Brazilian financial daily Valor Economico carried an interesting debate today (September 25) between eight leading economists on whether Brazil has thrown over its hallowed ‘tripod’ (inflation targeting; a floating exchange rate; and maintaining a primary surplus). The very fact that this is open to question highlights how much more turbid administration policies have become. It is precisely this lack of clarity that has many investors worried.
The likes of Octavio de Barros (Bradesco); Bráulio Borges (LCA Consultores) and Maurício Molan (Santander) had sharply divergent views on the fate of the tripod. Some argued that the policies had been simply slighly adjusted to take into account the global crisis and Brazil’s vulnerability to it (Marcelo Arnosti at BB-DTVM, the asset management arm of Banco do Brasil). Others argued that the change is more profound and that the Central Bank is in a dash for growth (Juan Jensen of Tendências) with senior govenrment officials still putting unrealistic growth figures forward for next year that now have to be stiven for (Fernando Genta, MCM Consultores).
More clarity is needed from the government on whether its economic policy has become pragmatic or it remains firmly wedded to its long-term aims.