LatinFinance - Special Edition - August 2013 - 54

new group that understands better the
dynamics of the country and its role in the
world. this is essential.
so this is not possible under the current
government?
no. With this government, it looks difficult.
There is some concern that a decade of
prosperity for Latin america has come to
an end. What is your view?
latin america today is very different
from what it was 20 years ago. now, you
have a group of countries that are organized in the so-called Pacific alliance. You
have “Bolivarian countries” on the other
side, and Brazil has remained a bit in doubt
between the two. changes that occurred
in latin america have weakened our voice
in latin america. the region is not homogenous. countries are taking different
directions.
How should Brazil position itself towards
the Pacific alliance and its new dynamics
in the region?
We must review our strategic position,
we must regain the capacity to influence
the region. to do that, we have to decide
which side we are on. are we going to keep
on accepting forever this Bolivarianism,
which is not very clear about what it is going
to do? or shall we take another direction?
it is clear that in Brazil we will always
have a government where the state will have
more weight than, say, in chile or colombia.
this is due to our challenges as a very large
country, where wealth inequalities are still
great and where poverty is still significant.
So the state still has an active role.
But we need to see with greater clarity
what is the role of the state, the role of the
market and what is the role of the society.
this has to be rethought in Brazil so that we
can adapt to a changing world.
You did not mention Mercosur, of which
you were one of the main protagonists.
should Brazil instead be moving closer to
the Pacific alliance?
i think so. the real problem is that
mercosur has not moved forward. there
has been a standstill, and Brazil became
isolated in terms of international relations
and trade agreements while countries of
the Pacific alliance have become more
integrated.
Brazil needs to make an effort again to
achieve greater integration in the global

54 l atinfina nce.com - 25 Years - August 2013

economy. So yes, we must start to integrate
with the most dynamic countries of our
region: colombia, chile and Peru. i think
Uruguay and Paraguay are moving in the
right direction. Brazil has more in common
with this mentality than Bolivia’s or Venezuela’s or nicaragua’s… this is not our way.
Do you think the reform agenda has been
implemented well since the time you
were in office?
from 2004 onwards, president lula
stopped all the reforms. as the global
economy was booming, he sought to take
advantage of the tail winds. He’d rather
avoid domestic political problems and
internal divisions. So the reform process
stalled. almost nothing was done.
President Dilma has been trying to
resume some reforms in ports, some con-

FERNANDO HENRIQUE CARDOSO

“Later, when we are
forced to act, we
wiLL either need a
very austere fiscaL
poLicy, which wouLd
have an impact Like
in europe, or there
wiLL be a very steep
interest rate hike”
cessions of public services – but with less
political strength than lula had. But she has
been doing it in a shy fashion, and somewhat reluctantly – one may have the impression that she would not like to have done it.
the result is that the infrastructure is still
paralyzed, which is serious, it has long-term
consequences. there has not been any
progress at all in the labor market. there
has been limited progress in the social
security reform. it would have been easier
to push the reform agenda forward during
the years of bonanza, but lula preferred
not to change what was difficult to achieve
to preserve his popularity. this will have an
impact now.
We will have to resume this reform
agenda, which is more microeconomic than
macroeconomic. the management needs
to improve a lot. there has been more

interference of party interests in recent
years and clientelism in the government
machine. this is a drag on efficiency of the
government.
Is your legacy – the end of hyperinflation
– now at risk? Is the current government
proving more tolerant towards inflation?
i would not say it is at risk. inflation
is still small. But here has been a loss of
enthusiasm for keeping these key factors
under control. there has been a lack of
organization to resist inflation. Public
spending and debt have increased a lot,
and above all, which is more serious, it’s
difficult to see what is happening with the
public spending.
there is an accumulation of problems,
which will have to be tackled later. the
government has not completely given up on
what is fundamental. But when it comes to
improving the lives of Brazilians, there are
signs it has started to weaken.
Concerns now center on the depreciation
of the real and the risk of inflation – which
you faced during the 1999 devaluation.
What are the implications today?
in a way, that was already the dilemma at
the time of the 1999 real devaluation. fiscal
policy was loose. now, again, fiscal policy
is loose. When the fiscal policy is loose, the
only exit is monetary policy, interest rates.
it is bad, it has a negative impact, it weighs
on the exchange rate.
So here we have to go back to what was
done in the past: a more rigorous fiscal
policy and interest rates that are not so
high. We need a different policy mix. Policy
is not science. it is more like navigation.
there is no recipe. You need to have a good
understanding of the current situation and
be able to navigate well. now there is some
uncertainty about the way we are going.
later, when we are forced to act, we will
either need a very austere fiscal policy,
which would have an impact like what we
see in europe, or there will be a very steep
interest rate hike, which also has a negative
impact.
So it would be better to be more cautious
now in fiscal policy and give more independence to the central bank – as it has already
started to have – so that it can complement
fiscal policy and do what can be done in
terms of the exchange rate.
We also need to understand what is happening with the US, where the dollar will really strengthen. this is going to make things
harder in the whole world, and here too. LF


http://LATINFINANCE.COM

LatinFinance - Special Edition - August 2013

Table of Contents for the Digital Edition of LatinFinance - Special Edition - August 2013

Latin Finance - Special Edition - August 2013
The Evolution of the Markets 1988-2013
The Future of Latin Finance
"Twenty-five Years Ago, LatinFinance Was Launched With One simple, if Well-worn, Belief: That Crisis Inevitably Gives Way to Opportunity"
Evolution of the Markets & Deals of the Quarter Century
Turnaround Time, for Some
Rising Champions
Locals Wanted
Gaining Pace
A Question of Depth
The Public-Private Balance
Cheaper Borrowing
Keeping It Simple
Local Banks Are Increasingly Stepping Up the Latin League Tables
LatinFinance Charts a Quarter Century of Change for the Biggest Banks in Latin America
LatinFinance Picks Out the Major Turning Points in the Region’s Political, Economic and Financial History Over the Past 25 Years
Governance & Reform
President, Mexico
Former President, Brazil
“the Government Has Not Given Up on What Is Fundamental. but When It Comes to Improving The Lives of Brazilians, There Are Signs It Has Started To Weaken"
Former President, Colombia
Opposition Leader, Venezuela
Former Us Treasury Secretary
Stability & Regulation
Governor, Bank of Mexico
“Latin America Did Very Well During the 2008 Crisis. but It’s Also True That a Lot of Ammunition Was Used”
Chairman, Grupo Financiero Banorte
Former Vice-Chairman, Citigroup
Partner, Cleary Gottlieb Steen & Hamilton
Former Governor, Central Bank of Brazil
Former Governor, Central Bank of Venezuela
Former Governor, Central Bank of Argentina
Professor of Economics, Columbia University
Corporates & Capital
CEO and co-CIO, Pimco
CEO, Gávea Investimentos
Founder, Celfin Capital
With Joyce Chang, Richard Frank, Hari Hariharan, Hans Humes, Will Landers, Mark Mobius and Martin Schubert
CEO, Itaú-Unibanco
CEO, Grupo Sura
Chairman, Santander
CFO, América MóVil
Former CEO, Vale
Chairman, Roubini Global Economics
Growth & Development
Former President, Chile
President, CAF
President, IDB
Former President, IDB
Former President, Caribbean Development Bank
President, Centennial Group Latin America
A Look Into the Future With Alternate Visions of Latin America a Quarter Century From Now
LatinFinance - Special Edition - August 2013 - Latin Finance - Special Edition - August 2013
LatinFinance - Special Edition - August 2013 - Cover2
LatinFinance - Special Edition - August 2013 - The Evolution of the Markets 1988-2013
LatinFinance - Special Edition - August 2013 - The Future of Latin Finance
LatinFinance - Special Edition - August 2013 - 3
LatinFinance - Special Edition - August 2013 - "Twenty-five Years Ago, LatinFinance Was Launched With One simple, if Well-worn, Belief: That Crisis Inevitably Gives Way to Opportunity"
LatinFinance - Special Edition - August 2013 - 5
LatinFinance - Special Edition - August 2013 - Evolution of the Markets & Deals of the Quarter Century
LatinFinance - Special Edition - August 2013 - 7
LatinFinance - Special Edition - August 2013 - Turnaround Time, for Some
LatinFinance - Special Edition - August 2013 - 9
LatinFinance - Special Edition - August 2013 - 10
LatinFinance - Special Edition - August 2013 - 11
LatinFinance - Special Edition - August 2013 - Rising Champions
LatinFinance - Special Edition - August 2013 - 13
LatinFinance - Special Edition - August 2013 - 14
LatinFinance - Special Edition - August 2013 - 15
LatinFinance - Special Edition - August 2013 - Locals Wanted
LatinFinance - Special Edition - August 2013 - 17
LatinFinance - Special Edition - August 2013 - Gaining Pace
LatinFinance - Special Edition - August 2013 - 19
LatinFinance - Special Edition - August 2013 - 20
LatinFinance - Special Edition - August 2013 - 21
LatinFinance - Special Edition - August 2013 - A Question of Depth
LatinFinance - Special Edition - August 2013 - 23
LatinFinance - Special Edition - August 2013 - 24
LatinFinance - Special Edition - August 2013 - 25
LatinFinance - Special Edition - August 2013 - The Public-Private Balance
LatinFinance - Special Edition - August 2013 - 27
LatinFinance - Special Edition - August 2013 - Cheaper Borrowing
LatinFinance - Special Edition - August 2013 - 29
LatinFinance - Special Edition - August 2013 - Keeping It Simple
LatinFinance - Special Edition - August 2013 - 31
LatinFinance - Special Edition - August 2013 - LatinFinance Charts a Quarter Century of Change for the Biggest Banks in Latin America
LatinFinance - Special Edition - August 2013 - G2
LatinFinance - Special Edition - August 2013 - G4
LatinFinance - Special Edition - August 2013 - G5
LatinFinance - Special Edition - August 2013 - 34
LatinFinance - Special Edition - August 2013 - 35
LatinFinance - Special Edition - August 2013 - 36
LatinFinance - Special Edition - August 2013 - 37
LatinFinance - Special Edition - August 2013 - 38
LatinFinance - Special Edition - August 2013 - 39
LatinFinance - Special Edition - August 2013 - 40
LatinFinance - Special Edition - August 2013 - 41
LatinFinance - Special Edition - August 2013 - 42
LatinFinance - Special Edition - August 2013 - 43
LatinFinance - Special Edition - August 2013 - 44
LatinFinance - Special Edition - August 2013 - 45
LatinFinance - Special Edition - August 2013 - 46
LatinFinance - Special Edition - August 2013 - 47
LatinFinance - Special Edition - August 2013 - Governance & Reform
LatinFinance - Special Edition - August 2013 - 49
LatinFinance - Special Edition - August 2013 - President, Mexico
LatinFinance - Special Edition - August 2013 - 51
LatinFinance - Special Edition - August 2013 - “the Government Has Not Given Up on What Is Fundamental. but When It Comes to Improving The Lives of Brazilians, There Are Signs It Has Started To Weaken"
LatinFinance - Special Edition - August 2013 - 53
LatinFinance - Special Edition - August 2013 - 54
LatinFinance - Special Edition - August 2013 - 55
LatinFinance - Special Edition - August 2013 - Former President, Colombia
LatinFinance - Special Edition - August 2013 - 57
LatinFinance - Special Edition - August 2013 - Opposition Leader, Venezuela
LatinFinance - Special Edition - August 2013 - 59
LatinFinance - Special Edition - August 2013 - Former Us Treasury Secretary
LatinFinance - Special Edition - August 2013 - 61
LatinFinance - Special Edition - August 2013 - Stability & Regulation
LatinFinance - Special Edition - August 2013 - Governor, Bank of Mexico
LatinFinance - Special Edition - August 2013 - 64
LatinFinance - Special Edition - August 2013 - B1
LatinFinance - Special Edition - August 2013 - B2
LatinFinance - Special Edition - August 2013 - 65
LatinFinance - Special Edition - August 2013 - Chairman, Grupo Financiero Banorte
LatinFinance - Special Edition - August 2013 - 67
LatinFinance - Special Edition - August 2013 - Former Vice-Chairman, Citigroup
LatinFinance - Special Edition - August 2013 - Partner, Cleary Gottlieb Steen & Hamilton
LatinFinance - Special Edition - August 2013 - Former Governor, Central Bank of Brazil
LatinFinance - Special Edition - August 2013 - Former Governor, Central Bank of Venezuela
LatinFinance - Special Edition - August 2013 - Former Governor, Central Bank of Argentina
LatinFinance - Special Edition - August 2013 - 73
LatinFinance - Special Edition - August 2013 - Professor of Economics, Columbia University
LatinFinance - Special Edition - August 2013 - Corporates & Capital
LatinFinance - Special Edition - August 2013 - CEO and co-CIO, Pimco
LatinFinance - Special Edition - August 2013 - 77
LatinFinance - Special Edition - August 2013 - 78
LatinFinance - Special Edition - August 2013 - 79
LatinFinance - Special Edition - August 2013 - CEO, Gávea Investimentos
LatinFinance - Special Edition - August 2013 - Founder, Celfin Capital
LatinFinance - Special Edition - August 2013 - With Joyce Chang, Richard Frank, Hari Hariharan, Hans Humes, Will Landers, Mark Mobius and Martin Schubert
LatinFinance - Special Edition - August 2013 - 83
LatinFinance - Special Edition - August 2013 - 84
LatinFinance - Special Edition - August 2013 - 85
LatinFinance - Special Edition - August 2013 - CEO, Itaú-Unibanco
LatinFinance - Special Edition - August 2013 - 87
LatinFinance - Special Edition - August 2013 - CEO, Grupo Sura
LatinFinance - Special Edition - August 2013 - Chairman, Santander
LatinFinance - Special Edition - August 2013 - CFO, América MóVil
LatinFinance - Special Edition - August 2013 - Former CEO, Vale
LatinFinance - Special Edition - August 2013 - Chairman, Roubini Global Economics
LatinFinance - Special Edition - August 2013 - Growth & Development
LatinFinance - Special Edition - August 2013 - Former President, Chile
LatinFinance - Special Edition - August 2013 - 95
LatinFinance - Special Edition - August 2013 - President, CAF
LatinFinance - Special Edition - August 2013 - 97
LatinFinance - Special Edition - August 2013 - President, IDB
LatinFinance - Special Edition - August 2013 - Former President, IDB
LatinFinance - Special Edition - August 2013 - Former President, Caribbean Development Bank
LatinFinance - Special Edition - August 2013 - 101
LatinFinance - Special Edition - August 2013 - President, Centennial Group Latin America
LatinFinance - Special Edition - August 2013 - 103
LatinFinance - Special Edition - August 2013 - A Look Into the Future With Alternate Visions of Latin America a Quarter Century From Now
LatinFinance - Special Edition - August 2013 - Cover3
LatinFinance - Special Edition - August 2013 - Cover4
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