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Brazil Central Bank president Roberto Campos Neto. (Photo: Brazil Senate)
Mexican President  Andrés Manuel López Obrador at a press conference May 10 2023. (Photo: Mexico President's Office)
Tuesday, May 9, 2023
Trade Talk

Lula Targets Brazil Central Bank

Mexican democracy deteriorates; mining law will crimp activity.


Since assuming office in January, Brazilian president Luiz Inacio Lula da Silva has repeatedly attacked the country’s Central Bank and its president Roberto Campos Neto for maintaining high interest rates.

In his latest attacks, Lula called Campos Neto “crazy” and “not committed” to Brazil.

"Is he crazy? This citizen cannot be speaking the truth,” Lula told the press during his trip to London after the Central Bank head explained the reason for the rate decision. “Who does he have a commitment with? With Brazil? He doesn’t." 

Campos Neto, a 53-year old Rio de Janeiro native with Master and Bachelor degrees in Economics from the University of California in Los Angeles – has headed the Brazilian Central Bank since February 2019 and his term ends in December next year. Before joining the Central Bank, he held various positions with Spanish bank Santander, including Global Treasury for the Americas, Head of Trading in Brazil and International Head of Fixed Income.

He also worked for Brazilian investment bank Bank Bozano Simonsen in several capacities, including International Fixed Income Executive, Stock Exchange Trader, External Debt Operator and Interest and Exchange Derivatives Trader.

In addition to keeping a steady hand in fighting inflation – the core of the dispute with Lula – Campos Neto has gained respect for implementing new technology, including the PIX payment system in 2020, which has become the most popular form of payment in Brazil, surpassing credit and debit cards.

The Central Bank has had formal autonomy since 2021, a fact repeatedly criticized by Lula. In his latest tirade against Campos Neto he said: “I'm sorry, the Central Bank has autonomy, but it is not untouchable.”

Now, Lula may be able to influence the bank from within. He has nominated two candidates to fill two empty seats at the bank’s Monetary Policy Committee (Copom), which is responsible for setting interest rates.

Most controversial is Gabriel Galípolo, whom Lula wants as director of monetary policy at the bank. Markets reacted negatively to the news of his nomination, Reuters reported.

“Galipolo … is seen as very close to Finance Minister Haddad,“ Goldman Sachs’ chief Latin American economist Alberto Ramos said in a note to clients. “Haddad stated that Mr. Galípolo will be "closer [to the MoF] and make our [the MoF] point of view clearer for the central bank…Given the senior political role in the current government, Mr. Galípolo is perceived as a potential replacement of central bank president Roberto Campos Neto when his term ends at end-2024.”

Galípolo has served as deputy finance minister in the Lula administration since January. He was President of Banco Fator from 2017 to 2021, had his own consultancy and held positions at the Sao Paulo state government, including as Head of the Economic Advisory Service of the State Secretariat of Metropolitan Transport and Director of the Project Structuring Unit of the State Secretariat of Economy and Planning. Galípolo has a BA in Economics and an MA degree Political Economy by PUC-SP.

“We see scope for a potential increase in communication noise in the near term,” Ramos warns. “We would not be surprised to start to see split Copom decisions and diametrically opposed views within the Copom on the what the proper policy stance should be. Furthermore, the perception that Mr. Galípolo will eventually replace Governor Campos Neto has the potential to generate some friction and uneasiness within the Copom.” 

Galípolo and Ailton Aquino dos Santos – a career central bank employee nominated as director of supervision -- should be ratified by the Senate Economic Affairs Committee relatively soon, Ramos predicts.


Mexico's new mining law will negatively affect mining activity in the country by curbing exploration, shortening concession lengths, raising operational continuity concerns and re-energizing community negotiations, according to Fitch Ratings.

However, large reserves, prospective concessions and diversified growth strategy should limit the effects for loal miners such as Grupo Mexico, Southern Copper and Industrias Penoles, it says.

The new law shortens concessions to 30 years (five years of preparation with 25 years of operation) from 50 years, with an automatic 25-year renewal followed by a tender that could further add 25 years, with preference for the incumbent. The maximum total length of a concession has been shortened to 80 years from 100 years. The law affects new concessions but is still unsettled with regard to current concessions, pending final rules from the respective government secretaries.

“Exploration activity stands to be most affected by the new law,” Fitch says. “Although details remain to be defined in specific rules, exploration activities will be centralized with the Mexican Geological Service, previously a government led research agency, which will allow private exploration after reaching special collaboration agreements. This could result in public auctions of new concessions instead of a first applicant priority process. Furthermore, the concession requirements are the same for each stage of exploitation, resulting in a higher regulatory burden for early-stage projects. This includes the filing of future mine closure plans, when such details are hard to come by before exploration takes place.”


Mexico saw a big negative change in its score on the latest Democracy Index from the Economist Intelligence Unit (EIU). It ranks in the bottom half of Latin American countries on the 2022 index and 89th worldwide out of 165 nations. By comparison Brazil ranks among the top six countries.

“Mexico is … undergoing a process of democratic backsliding under the president, Andrés Manuel López Obrador,” the EIU says. “Mr López Obrador has used his position to attack his opponents, including the electoral authorities.”

In 2022 the government passed a reform that reduces the financing of the electoral authority and restricts its oversight powers, putting election integrity at risk. Media freedoms are also under grave threat: at least 13 journalists were killed in 2022 and Mexican intelligence services routinely spy on journalists and activists, the EIU points out.

Meanwhile, the role of the military in public affairs has expanded greatly under López Obrador. The government intends to expand the armed forces’ role in the economy and over public security, including by giving them control over the National Guard until 2028.

“Mr López Obrador’s attacks on democratic checks and balances, as well as the growing role played by the armed forces in the economy and security, led to a further downgrade in Mexico’s overall score in 2022, following a decline in 2021,” EIU says.

Overall, Latin America and the Caribbean worsened. The region experiences its seventh consecutive year of decline in 2022, its average score falling to 5.79, down from 5.83 in 2021. The decline in the overall score occurs despite a broad-based increase in scores related to the lifting of pandemic-related restrictions that had affected civil liberties; however, these improvements are offset by a sharp deterioration in scores in a handful of countries in 2022.

LatAm Democracy
LRK=Latin America rank. GRK=Global rank. Ch=Change in global rank. 
LRK GRK Ch Country Score Category
1 11 2 Uruguay 8.91 Full democracy
2 17 3 Costa Rica 8.29 Full democracy
3 19 6 Chile 8.22 Full democracy
4 49 -1 Panama 6.91 Flawed democracy
5 50 Argentina 6.85 Flawed democracy
6 51 -4 Brazil 6.78 Flawed democracy
7 53 6 Colombia 6.72 Flawed democracy
8 65 -5 Dom. Rep. 6.39 Flawed democracy
9 75 -4 Peru 5.92 Hybrid regime
10 77 14 Paraguay 5.89 Hybrid regime
11 81 Ecuador 5.69 Hybrid regime
12 89 -3 Mexico 5.25 Hybrid regime
13 91 1 Honduras 5.15 Hybrid regime
14 93 -14 El Salvador 5.06 Hybrid regime
15 98 1 Guatemala 4.68 Hybrid regime
16 100 -2 Bolivia 4.51 Hybrid regime
17 139 3 Cuba 2.65 Authoritarian
18 143 -3 Nicaragua 2.5 Authoritarian
19 147 4 Venezuela 2.23 Authoritarian
Average 5.79 Hybrid regime
NOTE: Average includes countries not included here
Sources: Economist Intellgence Unit, Democracy Index 2022; Latinvex (LatAm ranking)

El Salvador saw the worst decline, falling 14 places on the international ranking.

“Tough-on-crime policies and anti-establishment rhetoric have made the president, Nayib Bukele, extremely popular,” the EIU says. “This popularity allowed Mr Bukele to undermine checks and balances, including replacing the entire bench at the Supreme Court. In 2022 he announced that he will run for consecutive re-election despite constitutional limits, and a pliant Supreme Court approved the move. In March 2022 Mr Bukele introduced a State of Emergency that severely restricted civil liberties and led to the imprisonment of about 1% of the population on suspicion of being gang members. Many caught in the dragnet end up in the nation’s overcrowded jails, often without due process, and dozens have died in custody, where torture is allegedly rampant. In April 2022 the government introduced criminal measures that threaten to curb media freedoms, further eroding civil liberties.”

Uruguay tops the ranking among Latin American countries, followed by Costa Rica an Chile. Uruguay has a higher score than countries like Canada, Germany and Australia, while Chile ranks higher than Austria and France.

The Democracy Index, which began in 2006, provides a snapshot of the state of democracy worldwide in 165 independent states and two territories. The Democracy Index is based on five categories: electoral process and pluralism, functioning of government, political participation, political culture, and civil liberties. Based on its scores on a range of indicators within these categories, each country is then classified as one of four types of regime: “full democracy”, “flawed democracy”, “hybrid regime” or “authoritarian regime.”

© Copyright Latinvex



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