Jair Bolsonaro. Picture: REUTERS/PILAR OLIVARES
Jair Bolsonaro. Picture: REUTERS/PILAR OLIVARES

Sau Paulo — Investors on Friday welcomed the appointment of Santander executive Roberto Campos to head Brazil’s central bank as a sign president-elect Jair Bolsonaro will entrust economic and monetary policy to a market-friendly team of economists.

Sao Paulo’s Bovespa stock index surged as much as 2.65%  on Friday and Brazil’s currency, the real, strengthened 1.2%  against the dollar, following Thursday’s announcement by incoming finance minister Paulo Guedes.

Analysts said Bolsonaro, a former army captain and lawmaker who has admitted having scant knowledge of economics, was assembling an experienced economic team to implement his plans to slash government spending, simplify Brazil’s complex tax system and sell off state-run companies.

Campos, the treasury director at Banco Santander Brasil,  with hands-on trading desk experience, will take over the central bank early in 2019  from Ilan Goldfajn.

Under Goldfajn, the bank’s benchmark interest rate dropped to 6.5% from 14.25%  in 2016, and inflation retreated to below government targets.

“I know Roberto Campos very well and I can assure you we will be in good hands. Wherever he has worked there have been excellent results,” said Rogerio Xavier, partner at SPX Capital, which manages about 40-billion reais ($11bn) in assets.

Another indication of the orthodox slant of Bolsonaro’s economic team was the appointment of former finance minister Joaquim Levy,  MD and World Bank chief financial officer, to be the next president of Brazil’s powerful state development bank BNDES, investors said.

They also welcomed an announcement from Guedes — himself a trained economist and investment banker — that well-respected treasury secretary Mansueto Almeida, a fiscal policy expert, had agreed to stay on.

‘Very positive’

UBS economist Tony Volpon, a former central bank director, called these announcements “very positive” in a note to clients.

The central bank said on Friday that Carlos Viana, its board member in charge of economic policy, had agreed with Campos to stay in his position for a “considerable" amount of time.

Campos still must be confirmed by the senate when it returns in February.

But markets saw his appointment as a sign that Bolsonaro will give his economic team headed by Guedes full autonomy to run the economy, eschewing nationalist and protectionist development policies he has advocated in the past.

Campos’ grandfather, Roberto de Oliveira Campos, was instrumental in founding Brazil’s central bank in 1964. He served as planning minister in the first years of Brazil’s 1964-1985 military government, championing free-market policies and foreign investment in Brazil, especially from the US.

“We don’t expect significant changes in monetary policy with Campos, and Goldfajn will continue until the new president is confirmed,” Brasil Plural asset management firm said in a note to clients.

Almeida’s retaining of his role reinforces the liberal profile of the team, the XP Investimentos brokerage said.