Gabriel Galípolo at the Central Bank

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By LUIS NASSIF*

The presence of Galípolo in the BC will have faster results than the process of winning the majority of the Copom

The appointment of Gabriel Galípolo to the Central Bank's monetary policy board will have faster results than the process of winning the majority of the Central Bank's Copom (Monetary Policy Committee). The Copom is responsible for defining the basic interest rate, the Selic. There are eight members, plus the president of the Central Bank. At the moment, Minister Fernando Haddad will be able to place only two members.

Gabriel Galípolo could, however, play two relevant roles. First, as head of monetary policy. Of the eight Copom departments, Monetary Policy is the only one that operates directly in the market, being responsible for the implementation of open market operations, purchase and sale of public securities. In this role, and with his experience in the market, Gabriel Galípolo will be able to set another pace in operations. In recent years, the Central Bank has acted passively in the open market, in exchange rate policy, trailing behind the market.

It's no small thing. A rise in long-term interest rates, an oscillation in the foreign exchange market, are factors of instability, helping to consolidate Copom's convictions about interest rates.

There will be more challenges ahead. The way to control the liquidity of the system is through the so-called “committed operations” – the Central Bank sells securities to banks with the commitment to buy them back the next day. All these points make the public debt more expensive, already overloaded by the excesses of the Selic rate.

It is not known how far Gabriel Galípolo intends to dare. Especially since the second challenge – convincing the Copom to reduce the Selic rate – will depend on good argumentation skills and a good relationship with colleagues. And you will have good arguments ahead. One of them is the IGP-DI (General Price Index, Internal Availability) of Fundação Getúlio Vargas, which recorded deflation of 1,01% in April and 0,34% in March and 2,57% in 12 months.

Another is the IBGE's Extended Consumer Price Index (IPCA). The factor that weighed in the last IPCA was the transport item, which depends exclusively on administered prices. With Petrobras reducing prices, there will be deflationary impacts on the IPCA.

Finally, Galípolo's broad knowledge of the PPP market (Public-Private Partnerships) and partnerships between public credit and investment funds weighs in favor of Galípolo. And, more than that, the pressure from companies, given the collapse of relevant sectors – such as retail, health plans, food – suffocated by the credit crisis and the cost of capital.

Once again, political time conspires against this strategy. Lula continues to bet on international investments as a way out of circumventing the limitations imposed by the Central Bank of Roberto Campos Neto on the credit of public banks.

* Luis Nassif is a journalist, editor of Jornal GGN. Author, among other books, of the spreadsheet heads (Ediouro).

Originally published on GGN newspaper.


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