LatinFinance - Special Edition - August 2013 - 70

2
THE
FUTURE
OF LATIN
FINANCE

Policymakers must focus on fundamentals as global liquidity tightens, says
Brazil’s former central banker Henrique Meirelles. Breaking with consensus, he
insists his country is on the right track. By Thierry Ogier

Henrique Meirelles
Business as usual

nce 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 monetary authority.
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 boost markets.
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 too welcome.
“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

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

©REUTERS

nevertheless buck conventional wisdom in
their optimism.
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 reform efforts.
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

NO PRESSURE: A sharp drop in
Brazil’s currency is a “normal” part of
rebalancing, according to its former
central bank chief Henrique Meirelles

http://LATINFINANCE.COM

LatinFinance - Special Edition - August 2013

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