January Copom Meeting Set to Operate with Two Vacancies, Sources Indicate
Brazil’s upcoming monetary policy meeting in January is expected to convene with an unprecedented two out of nine director positions at the Central Bank vacant, according to three sources familiar with the matter. This situation arises from delays in President Luiz Inácio Lula da Silva’s nominations for the Central Bank’s board, which require Senate approval.
The terms of two directors appointed by former President Jair Bolsonaro, Diogo Guillen (Economic Policy) and Renato Gomes (Financial System Organization), are set to expire at the end of December. The new appointments have not yet been formalized, adding to the uncertainty surrounding the composition of the Copom (Monetary Policy Committee).
Despite the potential for Guillen and Gomes to remain in their roles until their successors are sworn in, two sources, speaking anonymously, anticipate their departure at the end of their mandates. Consequently, their responsibilities would be temporarily absorbed by other Copom members, all of whom were appointed by President Lula. This scenario marks a significant departure from the Central Bank’s operational history, as records dating back to 1998 show no previous Copom meeting held with two absent directors.
Senate Hurdles and Political Climate Impacting Nominations
The process of appointing new directors involves presidential nomination followed by a confirmation hearing in the Senate’s Economic Affairs Committee (CAE), and finally a vote on the Senate floor. The current relationship between the executive and legislative branches is described as tense, posing a significant hurdle for the timely approval of these crucial appointments.
Senator Renan Calheiros, the president of the CAE, stated that he has not yet been approached regarding nominations for the Central Bank. Similarly, the government’s leader in the Senate, Jaques Wagner, indicated that while the executive branch is likely addressing the issue, no information has reached him.
Adding to the complexity is the tight legislative calendar. The current session concludes on December 22nd, leaving little time for the nomination and approval process before the year ends. The political atmosphere in the Senate has also been described as unfavorable to the government, particularly following President Lula’s choice for Attorney General of the Union, Jorge Messias, for the Supreme Federal Court, which reportedly displeased the Senate President, Davi Alcolumbre.
Economic Outlook and Monetary Policy Expectations
The market is keenly awaiting the Copom’s decision on January 27th and 28th, particularly whether the committee will initiate a long-anticipated cycle of interest rate cuts. Signs of a gradual economic slowdown, coupled with inflation remaining under control, suggest a potential easing of monetary policy. The Selic rate has remained unchanged at 15% since June, its highest level in nearly two decades.
The consensus among economists, according to a Reuters poll, is for the benchmark interest rate to be maintained in December. The current situation, with potential director vacancies, raises questions about the continuity and perceived stability of the Central Bank’s decision-making process during this critical economic juncture.
Potential Candidates and Internal Movements
Sources also revealed that the government has not yet finalized its choices for the new directors. One possibility being considered is for Paulo Picchetti, the current Director of International Affairs, to transition to the more strategic position of Director of Economic Policy. Picchetti is known for his close ties to Finance Minister Fernando Haddad and his expertise in inflation analysis.
For the Financial System Organization directorate, the government might opt to select an internal candidate from the Central Bank’s career staff. Potential names mentioned include Angelo Duarte, chief of staff to the outgoing director, Carolina Boher, head of the Financial System Organization department, and Rogério Lucca, the bank’s executive secretary, who is reportedly close to Central Bank President Gabriel Galípolo.
Both the Central Bank and government officials have declined to comment on potential appointments or the ongoing situation.
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