EFTA01361444.pdf

fail in his mission to prevent a junk rating for Latin America's largest economy, said John Welch, a strategist at Canadian Imperial Bank of Commerce. "His credibility and ability to deliver is diminished," Welch said in a phone interview. "He thought he'd be in charge of the economics but not the politics of the adjustment." The Finance Ministry reiterated its commitment to fiscal austerity measures and said it would seek to review mandatory public spending in order to reduce overall debt levels, according to an e-mailed statement in response to S&P's move. Risk Assessment Budget and Planning Minister Nelson Barbosa said the government is confident its inflation control, fiscal adjustment and growth measures would maintain a favorable risk assessment for Brazil. With President Dilma Rousseff's popularity ratings at an all-time low, Levy had personally negotiated with legislators to win approval of three government bills to raise taxes and curtail spending. Lawmakers began to balk at more austerity last month as unemployment rose and a corruption scandal involving more than 50 politicians spread. Levy, has insisted the government hasn't given up on fiscal discipline. The new, reduced primary budget surplus target, which excludes interest payments, is a floor, he said. While the University of Chicago-trained economist was forced to abandon his more ambitious targets at the last-minute, he has no intention of stepping down, said two people aware of his intentions who requested that they not to be named because the matter is private. "Abandon Ship" "Levy's job has become more difficult but not impossible," said Carlos Thadeu de Freitas Gomes, former central bank director and chief economist at the National Commerce Federation. "He's not one to abandon ship." Two days after Levy revised the budget target, Luiz Awazu Pereira, the central bank's economic policy director, said the bank sees new risks to the 2016 inflation outlook. The bank's monetary policy committee meets today to announce its benchmark Selic rate. One of Levy's biggest hopes is that the same corruption scandal that rattled Brazil's political bee hive and fueled opposition may bring down some of his detractors in Congress, said Welch. "The corruption scandal cuts both ways," he said. For Related News and Information: Brazilian Horror Movie Traps Rousseff as Allies Back Away CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0050618 CONFIDENTIAL SDNY GM_00196802 EFTA01361444