BC: Galípolo nods to Campos Neto on Saturday – 07/04/2023 – Market

Nominated by the Lula government (PT) to occupy a seat on the board of the Central Bank, economist Gabriel Galípolo said this Tuesday (4th) in a Senate sabbath that only a “neutral interest rate” of 4.5% a year it is a “solution to grow”, and made nods to the president of the autarchy, Roberto Campos Neto.

“Brazil’s growth does not depend only on an external issue. As the Central Bank’s CEO Roberto Campos rightly put it, if we continue with assumptions of potential growth of 1.5%, 1.6%, and a neutral interest rate of 4.5%, no matter how sophisticated the models and the economists who deal with the models are, the debt-to-GDP ratio will not show a good behavior”, he said.

“As President Roberto Campos also said, the only solution is to grow. And, in order to grow, it is necessary to follow the economic agenda that is being faced right now jointly by the Executive, Legislative and Judiciary”, completed Galípolo.

Lula’s trusted name, Galípolo will need to balance between the BC’s legal autonomy and the mission credited to him to open the way for the cut of the Selic – an appeal by the president echoed by members of the government and by PT cadres since the beginning of the term .

The PT reading is that the high interest rate harms economic activity, whose resumption is seen as crucial for consolidating popular and political support for the Lula government.

The secretary was chosen to take over the Monetary Policy board, one of the most important in the autarchy after the presidency — occupied today by Roberto Campos Neto, appointed by the administration of Jair Bolsonaro (PL).

In addition to Galípolo, Lula also appointed Ailton de Aquino Santos, a career server at the BC, to head the Inspection area.

The two names need to be confirmed by the Federal Senate, after the sabbath, but the expectation is that there will be no obstacles.

Government interlocutors say that Galípolo’s nomination is a way of “marking territory” within the BC, which today has a board composed entirely of names chosen by Bolsonaro. The collegiate’s rigid stance in defense of maintaining interest rates at 13.75% per year has been fertile ground for criticism fomented by the government.

In the future, the bet is that he will be chosen by Lula to succeed Campos Neto, whose term as president of the BC ends in December 2024.

The rapporteur for Galípolo’s nomination at the CAE (Economic Affairs Commission), Senator Otto Alencar (PSD-BA), one of the main allies of the President of the Republic in the Senate, stated that the economist should “reduce the conservatism of the Central Bank”.

In the recent past, Galípolo has defended ideas considered less orthodox for conducting economic policy. In 2022, he signed a document along with nine other specialists with proposals in line with Modern Monetary Theory. One of the co-authors was André Lara Resende, an exponent of the so-called MMT in Brazil.

Despite the expectations surrounding the nominee’s performance in BC, Haddad said that Galípolo is not affiliated with the PT and will not represent the party’s thinking in the collegiate.

The two names being debated by the Senate are the first to be nominated by Lula’s current administration for BC. According to the schedule, the next mandates to expire are Fernanda Guardado, director of International Affairs and Corporate Risk Management, and Mauricio Moura, director of Relationship, Citizenship and Conduct Supervision —both on December 31 of this year.

In December of next year, the mandates of Campos Neto, the director of Regulation, Otavio Damaso, and the director of Administration, Carolina de Assis Barros, end.

The BC autonomy law, approved in 2021, determines fixed four-year terms for the president and the directors of the autarchy, which can be renewed only once and do not coincide with that of the President of the Republic.