Banking on Brazil
The world changes a lot in 14 years.
Henrique Meirelles came to Boston from Brazil as the unlikely choice to be president of the city’s most important bank in 1996, an event heralded as very big news in his native country. More than 100 people flew here from Brazil to be part of an extravagant formal lunch at the old Ritz-Carlton celebrating his elevation to the number two job at Bank of Boston.
People don’t pay that much attention to bank presidents from Boston anymore. But they do follow Brazil’s hot economy and the people leading it. Meirelles, who returned home years ago, is watched around the world in his current job as the president of Brazil’s central bank.
In fact, Meirelles is the envy of most central bankers around the world. He doesn’t have to worry about jump-starting his country’s economy from a post-recession sputter, like counterparts in Europe and even America. He has the opposite problem: Keeping Brazil and its currency from overheating and generating too much inflation.
Brazil is a star of the global economy and Meirelles can take some credit for that. When leftist Luiz Inacio Lula da Silva became president in 2003, he chose Meirelles, an established businessman with a Harvard MBA, to lead the central bank. The prime rate in Brazil was 22 percent at the time.
Since then, Brazil’s primary stock market benchmark has returned 500 percent, nearly 10 times that of the Standard & Poor’s 500 index. More important, most economists look to the future and see the greatest growth taking place in countries such as Brazil.
Meirelles is back in Greater Boston today, speaking at the Brandeis International Business School. He’ll be talking up Brazil and its economic prospects at an event presented by the school’s Perlmutter Institute for Global Business Leadership. One fact he could mention is the number of jobs created in Brazil just last month, in comparison to the world’s leading economies. The abridged scorecard: Brazil 305,000 jobs, United States 290,000.
“The economy is growing again at the same trend as before the crisis,’’ he told me the other day. “That’s the result of the fact that it has good, strong fundamentals. The [government] stimulus is already withdrawn and we are tightening policies.’’
As you can tell, Meirelles follows central banking tradition of saying little. But Brazil’s central bank and the government are actually doing things to slow inflation in the face of economic growth forecast of as much as 6 percent. Meirelles has increased the benchmark interest rate and is expected to do so again. The government has cut spending.
So far, inflation appears to remain under control. A recent survey of 100 economists, released by the central bank, forecast an inflation rate of about 5.5 percent by the end of the year.
But Europe’s debt problems could temper Brazil’s growth, too. Stock markets around the world are sinking, as investors worry the global economy will get bogged down. Brazil’s economy counts on natural resources, especially oil, that depend on global demand. The prices for most of those commodities have been falling too. “We are watching the situation in Europe carefully to see if there are more serious consequences and to stand ready as every other central banker is,’’ Meirelles said. Translation: We’ll see.
The world’s economy changes month to month, but that’s nothing compared with the dramatic shifts that take place over 14 years. Henrique Meirelles could tell you all about it.
Steven Syre is a Globe columnist. He can be reached at email@example.com.