Governor of Brazil's Central Bank Joins Cabinet

The governor of Brazil's Central Bank, Henrique Meirelles, received cabinet status recently. Were this a simple matter of bank independence, it would be right to condemn this as an attempt to control the central bank. However, since Mr. Meirelles is under investigation for tax evasion, it is even worse. Under Brazilian law, he can now only face prosecution in the nation's supreme court. One political leader called it "an enormous demonstration of political ineptitude." He was not exaggerating.

The trouble stems from Mr. Meirelles' tenure as a big shot in the US -- he was near the top at Fleet Boston Financial Corporation. The Brazilian press has alleged that he filed contradictory tax returns for the time he worked in the US, and the news magazine Veja, which is on a par with Time in the US, claims he shifted $50,000 from a US account to one in the name of some Brazilian money changers -- who are under investigation for money-laundering. In response, the government has put together some legislation to create a code of conduct for journalists. It seems, however, that the Brazilian press is doing its job.

For President Luiz Inacio Lula da Silva, the stability and trustworthiness of the central bank and its top central banker are paramount. The economy cannot survive doubts. But his response, essentially to put the governor beyond the reach of his critics, only enhances the doubts. An open inquiry is the only resolution to what the president has called a media fomented "witch hunt."

Fortunately for Brazil, cabinet officers can be forced to testify before the country's congress. The senate has demanded Mr. Meirelles appearance. Mr. Meirelles would be well-advised to show up bright and early on the appointed morning and be as forthcoming and open as possible. Since the talk of whitewash will start the first time he appears to resist full disclosure, it will be his only chance to protect the central bank's reputation.

Luiz Candiota, formerly a colleague of Mr. Meirelles, took a better approach. Despite being the chairman of the committee that sets interest rates for Brazil, he was also touched by accusations of tax evasion and transferring money through New York accounts without telling the Brazilian authorities. He resigned, and can now spend his time clearing his name, while the bank can be about its business.


© Copyright 2004 by The Kensington Review, J. Myhre, Editor. No part of this publication may be reproduced without written consent.


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