Roberto Campos Neto: Brazil’s inflation tamer

The extreme tension in Brazilian politics between President Jair Bolsonaro and the elected Lula da Silva has achieved a point of coincidence: both want to lower inflation.

And to do so, one will respect the mandate of the official in charge of this task, even though he was appointed by the other.

Roberto Campos Neto, the orthodox president of the Brazilian Central Bank, will remain in office until 2024, having been appointed by Bolsonaro and supported by da Silva.

The point of coincidence between Lula da Silva and Bolsonaro is far from any ideological issue and is quite pragmatic:

Brazil is the only country that achieved three consecutive months of falling inflation after the explosion in 2022 of global energy and food prices caused by the Russian military operation in Ukraine.

Campos Neto is responsible for that success, raising monetary policy interest rates from 3% to 14% per annum.

This early and drastic reaction will allow Latin America’s largest economy to sustain itself despite the inflationary storm sweeping the world.

Brazil is the only country to have achieved three consecutive months of falling inflation after the global energy and food prices explosion in 2022.

Da Silva decided to support the one chosen by his arch-rival and to respect the laws that provided for the independence of the Central Bank.

“Campos Neto has today the same independence that Henrique Meirelles had in my government,” said the Brazilian president-elect, so applauded by the Argentine government these days.

Campos Neto and his anti-inflationary policy were praised at the International Banking Conference organized by the Santander Group last week in Madrid.

When explicitly asked about the path he will follow in the face of the change of government in Brazil, Campos Neto applied the manual of prudence that usually accompanies those who occupy his position:

“We central bankers do not talk about politics, even less in the face of a divided country. I prefer to be asked questions about inflation and not about politics.”

Without explicit reference to Lula da Silva’s endorsement, he added:

“Our task is to move forward, fighting inflation and making the country have sustainable growth. We hope to be able to work in the best way with the new government”.

At the Santander seminar held in the “Financial City,” where the bank’s headquarters are located on the outskirts of Madrid, financial executives from all over Europe listened to his prescription.

And Campos Neto was a local, having worked for 20 years at the Spanish bank.

Campos Neto and his anti-inflationary policy won praise at the International Banking Conference organized by the Santander Group.

In the conference corridors, those who worked with him during his time at the Spanish entity point out that he is a classic Chicago boy, an exponent of the most orthodox conceptions.

And some put him even further to the right.

With his intense trajectory in the corporate world, Campos Neto is not unfamiliar with the other side since he comes from a family with a strong political background.

His grandfather, Roberto de Oliveira Campos Neto, was close to Getulio Vargas and participated in the founding of Bndes, the powerful Brazilian development bank.

His leap from the private to the public world was the responsibility of Paulo Guedes, Bolsonaro’s Minister of Finance, who sponsored his arrival at the Central Bank.

In his presentation, Campos Neto pointed out that in the face of an inflationary crisis, “a central banker can make two types of mistakes: do too little or do too much”.

He assured that part of his success was strong fiscal and monetary policy coordination.

And that any price to pay in terms of low economic activity is worth it and is well accepted by a society like Brazil’s, which knows what it is like to live with high inflation.

In his dissertation, Campos Neto explained the complex steps he took in the face of the global crisis in the scenario that mixed the post-covid scenario with Russia’s military operation in Ukraine.

Part of the success of the anti-inflationary policy was the strong coordination between fiscal and monetary policy. And any price to pay in terms of low economic activity is worth it (Campos Neto).

His main reflections were:

• “It is difficult to judge what a Central Bank does in the face of a shock like this. There are two mistakes to fighting inflation: doing too little, without achieving any anchor to control prices, or doing too much, which is not good because credibility is lost. It is difficult to judge in a situation like this because many variables are at play.”
• “We decided on a sharp increase in rates because we were very concerned. Inflation in food reached Brazil before other countries. We understood that inflation would be strong and persistent, so we had to act. And we decided to act fast.”
• “Another key point to explain what we did is that Brazil is a country that has a long memory of what it is to have high inflation. When we started to see the impact of the depression on the world economy, we knew that in Brazil, everything was going to be more intensely impacted.”
• “During the pandemic, governments were very comfortable printing money and not making the necessary reforms to grow. Today we are paying the price for that. And the important thing is to pay those bills efficiently without adding taxes on capital. If the only solution is to raise taxes, we will lose credibility, and the situation will worsen.”
• “We received several crises at the same time. We were also impacted by the climate crisis, as there was little rainfall and most of our energy is hydro.”
• “There was a shock of demand for goods after the pandemic, something that has not yet normalized. And that production of goods required more energy to produce them. At the same time, the world is going through a ‘green transition’.”
• “The big economies also started their fight against inflation, which is good for Brazil because it helps us not to import inflation from the rest of the world.”

With information from Infobae