Change in Lula’s economic team is somewhat of a mystery – 09/05/2023 – Vinicius Torres Freire

The nomination of Gabriel Galípolo to the Central Bank motivated the usual speculation about interest rate policy, roughly speaking. The appointment of Dario Durigan to replace Galípolo, executive secretary, deputy finance minister of Fernando Haddad, generated much less talk.

The disproportionate amount of debate, or gossip, about the nominations does not make much sense. Gallípolo at the Central Bank will not cause a turnaround, for several reasons. Durigan’s role as deputy finance minister is a mystery and the change is premature. Maybe Haddad wanted to take a seat at BC before someone suggested Lula a bad name.

Durigan, 39, graduated in law at USP and holds a master’s degree in law from UnB. His master’s thesis, “Democratic Disobedience in Brazil” (2020), is an updated discussion of the idea of ​​civil disobedience, from the perspective of the recent Brazilian context. Until 2020, he made a career in public service, in legal matters. Since then, he has been working in the institutional relations area of ​​Meta / WhatsApp.

This formation is not demerit. But it has nothing to do with economics, in theory or practice. Durigan can be a political liaison, with experience in state bureaucracies, particularly in their legal intricacies. He was cast in the same position as Gallipolo, but his tactical role and skills are different. For now, an unknown.

Galípolo is a counterpoint to the most anachronistic and mistaken economic ideas of petism. He opposes tariffs, decrees of intervention in economic or state activity, mistaken privatizations. He suggests incentives for private investment. He is in favor of some spending ceiling (as is the so-called fiscal framework). He presided over a small bank, Fator, and was a consultant on concessions and public-private partnerships.

He has the sympathy of Luiz Inácio Lula da Silva and gets along well with the leaders of the centrão and the Chamber, including Arthur Lira (PP-AL). Even before joining the government, Haddad listened to him a lot, especially on financial markets, tax matters and investments.

Judging by prices in the financial marketplace, the big money in finance has shrugged off the nominations, so far at least.

Even if Galípolo was or will be part of the “government bench” in BC, he will be a very minority until the end of 2024, alongside the other nominee, Ailton dos Santos, an unknown and career employee of the institution. In any case, he knows that the job at the BC is not to “turn votes” or cause turmoil. You have to persuade; there are institutional limits (inflation targets and their technical or argumentative implications) and the finances for bullfighting.

And that’s not all.

It is very difficult to say whether the Selic should be at 14% or 13.25% per year, even if it were possible to abstract the political context. Or say whether the basic rate should end the year at 13.75%, in the current case of the Central Bank, or 12.5%, as forecast by economists in the private sector or indicate the interest rates in the market.

The less doubt there is about public debt growth or about inflation targets, for example, the less unlikely that the Selic will end this 2023 lower. At the tip of the BC’s pencil, it stays at 13.75% until you lose sight of it. But even this tough perspective can help contain inflation expectations and facilitate the fall of interest rates, everything else constant. In any case, it should be noted that these percentage points will not make the country grow more, not even in the short term.

Gallípolo may even change the perspective of the discussion. But there’s not much escaping this playing field. Of course, if Lula makes a crazy heterodox majority in BC 2025 (or indicates that he will do so), everything changes. To begin with, there would be such a riot that the plan would backfire.

It might as well happen. But it is not the perspective, now. It is interesting to know what Haddad intends on the farm and, further on, in BC.

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