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CONFIDENCE BOOSTER Henrique Meireless brings immediate confidence to Brazil's government, business executives and economists say. (Photo: PSD)
Monday, May 16, 2016

Brazil’s Economic Fireman: Henrique Meirelles

Ex-banker Henrique Meirelles boosts investor confidence in Brazil.


Brazil just got a fireman to put out its economic fire.  His name is Henrique Meirelles, the country’s new finance minister. With the help of fire chief Michel Temer, Brazil’s acting president after the May 12 suspension of President Dilma Rousseff, Meirelles is expected to move quickly to extinguish the flames of the economic disaster left by Rousseff.

“Everyone in Wall Street knows Meirelles, and he enjoys very high levels of investor credibility,” says Alberto Bernal, Chief Global and EM Strategist, XP Securities. “In addition, local pundits argue that he is quite savvy in terms of dealing with difficult political waters.”

John H. Welch, Managing Director for Macro Strategy at CIBC Capital Markets, gives Meirelles an 80 percent chance he improves things enough for growth in 2017.

“Overall the Brazilian economy needs to find a light at the end of the tunnel,” says Rogério Menezes, the CFO for Brazil, Argentina and Chile for Smurfit Kappa.Nothing will change dramatically in the following days but a lot about economy is linked to hope and confidence. To that extend, Meirelles is someone qualified to transmit these sentiments to the market, creating a room for a potential improvement in the economy. As someone with previous experience in both governmental and private sectors, he is well qualified to promote smart and intelligent changes to ramp-up the economy.”

Meirelles played a key role in the success of Rousseff’s predecessor, Luiz Inácio Lula da Silva. When Lula – a longtime union leader and founder of the Workers Party -- succeeded the widely respected President Fernando Henrique Cardoso, there were widespread fears among investors that he would implement radical economic policies.  


By appointing Meirelles – a veteran of BankBoston – as his central bank president, Lula was able to dramatically remove those fears. As it became clear that Lula gave Meirelles de facto autonomy at the bank, investors reacted favorably.


Meirelles became the first foreigner to head up BankBoston, when he was named President and COO in 1996 after a 22-year career at the bank.


During Meirelles’ eight years at the helm of Brazil’s central bank, he was able to keep inflation at relatively low levels – a feat not accomplished by his central bank successor, Alexandre Tombini.


During the international crisis in 2009, he played a key role in maintaining economic stability.


So well-respected is Meirelles that Lula allegedly pressured Rousseff to consider naming him as finance minister.


Unlike Joaquim Levy (Brazil’s finance minister for a little under a year until he resigned in December), Meirelles is seen as having the political skills to push for the necessary reforms. Levy, a well-respected economist, appeared to be hampered by lack of political support, including from Rousseff who had appointed him.


In contrast, Brazil’s new interim president Michel Temer has given Meirelles autonomy to set economic policy. Temer knows Meirelles is the key to succeeding in turning around the economy and will thus support, rather than undermine, him – in contrast to the Levy-Rousseff partnership.

Rather than becoming another Levy, Meirelles may even copy Cardoso, who as finance minister for a year (1993-94) slashed hyperinflation and was able to become president in 1995, serving for two terms.


Meirelles has been more politically active than Levy and many experts suspect he harbors ambitions of becoming president.


A year before becoming central bank president, Meirelles ran for congressman in Goiás with the political party PSDB and was elected with the largest number of votes in the state. In 2010, he was seen as a likely governor of Goiás, but did not run for office at the behest of Lula, who wanted him to remain until his mandate expired in January 2011.

"He is a politician, he knows how to work in Brasilia," one observer told Bloomberg.


Meirelles' appointment as finance minister also marks a stark contrast to Rousseff's two other finance ministers, Guido Mantega and Nelson Barbosa. Mantega was seen as too leftist, while Barbosa was seen as more pragmatic, but weak.


Meirelles’ presidential ambition will come in handy for the task at hand. A gigantic mess left by Rousseff, who the past five years implemented largely anti-business policies, with the appointment of Levy the main exception.

“He will face a titanic task, because the deterioration in the fiscal accounts has been unprecedented,” Bernal says. “That said, positive confidence shocks tend to deliver very positive outcomes in some instances. Hopefully that will be the case this time around.”


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Brazil's Economic Fireman: Henrique Meirelles

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