes on a crucial bill designed to curb pension outlays, part of a strategy to bolster public accounts.

Maia holds large sway over the country’s legislative agenda, while Meirelles is the administration’s chief economic policy architect. In recent days, they disagreed over a proposal on whether to ease a budget rule known as the "golden rule". This fueled concerns that nothing will be done to help public accounts until after the October vote.

Asked whether their disagreements could undermine the legislative agenda, Maia did not respond. The press office of Meirelles did not reply when asked to comment on the standoff between both men.

The credit rating downgrade represents a moment of reflection, Maia said in his message on Friday. It’s time to continue working to approve both the proposed pension overhaul and also other reforms that reorganize the Brazilian government, he added.

Following a corruption scandal that undermined President Michel Temer’s political capital, the government eventually was forced to delay pension overhaul. The plan was expected to save almost 400 billion reais ($124.4 billion) over 10 years by introducing a minimum retirement age, among other measures.

Maia will announce his presidential bid in late February or early March, his party’s vice-president, Jose Mendonca Filho told Bloomberg. Meirelles said this week he will only decide in April. Meanwhile, Lula and hard-right congressman Jair Bolsonaro have consistently placed first and second, respectively, in recent opinion polls on voter intentions.

©2018 Bloomberg L.P.

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