By Thierry Ogier
Once a central banker, always a central banker – or so
one might be forgiven for thinking of Henrique de Campos
Meirelles. Three years after stepping down as the head of
Brazil’s central bank, he remains as unflappable
as at any time during his eight years at the helm of the
In an interview with LatinFinance, Meirelles says Brazil is
on the right track and that the world economy is on the mend
– views sharply at odds with a growing consensus.
He dismisses outright the suggestion that global financial
markets could be heading for renewed turmoil, despite a sharp
rise in volatility in 2013.
"There is no turmoil," he says. "Real turmoil was the
post-Lehman events, I don’t see this happening
now," says Meirelles, who, as a central banker, was long
regarded as the guardian of orthodox monetary policy.
Where some see growing imbalances between developed and
emerging markets – which in the second quarter of 2013
triggered the biggest retrenchment of capital from Latin
America since the global financial crisis – he only
refers to a "normal change" in capital flows. "Instability is
part of the overall adjustment," he says.
The 2008 financial crisis marked a turning point globally,
as advanced economies bore the brunt of the adjustment while
emerging markets soared. But today, China’s
transition towards a slower, more consumer-oriented economy,
and an eventual tightening of US monetary policy are not
negative events, he says.
"The recovery of the US economy is very good news," he says.
He is also confident that global demand for food and soft
commodities will remain strong – factors he says will
He acknowledges that global monetary tightening will throw
up difficulties for countries with current account deficits,
but says this requires an adjustment that’s all
"The end of easy – maybe excessive –
liquidity is going to happen, which means that the abundance of
funding for current account deficits is ending," he says.
"Policymakers will have to pay attention to the fundamentals,
which means a more sustainable current account balance
– not relying on borrowing, but one consistent with
the level of foreign direct investment."
The 68-year old banker is still reluctant to comment on
Brazilian economic policies, partly out of courtesy to the
government and his successor. But the views he is willing to
share nevertheless buck conventional wisdom in their
A growing number of observers argue that
Brazil’s flagging economy is partly the result of
bad policies – and a lack of structural reforms. But
Meirelles, who now chairs the local subsidiary of Lazard
Americas, insists the country is not lagging behind in its
He acknowledges that there is a need to overhaul the tax
system "to make it more efficient", to modernize
infrastructure, and to boost productivity.
"We must do [these things], and that does not mean that we
can take too long," he says.
But he says progress is being made. "Brazil has already
taken some important steps, such as the fiscal responsibility
law... Yes, there is [an appetite for reforms]."
The Brazilian current account deficit – which is in
excess of 3% of GDP – is still "sustainable". He says:
"It is still compatible with the level of FDI, despite the fact
that [the deficit] this year will be somewhat higher, which is
A sharp drop in Brazil’s currency, the real,
has alarmed many observers, but Meirelles remains unmoved,
saying it simply reflects a normal process of rebalancing.
While the depreciation may be a challenge, it is nevertheless
"necessary" and the process "simple," he says. "The change in
the exchange rate reflects the drive towards rebalancing the
current account balance to a more sustainable level. With the
real moving from 1.8 to the dollar, to 2.2 or 2.3 or more, it
is part of the rebalancing."
"We are going through a process of change in the relative
prices in the economy. The part of the society that produces
tradable goods are gaining income, relative to the ones who
consume tradable goods and produce non-tradable goods,
Even the dramatic collapse of the business empire of Eike
Batista, following several heady years for the Brazilian
corporate world, fails to trouble Meirelles. "This is the
normal course of business. Corporations and entrepreneurs raise
money. They have to deliver results. And if they
don’t do very well, stock prices fall. It is as
simple as that. One has to deliver what it is supposed produce.
There is nothing new here, there is no earth-shaking
Brazil still first
In Latin America, Brazil is seen as less market-friendly
than Mexico, which has embarked on an ambitious economic reform
"At the moment Mexico is probably the [regional] star.
Definitely it is addressing some of its key problems. We must
congratulate it," says Meirelles, adding that the country
should be an inspiration for the rest of the region.
But he rejects the suggestion that Mexico could become the
largest Latin American economy. That title, he says, will
remain Brazil’s – no matter the
challenges at hand. LF