Brazil’s Central Banker Shouldn’t Become a Scapegoat

(Bloomberg Opinion) -- Brazil’s president elect should ask central banker Ilan Goldfajn to stay on for a while. Goldfajn ought to politely decline.

Goldfajn has performed a true public service in his two years at the helm of the central bank. While the political class has flailed and failed, he was the adult in the room and steered the benchmark rate to a record low. Inflation, long the curse of Latin America, is negligible.

That’s exactly why Jair Bolsonaro should ask him to remain at the central bank’s helm. But the reality is that sooner or later, Brazil’s incoming president will want his own person in that job. Quite likely, keeping the previous administration’s central banker would mean keeping a scapegoat handy — someone to fire whenever there’s an economic miscue.

Bolsonaro’s team has made the right noises about central bank independence. Yet the Central Bank of Brazil’s autonomy has never been a sure thing, and now — under a president elected in a landslide after dissing politics as usual and promising to govern in a very different way — the norms of independence are even less secure.

Better for Goldfajn to return to the private sector. He is overqualified for the role of scapegoat. His reputation, already impressive before running monetary policy, has been enhanced. The economy is growing after a deep recession, and he implemented meaningful reforms to the operations of the bank. Goldfajn leaves it in better shape than he found it. For your two years as arguably the real leader of Brazil: Thank you, Ilan Goldfajn.

He has been consistent in the messages he sends. He recognized early the need and the opportunity for deep rate cuts, and he executed them almost flawlessly. Goldfajn also modernized communications. No more classic developing-world late nights spent waiting for a statement that could come anytime and by any means. Monetary policy meetings would finish about 6 p.m. local time. The decision and a commentary on it would be released within minutes.

There seems to be a bit of a dance going on. Goldfajn was reported by my Bloomberg News colleagues before this week’s election to be planning to depart. The president-elect’s representatives have sent signals (with varying degrees of conviction ) that they want him to stay. But we all know what will happen if he stays.

Bolsonaro is peddling snake oil. Like other self-styled tough-guy presidents, when his snake oil doesn’t work, he will lash out.

Better that he lash out at his own choice for the central bank.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Daniel Moss writes and edits articles on economics for Bloomberg Opinion. Previously he was executive editor of Bloomberg News for global economics, and has led teams in Asia, Europe and North America.

©2018 Bloomberg L.P.