With vacancy open in BC, Lula must appoint a ‘pro-market’ economist

new presidency

Bruno Serra may remain in office until his successor is appointed

The vacancy for the director of monetary policy at the Central Bank will open this week, with the end of the term of director Bruno Serra at the BC, which expires on Tuesday (28). President Luiz Inácio Lula da Silva (PT) has already been warned, by interlocutors at the Planalto Palace and at the National Congress, that the choice of an anti-market economist could be stuck in the Senate.

Bruno Serra may remain in office until his successor is appointed and is even considering participating in the next Copom meeting, the BC committee that decides on the basic interest rate, scheduled for March 21st and 22nd.

Lula has not yet revealed to allies whom he intends to nominate. Finance Minister Fernando Haddad and BC President Roberto Campos Neto spent the week together in India, at a G-20 meeting, and the expectation in the government is that they bring Lula a consensus name for the succession by Bruno Serra.

The bet, in Planalto, is that Haddad and Campos Neto deliver to the president a suggestion of an economist with good transit in the financial market and who recognizes the importance of the fiscal adjustment for a sustainable drop in interest rates. At PT, preference is given to choosing a name that does not follow the financial market guidelines. Someone along the lines of economist André Lara Resende, who has minimized the fiscal risk and defended a more aggressive reduction in the Selic rate, would have immediate support in the party.

However, Lula’s direct assistants and his allies in Congress have already alerted him to the political sensitivity of the nomination. If this is the profile, they warn that the name could be stopped for weeks or months in the Economic Affairs Committee (CAE) of the Senate, responsible for the sabbath. In practice, no one believes in the possibility of rejection of the nominee. But there is a chance that an economist considered “anti-market” will be blocked, without a date for the Sabbath, causing prolonged wear and tear for the government.

A source reminded CNN that the president of the Senate, Rodrigo Pacheco (PSD-MG), has a great relationship with Campos Neto and will certainly hear from him about the nomination. The president of CAE, Vanderlan Cardoso (PSD-GO), is from the opposition and will have a key role in the process of analyzing the nominated future.

With the Senate playing that role, Lula’s direct advisers believe that he will not buy into a political fight and will take care to avoid that the nomination generates negative repercussions in the market.

According to the latest Focus bulletin, published weekly by the Central Bank, the GDP growth forecast is just 0.80% for 2023. In the government, the fear is that a retail credit crisis — in the wake of the accounting scandal of Americans — push that number close to zero. Measures to accelerate the economy — exemption from Income Tax for up to two minimum wages, an additional readjustment of the minimum wage to R$1,320 and the relaunch of Minha Casa Minha Vida — were recently announced. A debt refinancing program for millions of consumers, Desenrola, will be launched in the coming weeks.

For this reason, in those closest to Lula, there is concern about the choice of name for the BC and a fear of avoiding the nomination of an economist considered “anti-market”, who would generate negative reactions from investors and turbulence in the dollar or the stock exchange.

In addition to the vacancy of Bruno Serra, the position of inspection director will also open, whose mandate also ends on Tuesday (28). For this board, which functions as a kind of auditor or controller of the financial system, the choice is traditionally made by BC employees who have experience in the area.

*With information from CNN

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