Brazil's president appears inclined to accept the Finance Ministry's recommendations for two central bank director posts, sources with direct knowledge of the discussions said. Those sources identified the candidates as Guilherme Mello and Tiago Cavalcanti, both economists put forward by Finance Minister Fernando Haddad.
The sources, who spoke on condition of anonymity, said President Luiz Inacio Lula da Silva is likely to move forward with Haddad's suggestions despite objections coming from segments of the central bank and parts of the financial community.
Candidate backgrounds
Mello holds a PhD in Economics from the State University of Campinas (Unicamp), an institution widely viewed in Brazil as a center of heterodox economic thought. He currently occupies the post of economic policy secretary within the Finance Ministry.
Cavalcanti is a professor at the University of Cambridge and earned his PhD in economics from the University of Illinois at Urbana-Champaign.
Haddad acknowledged publicly that he had proposed those names in an interview with BandNews, while stressing that Lula had not yet made a final decision on appointments. Haddad made his remarks after Mello's name leaked to the press and prompted criticism from some investors; the sources said Haddad and Lula had agreed that the minister would publicly mention the two potential candidates.
Requests for comment to Mello, Cavalcanti and Brazil's presidency did not receive an immediate response, the sources said.
Context at the central bank
Since early January, two of the nine seats that sit on the central bank's interest-rate-setting committee have been vacant. One of those vacancies is for the position responsible for economic policy - a role often associated with producing the technical studies that inform rate decisions. The other vacancy oversees the organization of the financial system.
Haddad did not specify which candidate would take which role during his public comments, but two people familiar with the matter said Mello would be nominated to the economic policy slot while Cavalcanti would be tapped to oversee financial system organization.
Market reaction and internal resistance
Investors have expressed unease that naming Mello to a central bank post could shift monetary policy toward a more political orientation. Traders told Reuters that reports linking Mello to the appointment had pushed long-term interest rates sharply higher and steepened the yield curve in Latin America's largest economy.
The nomination also appears to face resistance inside the central bank itself. Two people with knowledge of the matter said Mello's candidacy had not been coordinated with the monetary authority and was not endorsed by it. One of those sources noted that previous appointees to the post typically brought market experience, such as time spent as chief economist at financial institutions - a background Mello does not have, according to the same source, which highlighted his academic record instead.
Haddad defended both men and pushed back against market criticism of Mello, saying the economic policy secretary had accurately forecast multiple indicators in recent years. He described Cavalcanti as "a major Brazilian star" in economics abroad.
Political implications for Haddad
Haddad, who has said he plans to leave the Finance Ministry this month, confirmed ongoing conversations with Lula about the prospect of running for governor of Sao Paulo state. He told reporters that his main desire is to participate in Lula's re-election campaign, adding: "It’s what I think I can do best."
Within Lula's Workers Party, many view the Sao Paulo governorship as an important platform for the president's campaign for a fourth non-consecutive term in the October election. Haddad previously ran for governor in 2022 and lost to incumbent Tarcisio de Freitas, who currently holds a wide lead in opinion polls.
What remains unclear
- President Lula has not publicly confirmed any final decision on the central bank nominations.
- Formal nominations, any internal coordination with the central bank, and the process to fill the two open seats have not been completed or disclosed, according to the sources.