The Central Bank
of Brazil is the result of a typically Brazilian compromise. It
is a quasi-independent department of the Finance
Ministry, which means that ultimately it is under
political control. Yet it has won ? and exercises ? a wide
degree of independence over policy and staffing. Incoming
governments exercise their right to appoint a new Central Bank
president as part of the spoils system, and often vet the board
members as well. President Luiz Inácio Lula da Silva was
no exception and replaced Armínio
Fraga, a brilliant academic economist and financier,
with Henrique Meirelles, a former top
executive at FleetBoston.
Meirelles had no experience as a central banker, was a
political neophyte and a deputy from the opposition PSDB. But
he has steered the Central Bank along the same rigorously
independent path as his predecessor and retained several board
members from the previous administration. He...
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