The Committee on Economic Affairs (CAE) of the Senate approved this Tuesday (5th) the appointment of two economists to compose the board of the Central Bank. The names of Diogo Abry Guillen and Renato Dias de Brito Gomes still need to go through the plenary.
Diogo Guillen got 20 votes in favor and 2 against. Renato Gomes received 22 favorable votes. The two nominations were sent to the Senate by the President of the Republic, Jair Bolsonaro (PL), in December last year.
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Diogo Abry Guillen is 39 years old and holds a degree in economics from the Pontifical Catholic University of Rio de Janeiro (PUC-RJ), where he also completed his master’s degree. He has a doctorate from Princeton University, in the United States, and is currently chief economist at Itaú Asset Management. Before that, he served as senior economist at Gávea Investimentos.
The nomination was reported in the CAE by Senator Esperidião Amin (PP-SC). The congressman highlighted that Diogo Guillen’s father-in-law, Fabio Colletti Barbosa, was CEO of Banco Santander between 2008 and 2010 and is currently an independent member of the board of Itaú Unibanco.
However, according to the senator, “there is no express impediment” in the Internal Regulations of the Senate for the exercise of the position by kinship to people linked to the professional activity. “There is a need for the link to be declared, so that the Senate politically evaluates the nomination”, said the rapporteur.
Esperidião Amin questioned Diogo Guillen about the autonomy of the Central Bank. For the senator, the institution should not have, for example, the role of defining the country’s exchange rate policy.
“I don’t know if we are right in giving the Central Bank the command of the exchange rate. And I am not alone in this: several countries of the most developed group in the world do not attribute this complement to monetary policy. What we suffered in the last two years was an inconsistency in terms of of exchange rate evolution. The Brazilian exporter made a lot of money with the exchange rate. But we are paying in dollars not only for oil, but for coffee. Exchange like this dismantles our industry”, criticized Amin.
Diogo Guillen defended autonomy and exchange policy.
“With regard to autonomy, the academic literature shows that decoupling the monetary policy cycle from the political cycle is beneficial. Specifically on the exchange rate, I emphasize that the floating exchange rate is the first line of defense for international shocks or idiosyncratic Brazilian shocks, and I defend this drive,” he said.
Senator Fernando Bezerra Coelho (MDB-PE) praised the performance of the Central Bank of Brazil during the coronavirus pandemic. For the parliamentarian, the interest policy adopted by the institution managed to stop the acceleration of inflation.
“The pandemic disrupted production chains and provoked inflationary pressure never seen before in the history of economic policy, especially in developed countries. Here, we quickly took care of facing the lack of control over inflation caused by the pandemic. The Central Bank was one of the first to act to bring the inflation trajectory returns. We will have inflation of 7% or below 7% this year, which means a reduction of 30% in relation to the inflation verified last year”, said the senator.
Diogo Guillen acknowledged that the Central Bank of Brazil “was one of the first and most aggressive” to impose an increase in interest rates. He said the measure contributed to keeping inflation close to the 3.5% target until 2023.
“The Central Bank’s projection, in the last report, is an inflation close to the target in the relevant horizon of monetary policy. And this is the main objective: the achievement of the target in the relevant horizon”, he said.
Parliamentarians criticized the Central Bank’s stance in dealing with inflation. For Senator Rogério Carvalho (PT-SE), the “retentive inflation” seen in Brazil is due to the indexation of the economy caused by the privatization of state-owned companies.
“You, who will be at the Central Bank, will be the famous ‘ice wipers’. How to control inflation with interest rates, if this inflation is caused by an indexation of the economy? 1970: indexation based on a foreign currency. There is a permanent process of destruction of our productive capacity”, he warned.
Senator Kátia Abreu (PP-TO) reinforced her criticism of the Central Bank’s inflation control policy. For her, the country should raise the inflation target to spare Brazilians from constant increases in interest rates.
“Inflation will be around 7%. Our target is 3.5%, but we are already at 5%. why keep this inflation target so low if it is not real? To maintain this target, we will have to drain the blood of Brazilians with interest rate hikes. Isn’t this a waste? Is it not an unnecessary effort? works and for whom he employs,” he said.
Despite the criticism, Diogo Guillen reiterated his support for the policies implemented by the Central Bank.
“The target has the role of converging and anchoring expectations. When the target is raised, whether for a conjunctural or structural issue, inflation expectations also rise. This generates greater indexation. People start to incorporate this target and, consequently, in the future, they will incorporate higher inflation. A commitment to the credibility of the target helps in this role of anchoring expectations”, he defended.
Renato Dias de Brito Gomes is 41 years old and has a degree in economics from PUC-RJ. He studied for a master’s degree at the same institution and completed a doctorate at Northwestern University, in the United States.
The main areas of research for the nominee are public sector economics and industrial economics, with an emphasis on payment regulation, antitrust and competition protection. The nomination (MSF 86/2021) was reported in the CAE by Senator Fernando Bezerra Coelho.
Renato Gomes said that Brazil is in a moment of recovery, after the crisis caused by the coronavirus pandemic. For him, several factors will determine the country’s success in the near future. One of them is the proper functioning of financial intermediation: the credit, payment and capital markets.
“The payments sector attracted the attention of Brazilians with the launch of Pix, led by the Central Bank. This initiative generated huge gains in efficiency and financial inclusion. And it should continue to do so, probably reducing the aggregate cost of make and receive payments in Brazil. A similar effect is expected for open banking, or open financial system, in which each customer can choose, among several financial institutions, the most advantageous credit offer”, he said.
Senator Veneziano Vital do Rêgo (MDB-PB) harshly criticized the national financial system. He demanded from the Central Bank an action that does not remunerate only the banks, while the population is excluded from the gains.
“I don’t see any initiative by the Central Bank regarding the discrepancy, the absurdity, the indecency of the profits earned by this financial system. No one can say that this does not exist. I see a criminal omission by the Central Bank, which does nothing. normal? Is it acceptable? Is it defensible? Does this mean the balance of the financial system? Isn’t this an aggression against so many millions of Brazilians who see themselves completely on the sidelines?”, he questioned.
Renato Gomes played down the criticism.
“One measure that perhaps gives a more accurate angle of bank profits is profitability. It is certainly higher in Brazil than in several developed economies, such as France, Germany and the United States. But it is lower than in other developing countries, that have an economic profile similar to ours, such as India, South Africa and Turkey. I would say that I am less pessimistic than the senator [Veneziano Vital do Rêgo]. I think that several initiatives will intensify competition in the banking, payments and credit market,” he said.
Questioned by Senator Mecias de Jesus (Republicans-RR), the nominee defended the regulation of cryptocurrencies. In February, CAE approved the bill (PL) 3.825/2019, by Senator Flávio Arns (Podemos-PR), which recognizes and regulates the cryptocurrency market in Brazil. The text reported by Senator Irajá (PSD-TO) awaits a vote in the Plenary.
“The project determines that there should be regulation of crypto-asset brokers, but it was not defined that it would be by the Central Bank. This will be decided by the Executive Branch. axes: prevention of money laundering and the financing of terrorism; prudential regulation; and financial education. Many Brazilians have traded crypto assets. And they are dangerous assets, which do not work as insurance for Brazilians’ income fluctuations. Consumers need to know what you’re doing”, said Renato Gomes.