Brazil House Speaker Says Ties With Economy Minister Are Cut

Brazil’s influential lower house Speaker Rodrigo Maia said he’s no longer on speaking terms with the nation’s economy chief just as the government resumes its push for austerity reforms in congress.

“I haven’t been talking with Minister Paulo Guedes; he has barred his economic team from talking to me,” Maia told Globonews TV in an interview late on Thursday. The speaker, who was instrumental in the approval of a crucial pension overhaul last year, said he had invited senior members of the economic team for a work lunch on Wednesday but Guedes prevented them from attending.

Brazil House Speaker Says Ties With Economy Minister Are Cut

“The conversation was interrupted,” Maia said, adding that from now on all contacts with the economy ministry will be made through the government’s office of congress liaison. He also said reforms will continue.

The economy ministry declined to comment.

President Jair Bolsonaro, who used to refer to Guedes as a one-stop shop for all economic matters, has been giving mixed signs of support for his austerity plans. Last month, the president rejected plans to fund social programs without creating new expenses, sending local markets tumbling. On Thursday, however, his administration submitted to congress a proposal to rein in the country’s high civil servant costs, a nod to Guedes’ austerity agenda. The economy minister didn’t attend the ceremony where the proposal was symbolically launched.

Read More: Bolsonaro Submits Proposal to Cut Brazil Civil Servant Costs

While Maia and Guedes are both seen as pro-market, they have repeatedly clashed over the timing and the scope of the reforms agenda. The minister has indeed barred his team from communicating directly with the house speaker, complaining that he often tried to undermine his authority, according to two people familiar with the matter. That won’t derail reforms as the government has other channels of communication with Maia, the people added, asking not to be named discussing internal affairs.

Local markets largely brushed off the spat between Maia and Guedes, with the Brazilian real gaining 0.5% to 5.2651 per dollar in early morning trade.

``That's old rivalry,'' said Ricardo Cara Monteiro, partner and portfolio manager at Macro Capital in Sao Paulo.

A tax reform, a bill to extinguish hundreds of state funds and plans to open the gas sector to private investment are also among the proposals the administration needs congressional support for.

Guedes is facing increasing pressure from congress and other ministers to continue spending big next year in the aftermath of the coronavirus pandemic. Brazil is one the world’s hardest hit countries by the virus, with more than 4 million cases and nearly 125,000 deaths. The minister has signaled he will stay in the job as long as Bolsonaro keeps the country on track to fiscal austerity.

©2020 Bloomberg L.P.

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