RIO DE JANEIRO, Dec. 12 (UPI) -- Brazil's president-elect Thursday named a moderate central bank president who has extensive international banking experience.
But economists and the local market had a lukewarm reaction to the nomination of Henrique Meirelles, a former head of global banking at FleetBoston, who has been criticized for having no training as an economist.
Meirelles resigned earlier this year from FleetBoston to make a successful run for the lower house of Congress.
His nomination is subject to Senate approval, which is expected next week.
Investors have been anxiously waiting for weeks for President-elect Luiz Inacio Lula da Silva to announce who would take over at the central bank and steer monetary policy in Latin America's largest economy.
The direction of the central bank is a tender spot for investors, as Brazil's currency -- the real -- has been under severe strain in this election year, losing nearly 40 percent of its value.
Meirelles ran for Congress as a member of the centrist Brazilian Social Democracy Party -- that of Brazil's current president -- while Lula, as the president-elect known, is the founder and leader of the leftist Workers' Party.
Meirelles is said to have good relations with the Workers' Party and with Lula in particular, with whom he often talked during his run for Congress and Lula's bid for the presidency.
It is unclear if Meirelles will be forced to leave his position as a congressman to take the post.
While no one questions Meirelles' orthodox, free-market credentials, some local economists are disappointed with his nomination.
"Meirelles is not an economist, he lacks the technical skills required by the position," said Gustavo Reis, an analyst with the Rio de Janeiro-based Pactual investment bank. "He has no capacity of formulation and implementation."
Reis said that Meirelles will be relying heavily on the economics team he builds at the central bank.
"But how can we expect experts on his team if the (Workers' Party) was not able to get one as a central bank head? The bottom line is we seem to be learning that the outgoing central bank directors are much more qualified than the incoming ones," Reis said.
But Roberio Costa, a senior economist with Citibank in Brazil, told the business newspaper Valor that Meirelles has the experience necessary to competently preside over the central bank, though he concurred with Reis that there will be a heavy reliance on subordinates.
Meirelles will have to "form a well prepared and competent" team of economists, Costa said.
"Meirelles has many years of experience as an executive, and this will be important for him to be a good coordinator," Costa said. "He was nominated because he has international experience and is very competent."
Meirelles was in New York on Wednesday with the head of Lula's transition team and the next finance minister, Antonio Palocci. A Brazilian delegation met with top international bankers in a bid to reassure them the country will stick to economic austerity when Lula takes over.
Arturo Porzecanski, chief emerging-markets economist with ABN Amro in New York, attended a small meeting at which Palocci and Meirelles were present Wednesday.
The economists in attendance were "positively impressed by (Palocci's) ideas and intentions" and relieved to hear Palocci reaffirm that fighting inflation is the No. 1 short-term priority for the next government -- which will be the Herculean task of Meirelles.
Palocci told those at the New York meeting, "We will not try solutions that are tentative, strange or heterodox. We will not carry out economic experiments."
Additionally, Palocci said that the Lula government is in favor of granting the central bank more operating autonomy.
Meirelles, attending a World Economic Forum summit in Rio de Janeiro last month, said then that new economic models are needed in Latin America, but that this sentiment in no way gave approval for a return to past policies of heavy state intervention.
"There is no question that the 'Washington Consensus' failed in responding to growth needs, income distribution and the inclusion of those living below the poverty line," Meirelles said.
"We shouldn't step backward, not in the sense of having the state trying to generate resources, as we did in the 1950s. The only course of action is to follow the norms of math, of two-plus-two equals four. If the government wants to spend, it must find the resources."
For weeks, markets have been hanging on every word Lula and his top economic advisers have said, trying to divine who might take over at the central bank. Several names went through the rumor mill, but by late Wednesday Meirelles was the consensus choice among analysts and newspapers alike.
Meirelles will have big shoes to fill once he takes over on Jan. 1, the day of Lula's inauguration.
Arminio Fraga, Brazil's current central bank president and a former fund manager for George Soros, won the respect of the international financial community as he steered Brazil's monetary policy through a tricky 1999 devaluation.
Two other top candidates routinely mentioned in the press as possible bank president were Pedro Bodin, with Icatu financial services group, and Jose Julio Senna, of the MCM consulting group.
Market reaction was flat on Meirelles' nomination.
The real slid 0.4 percent against the dollar to end at 3.79. The Bovespa stock index ended the day down 0.25 percent at 10,587.
Former Central Bank President Emilio Garofalo Filho told Globo News that the market wasn't too optimistic on Meirelles because of his lack of economic experience.
"The central bank has two basic functions. One of those is to act as a guardian of the currency, and the other is to care for the financial system," Garofalo said.
"Meirelles will be good in caring for the system, but investors still don't know how well he will defend the currency."