Brazil’s New Finance Minister Has Ties to Booth

Originally published in Chicago Booth
January 5, 2015

Joaquim Levy, a member of Chicago Booth’s Global Advisory Board who earned his PhD in economics at the University of Chicago in 1993, faces a tough mission as he becomes Brazil’s finance minister in January.

Levy’s appointment in late November is widely considered an attempt to reverse growing capital market concerns over the country’s worsening economic situation, which has been largely blamed on president Dilma Rousseff’s interventionist policies in recent years.

Turning around the Western Hemisphere’s second-largest economy will call on all the talents the respected banker has acquired while compiling a growing resume of prestigious government finance posts.

“Levy is a highly competent economist with enormous executive capacity,” said Paulo Sotero, executive director of the Brazil Institute at the Woodrow Wilson Center International Center for Scholars in Washington, DC. “He doesn’t suffer fools easily and once he gets a mission, he’s determined to accomplish it.”

Brazil economic woes have grown in recent years after spending on social programs kept expanding during Rousseff’s first term, while revenues to government coffers failed to keep pace. National debt as a proportion of GDP remains near 57 percent, according to Brazil’s central bank.

The central bank hiked interest rates recently to 11.75 percent, significantly higher than the 7.25 percent interest rates of October 2012. And for the first time in recent history, Brazil’s economy has a federal deficit and stagnant economic growth, Sotero noted.

“I think the president was under pressure to send positive signals to the market and also to signal that she will validate and embrace a serious adjustment of the economy; Joaquim will embody that,” said Alberto Ramos, a managing director at Goldman Sachs Group and head of the firm’s Latin American economic research group.

Ramos knows Levy well. They crossed paths at the University of Chicago while they were both pursuing their PhDs in economics. They also were colleagues at the International Monetary Fund from 1996 to 1998 and have remained in contact.

Levy maintains deep ties to the university. He serves on the Americas Cabinet of Booth’s Global Advisory Board, which advises dean Sunil Kumar and offers input on significant strategic issues facing the school globally.

Levy’s list of accomplishments in Brazil are impressive: He was treasury secretary from 2003 to 2006, and from 2007 to 2010 he was finance minister for the state of Rio de Janeiro.

Most recently, he was the director and chief strategy officer at Bradesco Asset Management, the second-largest private investment management firm in Brazil. He is lauded for his successes at each of his previous posts and is known as a champion of free market forces.

Levy’s appointment as finance minister is considered a move away from the Rousseff administration’s interventionist policies that included spending programs for job creation, controlling national gasoline and diesel prices, and subsidizing select companies and industries to stimulate economic growth.

The expectation among many in Brazil is that Levy will introduce rigorous economic policies to restore fiscal balance to the federal government. Levy has said publicly that he will brake spending, rein in inflation, and convince the capital markets that Brazil will follow new economic policies that will put its fiscal house back in order.

“The policies that are about to be implemented (under Levy’s direction) will be a radical departure from the policies that characterized the first four years of the Rousseff administration,” Ramos said. “It all boils down to the degree of autonomy he’ll have. I think the president picked him with the understanding that he may believe in different things, but she’ll give him enough leeway to implement the economic policies the country needs. Only time will tell if that happens.”

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