Brazil: Lula Comments On ‘Political Influences’ At Central Bank

By Pedro Peduzzi 

Brazilian President Luiz Inácio Lula da Silva on Tuesday (Jun. 18) criticized the way Central Bank head Roberto Campos Neto has conducted the institution’s policies. In an interview with Rádio CBN, the president said Neto’s closeness to the opposition raises suspicions, adding that São Paulo Governor Tarcísio de Freitas probably has a greater influence on the Central Bank than the government itself.

“Just one thing is out of kilter in Brazil at the moment: the behavior of the Central Bank. We have a Central Bank president who shows no capacity for autonomy and who has a clear political side. As I see it, he works much more to harm than to help the country,” President Lula argued.

President Lula noted he is one of the most experienced heads of state in Brazil’s history, and mentioned his choice of economist Henrique Meirelles, who headed the Central Bank from 2003 to 2011. “I doubt that Roberto Campos has any more autonomy than Meirelles did,” he said, criticizing Campos’s closeness to the governor of São Paulo.

“Honestly, I think Tarcísio de Freitas has more influence [with Roberto Campos] than I do,” said Lula, referring to the Central Bank president’s request to join the São Paulo governor’s economic team during an event in the São Paulo capital.

“It’s not that he met Tarcísio at a party. It was Tarcísio’s party for [Roberto Campos]. It was a tribute paid to him by the São Paulo government—certainly because the governor thinks the 10.5 percent interest rate is wonderful,” he added.

In President Lula’s view, there is justification for the current interest rate, which is an understanding even among foreign authorities, including financial ones. “I have traveled the world and talked to a number of presidents. I’ve received presidents from the International Monetary Fund, from Asian banks, from Citibank, from Santander. All the banks show there is no country with more optimism than Brazil. Proof of this is that we ranked second among the nations the received the most foreign investment.”

“Therefore, in our situation, there’s no need for this interest rate. Brazil cannot continue with such restricting rate of investment in the productive sector. We need to lower it down to a level compatible with inflation, which is fully under control. But now they’re making up discourse around future inflation. We’re going to work on what’s real.”

In President Lula’s opinion, a low-inflation landscape is no place for high interest rates, promoted as they are by a Central Bank that should be autonomous, but suffers political interference from the opposition.

With the possibility of a split among its members, the Central Bank’s Monetary Policy Committee will decide on Wednesday (19) whether to cut or maintain the country’s benchmark interest rate, the Selic.