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Brazil After Mereilles: What Next?

Experts disagree on what will happen after central bank president Henrique Meirelles leaves to re-enter politics.

Inter-American Dialogue 

Brazilian central bank President Henrique Meirelles, who is credited with implementing sound macroeconomic policies that have spurred economic growth and kept inflation low, has said he may resign his post in order to seek the governorship of his home state of Goias. Is Meirelles likely to pursue his political ambitions, and if so, do you think he will be elected? What impact could such a move have on economic confidence in Brazil? Who would likely succeed Meirelles as head of the central bank?

Georges D. Landau, editor of Brazil Focus and head of Prismax Consultoria in Sao Paulo: Paradoxically, the arch-conservative banker Henrique Meirelles (a former head of BankBoston) was and is the anchor of economic stability in the Lula government. During Lula's first term, Finance Minister Antonio Palocci maintained the policies of the Cardoso administration, and there was a synergy between the government and the central bank. However, this was not the case with Palocci's successor, Guido Mantega, whose 'developmentalism' collided with Meirelles' zealous guardianship of inflation targets, which sometimes led the central bank to pursue a perhaps overly conservative stance. It is to Meirelles' credit that he resisted the Workers' Party's populist onslaught, and it is to Lula's credit that he supported the operational autonomy of the central bank. Now Meirelles (who, before taking over the bank, had been elected a federal deputy from his home state of Goias) wishes to re-enter politics. Lula's endorsement of him seems designed to thwart the electoral ambitions of Senator Marconi Perillo (PSDB-GO), a former governor who Lula dislikes. Meirelles can certainly finance his campaign for the Goias governorship, even if he lacks personal charisma. The question of his replacement at the central bank is fraught with uncertainty, but there are indications that Lula might nominate a current director of the bank, perhaps one more sympathetic to the Workers' Party. What Lula doesn't want at this stage is to rock the boat. Several names from outside the bank have been mentioned, but it is hoped that Lula will resist the temptation to succumb to one of the populist alternatives.

Melvyn Levitsky, professor of international policy and practice at the Gerald R. Ford School of Public Policy at the University of Michigan and former US ambassador to Brazil: In my opinion, Henrique Meirelles has been the brightest star in Lula's government. It is to Lula's credit that he picked a man so far afield from his political perspective for the critical central bank presidency—and that he listened to him. Despite criticism from the extreme left of the Workers' Party, Lula relied on Meirelles' advice on issues such as interest and exchange rates, money supply and (though it has not been part of his formal mandate) on government spending as well. Meirelles has been largely responsible for keeping inflation within reasonable limits and, because of his contacts and connections to international bankers and financiers, as well as the respect he commands among them, for raising Brazil's profile and reputation within the international financial community. Confidence in Brazil's economy has risen and there is a general consensus that Brazil has been able to navigate its way through the worldwide recession more smoothly than any other developing country, and in fact, a number of more-developed countries. Unless Meirelles is cloned, it will be difficult to find someone as able and as acceptable to the political spectrum of Brazilian society. In terms of his electability, it is not yet clear how Meirelles would fare in the governor's race. He is not a traditional politician; though he was elected from Goias as federal deputy, his election was from a party list rather than as a result of personal popularity. Certainly, his national reputation and visibility will help, but then there is a rough and tumble nature to Brazilian politics which often trumps quality and dedication to service.

David Fleischer, emeritus professor at the University of Brasilia and editor of Brazil Focus: Since early 2009, rumors have circulated in Brasilia that central bank President Henrique Meirelles might run for governor of the state of Goias in 2010. In the 2002 election, he was elected federal deputy by the PSDB with the largest vote total in the state, but resigned this mandate and party membership in December 2002 when Lula, then president-elect, appointed him to be central bank president. This decision was very difficult for the more radical PT militants to accept—an international banker from the PSDB at the central bank. However, Meirelles' performance and the success of Brazil's macro-economic policies over the past six years have fully confirmed Lula's decision. A native of Anapolis, Goias, Meirelles has a natural attraction to this state's politics. Last month, President Lula attended a public works inauguration rally in Anapolis and included Meirelles in his entourage. During these festivities, Lula launched Meirelles' 2010 candidacy for governor. However, Meirelles was feted by local politicians much more than Lula. The following week, Lula received the mayor of Goiania and Iris Rezende, a former PMDB governor and senator, to 'explain' his support for Meirelles' candidacy. Rezende is considered a pre-candidate for governor. The Workers' Party in Goias was also not pleased by Lula's gesture. However, two questions remain—Meirelles' party choice, and when he would step down from the central bank. Many think Meirelles will join the PP (before the Oct. 2 deadline) in support of the current governor's Senate candidacy, and by law he would have to step down by early April 2010. His exit from the central bank will probably have little impact on Brazil's macroeconomic policies or on market confidence in Brazil. Meirelles prefers to be replaced by former Febraban President Fabio Barbosa (Banco Santander), but Finance Minister Guido Mantega's choice is current central bank director Alexandre Antonio Tombini, over whom he would exert more control than with Meirelles.

Republished with permission from the Inter-American Dialogue's daily Latin America Advisor newsletter. 


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