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Brazil's central bank chief eyes jump to politics
March 24, 2009 / 4:34 PM / 9 years ago

Brazil's central bank chief eyes jump to politics

BRASILIA, March 24 (Reuters) - Henrique Meirelles, the longest serving central bank president in Brazilian history, is considering stepping down after more than six years on the job to pursue a career in politics.

Meirelles has been discussing the possibility of running for governor in his home state of Goias next year with leaders of the right-wing Progressive Party, or PP, according to several locally prominent politicians.

“He accepted the party’s invitation. If he really wants to govern the state of Goias, he’ll join the PP. That’s a given,” Goais PP secretary-general Sergio Lucas told Reuters.

Another PP leader who asked to remain anonymous said Meirelles, a former Wall Street banker who contained inflation during Brazil’s biggest economic boom in three decades, is seriously considering the invitation to run on the PP ticket.

Asked to comment on a potential leap to politics, a Meirelles spokeswoman said “Henrique Meirelles at this time is focused on monetary policy.”

Brazilian candidates must register with a political party a year before election date. That means Meirelles would have to join a party by Oct. 3 to run in nationwide elections in 2010.

Meirelles’ departure could pave the way for President Luiz Inacio Lula da Silva to nominate a central bank chief who would be willing to cut interest rates more aggressively to prevent the economy from slipping into recession.

Since taking the helm of the central bank in early 2003, Meirelles resisted political pressure to slash interest rates as far and as fast as sought by prominent government members.

Brazil’s benchmark interest rate is 11.25 percent, one of the highest in the world after discounting inflation, despite two cuts this year. Comparatively high interest rates helped fuel a multiyear rally in Brazil’s currency, which petered out in latter part of 2008 amid the global financial crisis.

NEW MONETARY POLICY STEWARD?

Eager to get his chief of staff, Dilma Rousseff, elected in the 2010 presidential race, Lula is pushing his economic team to take steps to ensure that Brazil’s economic downturn will be short-lived. The slowdown made the president’s approval ratings fall this month for the first time in almost two years.

Lula, a former union leader in office since January 2003, is constitutionally barred from running for a third consecutive term. Incoming presidents traditionally nominate a new central bank governor, who must then be approved by the Senate.

Meirelles is not a newcomer to politics. In 2002 he won a seat in the Chamber of Deputies, the lower house of Congress, but turned down the seat to take the central bank job. He left the Brazilian Social Democracy Party (PSDB), now in the opposition, and has remained unaffiliated since.

President of Global Banking in FleetBoston Financial until 2001, Meirelles was not Lula’s first choice to head the central bank. He has also drew frequent criticism for what many in Lula’s government see as ultra-conservative monetary policy.

The central bank is officially a branch of the finance ministry and implements monetary policy guidelines set by the government. Though the president can fire a central bank director at any time, the bank has enjoyed informal independence under Lula to implement monetary policy.

Two names have been circulating in financial and government circles as possible replacements for Meirelles.

Luciano Coutinho, currently head of the state development bank BNDES, favors more government intervention in the economy. Alexandre Tombini, central bank director for norms, is seen as in line with current policies.

“I don’t think Coutinho is a candidate, or even wants to be one,” said Roberto Padovani, strategist with West LB Bank in Sao Paulo. “The market would be OK with Tombini.”

Padovani said Lula would be reluctant to replace Meirelles with a government proxy to radically slash interest rates.

“It would generate more cost than benefit -- uncertainty at a delicate economic time like this,” said Padovani.

Some members of Lula’s nominally left-wing Workers’ Party (PT) asked Mereilles to form an alliance with them in Goias, a vast central state known for farming and cattle ranching.

“He’s very eager to participate in next year’s election, that could be for governor or senator,” Rubens Otoni, PT Deputy for Goias, told Reuters. (Writing by Raymond Colitt, Editing by Todd Benson and Walker Simon) ((ray.colitt@thomsonreuters.com ; +55 61 3426-7021; Reuters Messaging: ray.colitt.reuters.com@reuters.net))

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