Dilma Replacing Brazil’s Central Bank Chief? (EWZ, BZF, BBD, BSBR)
We have speculated that this was happening for a month now, but it looks almost official. Tomorrow, Brazilian president-elect Dilma Rousseff will probably tell Henrique Meirelles he can go.
Dilma reportedly has a short list of replacements for Meirelles as head of the local central bank. Top regulator Alexandre Tombini is reportedly the front runner, but executives from Santander Brasil (NYSE:BSBR) and Bradesco (NYSE:BBD) are also on the list — good news for investors looking for a corporate-friendly face here.
A corporate banker himself, BankBoston alumnus Meirelles took over the Brazilian central bank, or Copom, in 2003 as the pick of then-incoming president Lula, and has served in that role ever since, making his tenure at the bank the longest in the country’s history.
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His career was distinguished as the climax of Brazil’s long struggle to defeat the hyperinflation of the late 1980s. Famously, when he accepted the job, Brazilian inflation was running at an annualized rate of 12% and interest rates were a staggering 25%, choking credit while leaving prices climbing on a steep trajectory.
Now, both benchmarks have been cut in half and Dilma is looking for a way to put her own stamp on Brazil’s fiscal policy once she takes office January 1.
Any move will need to reassure investors that change is good. The sad fact is, despite all the buzz about this market, Brazil has been a big underperfromer this year. The Bovespa is flat in currency terms and key big-cap names ex-VALE have been been weak.
Look at the rest of Latin America: Argentina up 40%, Chile up 39%, Colombia up 28%, Mexico up 16%.
What is wrong? For one thing, the current account deficit is surging at a moment when a political transition could distract attention from the need to take quick action.
It would be nice to get some excitement for iShares MSCI Brazil Index (NYSE:EWZ) that is not motivated by interest in the Brazilian currency, the real, or real-based instruments like WisdomTree Dreyfus Brazilian Real (NYSE:BZF):
Written By Tim Seymour From Emerging Money
Emerging Money provides insightful and timely information about the increasingly important world of Emerging Market investments. CNBC Emerging Markets Contributor Tim Seymour leads the team of Emerging Money to bring you cutting edge global news and analysis.
About Tim Seymour: Tim is a founder of Emerging Money. He is a founder and Managing Partner at Seygem Asset Management, and The Emerging Markets Contributor to CNBC. Seygem Asset Management focuses on investing throughout the global emerging markets asset class. With a view that emerging and developing economies will continue to outpace the economic growth and advancement of developed economies, Seymour has devoted a career to investing in the dominant markets of tomorrow, today. Seymour’s career has included significant experience in both alternative asset management (hedge funds) and capital markets, having launched two hedge funds, and built the largest Russian broker dealer in the USA. Seymour started his career at UBS, focusing on international credit (cash, swaps, forex) in a specialized hedge fund group (New York). Seymour completed the firm’s training program after graduating with an MBA in international finance from Fordham University. Seymour received his undergraduate degree at Georgetown University.
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