Galipolo, chosen to head Brazil’s central bank, is a heterodox economist by Reuters

By Marcela Ayres

BRASILIA (Reuters) – Gabriel Galipolo, chosen to be the next head of Brazil’s central bank, is a 42-year-old economist who has not always expressed orthodox economic views.

His appointment by President Luiz Inacio Lula da Silva, confirmed by Finance Minister Fernando Haddad on Wednesday, was widely anticipated. If confirmed by the Senate, he will take over when Roberto Campos Neto’s term ends in December.

Galipolo is currently the bank’s director of monetary policy and was previously second-in-command at the Ministry of Finance.

His arrival at the central bank last July, appointed by Lula, sparked skepticism among many in the market, who worried about what they said was a lack of technical expertise, as well as his unorthodox views on topics such as the need for the state. intervention to prioritize social needs and the suggestion that the central bank could act across the entire yield curve.

Since then, however, economists have warmed to him, and he is now seen by many as the best option to succeed Campos Neto, not least because of his relationship with Lula.

Lula called Galipolo a “golden boy”, saying he was “extremely competent” and had “unparalleled honesty”.

Over the past two years, Lula has regularly expressed his frustration with working with Campos Neto and complained about high interest rates. The benchmark rate is currently at 10.5%.

But recently, Lula appears to have softened his stance, telling policymakers earlier this month: “If they have to raise interest rates, then they have to raise interest rates.”

This change in tone coincided with statements by Galipolo, in which he stressed that an interest rate hike is on the table for the September monetary policy meeting, amid continued inflationary risks.

The comments provided some relief to investors who had worried that once Lula had most of his appointed members on the monetary policy committee starting next year, the central bank would be more lenient on inflation.

One market player, speaking anonymously because of the sensitivity of the subject, said the comments indicated Galipolo had shown “persuasiveness” with the president.

A second source said Galipolo was “moving quickly” within the central bank and appeared to have aligned with the institution’s essentially technical position.

Galipolo was introduced to Lula in 2021 by Luiz Gonzaga Belluzzo, a Lula adviser and economics professor at Unicamp, a Sao Paulo university known for its unorthodox economics.

In one of three books that Galipolo and Belluzzo co-authored, they criticized the ease with which multinational companies engage in interest rate and currency arbitrage, with subsidiaries borrowing at low interest rates in their home countries and profiting from leveraged investments in Brazilian interest rates.

However, as monetary policy director and responsible for the crucial foreign exchange office, Galipolo has not implemented any changes to the central bank’s exchange rate policy, refraining from intervening in the market amid a recent sharp weakening of the real brazilian, who lost more. over 12% against the US dollar this year.

Galipolo has a master’s degree in political economy from the Pontifical Catholic University of Sao Paulo.

He was previously economic adviser to the Sao Paulo state government and CEO of Banco Fator. He also established a consultancy on public-private partnerships.

At the Treasury Department, he won favor with Congress as a good listener and negotiator, helping Haddad achieve important victories, including approval of a new public accounting framework.

“He is a good choice, he has already been vetted here, everything is fine, people liked him,” said Senator Vanderlan Cardoso, chairman of the Senate Economic Affairs Committee, which must confirm his nomination before it is submitted to the the plenary session of the Senate.