The financial market has supported the potential arrival of
former central banker Henrique Meirelles at the Ministry of Finance by
unmistakably pushing up the Ibovespa stock index and the real, the
Brazilian currency. But what may be happening there is a classic case of
overpricing.
Mr. Meirelles doesn’t represent a different economic policy from
Joaquim Levy, the current minister. Therefore, one can deduct that the
current path will be very similar to what the former Central Bank (BC)
chief would take and that this is not the main explanation for the
adjustment in asset prices. The euphoria with the change in command
seems result of the view that Mr. Meirelles would have autonomy to
appoint a new BC chief and a new minister of Planning. He would form a
more cohesive economic team, capable of imposing on President Dilma
Rousseff a consistency in the economic policy that doesn’t exist today.
Indeed, the government would gain with Mr. Meirelles’s better
negotiating skills. But one can’t forget all the praise Mr. Levy won
when he began to negotiate the economic agenda with Congress. At that
not so distant time, he was the favorite negotiator of the government
and of legislators. He no longer is, as many comments criticizing him
can attest.
Another gain that the former central banker can bring is the vast
experience accumulated in the Luiz Inácio Lula da Silva administration
of disputes with the ruling Workers’ Party (PT) and the veiled support
he would have from the opposition Brazilian Social Democracy Party
(PSDB) and explicit one from the allied Brazilian Democratic Movement
Party (PMDB). It is worth remembering, though, that the PT leads the
target shooting at Mr. Levy, but the PSDB is guided by the possibility
of returning to power in 2018, and that the PMDB thinks Mr. Meirelles is
indeed an excellent Finance minister, especially of a PMDB
administration.
It is also indisputable the advantage of a cohesive economic team,
where all push to the same side and where the proposals that go to the
president don’t bring unsolvable contradictions that demand the constant
arbitration of the chief executive. But even that gain must be
relativized.
It is political naiveté, or big wishful-thinking, to consider that
powerful, autonomous ministers, impose decisions on a president of the
republic. One needs only to remember the countless persuasion sessions
that the then powerful and respected minister Fernando Henrique Cardoso
had with Itamar Franco, president in the mid-1990s. And at that time,
unlike now, there was a successful economic plan in place. Does someone
imagine such a meeting between Ms. Rousseff and Mr. Meirelles? The
president will have to be convinced by a minister she distrusts and
dislikes, and that is only the beginning.
The arrival of the former central banker by itself will not represent
a capitulation, a near-resignation. Dilma Rousseff needs to want the
policy people want from Mr. Meirelles, she needs to be willing to
abdicate her government. And the signs don’t indicate that we have
reached such point. It may even come to that, but today it is not what
is shaping up.
Looking at the small rearview mirror of her second term, Ms. Rousseff
gave autonomy to Mr. Levy do everything she agreed with. Administered
prices shifted, electricity got more expensive, gasoline too, and the
new money to the Brazilian Development Bank (BNDES) dried up. But it was
Ms. Rousseff who decided that the first budget cut of the year would be
R$69.9 billion and not the R$70 billion announced by Mr. Levy. It was
the president who signed off a deficit-carrying budget, even warned of
the risk of a ratings downgrade. It was the president who authorized,
Thursday, the government to negotiate a fiscal target allowing the
deduction of Growth Acceleration Program (PAC) investments in 2016,
ruining any attempt of restoring the fiscal credibility.
It is unquestionable that Minister Levy reached a point from which it
is difficult to recover. Just like it is unquestionable that the
president will have to take a decision on how to strengthen her economic
team. The only thing that is not clear is that the exit she found is to
abdicate her power. Especially at a moment in which the notion of
impeachment seems to lose momentum and she foresees the chance of
staying until 2018.
By
| Brasília
valor.com.br
Waldemar Jezler
About Me
- Waldemar Jezler
- For over 30 years, Brazilian-American investment banker Waldemar Jezler has worked in the finance sector. Jezler earned his Bachelor's degree in Civil Engineering from the University of São Paulo in Brazil and then went on to attend Harvard Business School for his MBA. While at Harvard, Jezler was highly involved in extracurricular activities, including a term as President of the Ibero American Club.