A appointment of professor Paulo Picchetti to the board of directors of the BC (Central Bank) was well received by the market, but it was not enough to allay fears of a possible turnaround in the Copom (Monetary Policy Committee), responsible for defining the basic interest rate, to a less conservative field. Analysts warn that the economist could end up outnumbered in a panel dominated by more heterodox ideas.
This fear was maintained because of the appointment of the deputy special secretary for government analysis at the Civil House, Rodrigo Teixeira, to one of the BC’s directorates. While Picchetti is seen as a technical cadre due to his training and research in FGV (Getulio Vargas Foundation)where he coordinates the IPC-S, Teixeira is considered closer to heterodox ideas and to the Minister of Finance, Fernando Haddad.
Teixeira is a professor at PUC-SP, an institution seen as one of the centers of heterodox thinking in economics in Brazil, and was chief of staff and deputy secretary of Planning, Budget and Management of São Paulo during Haddad’s mayorship. The secretary of the department was USP professor Leda Paulani, specialized in political economy and Marxism. She was the economist’s advisor in his master’s and doctorate studies.
Economists’ concern is that Picchetti could end up isolated within the Copom, especially considering that the collegiate’s current director of Monetary Policy, Gabriel Galípolo — appointed by Lula in the first half of the year and tipped to assume the presidency of the BC in 2025 — also it is seen with a more heterodox tendency, especially in articles written with the economist Luiz Gonzaga Belluzzo.
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The chief economist at G5 Partners, Luís Otávio de Souza Leal, praises Picchetti’s choice for the BC, but drew attention to Teixeira’s profile. “Perhaps, of the four names that have already been announced, he is the most left-wing guy”, says the analyst, highlighting the BC nominee’s academic production during the years he was studying postgraduate studies at USP.
Economist Antonio Correa de Lacerda, professor at PUC-SP and member of the Strategic Studies committee of the National Bank for Economic and Social Development (BNDES), also says that his colleague started from the Marxian matrix of studying economics, but “didn’t get stuck to it” and is “quite updated” in the theoretical debate and best international practices. “He is a pragmatist, not at all dogmatic and with a solid straight and orthodox background”, says Lacerda, who considered Teixeira an “excellent name for the ongoing reformulation of the BC”.
The chief economist at MB Associados, Sergio Vale, highlights that, with the exception of Picchetti, all the names nominated by the Lula government to the BC signal a more heterodox composition for the Copom. This, according to the analyst, raises doubts about the profile of the next three nominees — the mandate of the BC president, Roberto Campos Neto, and that of directors Carolina Assis (Administration) and Otávio Ribeiro Damaso (Regulation) ends on December 31st of the next year.
“In two choices, the focus was essentially unorthodox, and I think it’s difficult that it won’t be again in the change of three directors next year,” said Vale. “The pressure that the government will place on the BC will reverberate much more with a heterodox composition. There is a great risk of a BC that is more accommodating to inflation, as was the case under Dilma’s government, and it will be difficult for the bank to lower inflation expectations in this context , especially because the inspector continues to make water.”
The chief economist at Banco Fator, José Francisco de Lima Gonçalves, praises the choice of both new nominees for the BC and states that both Picchetti and Teixeira allay fears of a Copom turn towards the more heterodox camp.
A market economist, who asked not to be named, highlights another point in the indications that have been made by the government to the BC board: the tendency to reduce the number of people entering the financial market at Copom. The professional states that this movement has the potential to reduce the BC’s sensitivity to market behavior, since its directors come from other areas.
“The Copom could become a foreign body to the market”, says the economist, for whom the market tends to view graduates from the area more positively. He notes that professionals who worked in banks, management companies and consultancies who become directors of the Central Bank are typically less likely to agree to “experiments” in the conduct of monetary policy, as they tend to return to similar positions later.
If the appointments of Picchetti and Teixeira are confirmed, the BC board will have only two directors coming directly from the financial market: the president of the authority himself, Roberto Campos Neto, who spent his career in Santander’s treasury; and the director of Economic Policy, Diogo Guillen, who was chief economist at Itaú Asset before joining the agency.
Picchetti will replace Fernanda Guardado, who was chief economist at Bocom BBM bank before being appointed to the BC. Galípolo — who had been president of Banco Fator, but occupied the executive secretariat of the Ministry of Finance when he was appointed to the authority — took the place held by Bruno Serra Fernandes, who before becoming director of the BC had a career at Itaú BBA.
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