Lieutenant Island Views : Commentary About Finance, Politics and Baseball

Bad News/Good News for Brazil

October 8, 2009

Today’s Wall Street Journal highlights the fact that the nation’s legendary Central Bank President, Henrique Meirelles, is seriously considering re-entering elective politics. He is postulating a run for either the Governorship or Senate from his home state of Goias. He has also been mentioned as a Vice Presidential candidate on the Labor Party ticket with the strong support of President “Lula” da Silva. While Mr Meirelles prior work as a banker may make him less popular with other Labor politicians, it would be a smart move to garner support from centrists and pro business types in Brazil who respect Mr. Meirelles superior abilities, honesty and world reknown. In particular, he has been the Labor Party’s antidote to the charge that they would destroy Brazil’s currency, banks and free market systems.

The bad news is that he will have to resign as Central Bank President to pursue any office. This can’t be a positive for the Brazilian economy. His firm hand and solid judgment have made the Brazilian economy and financial system a model for the developing world as well as developed nations. It will be virtually impossible to replace him. It will be important to watch who Lula chooses to replace him. An inappropriate choice could have significant adverse implications to the prices of Brazilian securities and the value of the Real. The hope, of course, is that Mr. Meirelles eventually rises to an even more important position than his current job. A President Meirelles would really make Brazilian equities jump!

Brazil Should Count on Meirelles not Washington

March 23, 2009
1 Comment

Mary Anastasia O’Grady has an excellent and insightful piece on Brazil’s ongoing success in the current market turmoil. She also points to the irony of a Socialist President calling for more free trade and the possible “United States risk” in Brazil’s economic future. In particular, she notes issues with Citibank financing trade and a declining dollar as impediments to Brazil’s continued success. The one major item that she missed was that the secret key to Brazil’s success has been the vigilence and fortitude of their Central Bank President, Henrique Meirelles. In the face of cries to lower interest rates and a more “American” like monetary policy, he has persevered in the best interests of his country. He deserves much of the credit for Brazil’s success. Lula also deserves great credit for not succumbing to calls from the left and the right to ease up on Meirelles economic vigilence. They both deserve kudos for a continuing job well done!

About author

Mr Thaler is currently the Managing Partner of Lieutenant Island Partners, an organization providing corporate finance advice and general consulting to corporations and not-for-profit organizations. Mr Thaler retired as Vice Chairman of Deutsche Bank Securities in early 2008. His background includes experience as an investment banker, senior manager, business builder, college professor, not for profit board chair and trustee. In his thirty plus years as an investment banker for Deutsche Bank and Lehman Brothers, he has been involved in numerous significant debt and equity financings, mergers & acquisitions, leverage buyouts, restructurings and cross border transactions. Of particular note, Mr Thaler has been one of the most active participants and strategic advisors to the homebuilding industry. In a period of significant turmoil and losses, he was one of the few active bankers to the industry who did not have either a loss or credit write down. He is currently advising several public builders on strategic matters and is an adjunct professor of finance at Morehouse College in Atlanta, Georgia. Though he lives in New York, he is a life long Red Sox fan!