By Lisandra Paraguassu, Marcela Ayres and Bernardo Caram
BRASILIA, Feb 3 (Reuters) – Brazilian President Luiz Inacio Lula da Silva is leaning toward nominating economists Guilherme Mello and Tiago Cavalcanti to roles as central bank directors, as suggested by Finance Minister Fernando Haddad, two people familiar with the matter told Reuters.
Lula is likely to endorse Haddad’s picks despite resistance from within the central bank and some corners of the financial market, the sources said on the condition of anonymity.
Mello holds a PhD in Economics from the State University of Campinas (Unicamp), widely viewed as a hub of heterodox economic thought in Brazil, and he currently serves as Haddad’s economic policy secretary.
Cavalcanti is a professor at the University of Cambridge and holds a PhD in economics from the University of Illinois at Urbana-Champaign.
Earlier on Tuesday, Haddad told BandNews in an interview that he had suggested those candidates, but stressed that Lula had not made a final decision on his nominations.
The minister spoke publicly after Mello’s name leaked to the press and drew criticism from some investors, the sources said, adding that Haddad agreed in a conversation with Lula that he would mention those two potential candidates publicly.
Mello, Cavalcanti and Brazil’s presidency did not immediately respond to requests for comment.
Since early January, the central bank has had two of the nine seats on its interest-rate-setting committee vacant: one responsible for economic policy, a role seen as key to the technical studies underpinning rate decisions, and another overseeing financial system organization.
Haddad did not say which candidate would fill each role, but the two sources said Mello would be tapped for economic policy and Cavalcanti for oversight of the financial system.
Investors in recent days voiced concerns that Mello’s potential appointment could tilt monetary policy in a more political direction, following media reports that Haddad had pitched him for a central bank role.
Traders told Reuters on Monday that the reports had pushed long-term interest rates sharply higher, steepening the yield curve in Latin America’s largest economy.
Mello also faces resistance inside the central bank, two separate sources with knowledge of the matter said, adding that his name had neither been coordinated with nor endorsed by the monetary authority.
One of them noted that candidates for the post are typically expected to have market experience, such as serving as chief economists at financial institutions – something Mello lacks, relying instead on his academic background.
Haddad praised both candidates and rejected market criticism of Mello, saying the secretary had correctly forecast multiple indicators in recent years. He called Cavalcanti “a major Brazilian star” in economics abroad.
Haddad, who has previously said he plans to leave the Finance Ministry this month, acknowledged he has been discussing with Lula the possibility of running for Sao Paulo state governor.
He said, however, that what he most wants is to take part in Lula’s re-election campaign. “It’s what I think I can do best,” Haddad said.
Many in Lula’s leftist Workers Party view the race for governor of Brazil’s richest and most populous state as a key platform for the president’s bid for a fourth non-consecutive term in the October election.
In 2022, Haddad ran for governor but lost to right-wing incumbent Tarcisio de Freitas, who currently holds a wide lead in opinion polls.
(Reporting by Lisandra Paraguassu, Marcela Ayres and Bernardo Caram. Additional reporting by Fabricio de Castro in Sao Paulo. Editing by Brad Haynes, Gabriel Araujo and Mark Potter)
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