SAO PAULO (Reuters) – Brazilian Finance Minister Fernando Haddad ended months of uncertainty on Monday as he revealed that Gabriel Galipolo, his second-in-command at the ministry, will be nominated for a top position at the central bank, which the government has heavily criticized for its high borrowing costs.
Haddad said that Galipolo, the former CEO of investment bank Banco Fator, will be nominated by President Luiz Inacio Lula da Silva as the central bank director of Monetary Policy.
Additionally, Ailton de Aquino, a central bank official, will be nominated to lead Supervision, he told reporters.
The market initially responded negatively to the news, as the Brazilian real weakened by over 1% against the dollar with Galipolo’s nomination being associated with a more heterodox view of the economy. Both nominees will still need to be approved by the Senate.
Goldman Sachs economist Alberto Ramos highlighted the potential for increased communication noise within Brazil’s rate-setting committee, Copom, as Galipolo is also viewed as a potential replacement for the central bank chief.
“We would not be surprised to start to see split Copom decisions and diametrically opposed views within the Copom on what the proper policy stance should be,” he wrote in a note.
The terms of the two directors who held these positions, appointed by former President Jair Bolsonaro, expired at the end of February.
Leftist Lula’s choices were eagerly anticipated, as he has been a vocal critic of the central bank, which has kept interest rates steady at a cycle high of 13.75% since September despite cooling inflation. The president argues that this stance hampers growth and credit.
Current governor Roberto Campos Neto’s term runs out in December 2024. Over the course of his time in office, Lula will eventually replace all nine members of the bank’s board, which decides monetary policy. The new members, however, will only hold a majority once Campos Neto departs from his post.
Reuters reported last week, citing sources, that Galipolo was a possible candidate for the position. Haddad said Dario Durigan would replace him as executive secretary of the Finance Ministry.
“Galipolo is the former CEO of a bank, well known by economists, and has been working with me for several months,” Haddad said. He added Campos Neto had suggested Galipolo’s name for the vacant position.
Galipolo advised several public-private partnerships as managing partner at the Galipolo Consultancy since leaving Banco Fator.
Seen as an economist with connections across the ideological spectrum, he has co-authored books and articles with Luiz Gonzaga Belluzzo, a longtime Lula adviser and economics professor at Unicamp, considered a center of heterodox economic thought.
Aquino, head of the central bank’s Accounting, Budget and Financial Execution department, has been working at the institution since 1998.
(Reporting by Gabriel Araujo and Marcela Ayres; Additional reporting by Fernando Cardoso; Editing by Steven Grattan and Alistair Bell)
