Panel SA: Only a new government can take the country off the precipice, says former BC director

One of the first in the financial market to join Jair Bolsonaro (PL)’s campaign in the 2018 elections, former Central Bank director Luiz Fernando Figueiredo is ready for another bet.

Two weeks ago, he opened the doors of his house for a dinner of former minister Sergio Moro (Podemos) with a group of bigwigs that included banker Roberto Setubal, from Itaú Unibanco, and manager Luis Stuhlberger, from Verde Asset.

Founding partner of Mauá Capital, Figueiredo says he was disappointed with Bolsonaro and thinks that the return of former president Luiz Inácio Lula da Silva (PT), who leads the presidential race, would represent another setback for the country.

Three years after the election, do you think you underestimated the risks posed by Jair Bolsonaro to the country’s stability and the economy? No doubt it was a disappointment. I voted for it because it looked better than the alternative. On the other hand, the PT pointed the way to fiscal irresponsibility. In my view, we would go to disaster.

Bolsonaro offered a chance not to be like that and at the time it seemed like the best option. In fact, he didn’t have a good story and it raised doubts. But he had the right agenda and built a robust team. Then he was doing a lot of nonsense and we got to where we are.

The country is more broken than it was then. There has been an improvement in the fiscal situation in recent months, but it is still very fragile. Despite advances such as Social Security reform, we abandoned the last fiscal anchor we had, the spending ceiling.

We are once again at the edge of the precipice and it will be up to a new government to fix this. As long as we’re in this fall-no-fall, we can’t face our problems. The country has not grown sustainably for 15 years.

Was there no reason to distrust Bolsonaro before? The fragility of his commitment to liberal campaign discourse has always been evident.I thought like this: the good wasn’t going to happen, so we had to take the less bad. It was an ugliness contest, and I don’t think we need to go through another contest like this.

The PT’s passage through the government was disastrous for the country. Bolsonaro went too. A crazy, denial president who doesn’t let the team work. It is a delay for the country, as Lula’s return would also be. That’s why we desperately need a third way.

Tensions between Bolsonaro, Congress and the judiciary have subjected democratic institutions to enormous strain in recent years. What effects will this have in the long run?I don’t think the institutions have weakened. They have been tested and proven to be strong. I think an impeachment process always causes trauma, but it was the risk of being impeached that made the president back down and that calmed spirits, without having to press the button.

Does this truce seem to you to be enough to restore investor confidence in the country?We need a reasonable president, a government that can look ahead and start to face the problems. The doubt about institutional security is bad. The external perception of Brazil has never been so negative since I started following the market, almost 40 years ago.

The country is no longer on the investment route. There is some interest in infrastructure opportunities, but we are seen marginally. The risk is for a country the size of Brazil to be forgotten by the developed world.

​ Economic activity seems to have lost steam before the BC started to increase the basic interest rate. What to expect next year?Financial conditions started to get tight a few months ago, due to the uncertainty created by the expectation of a break in the fiscal framework. The effect of this tightening to contain inflation takes time, but in economic activity it is instantaneous.

So we had several negative surprises, with bad data from retail, from the industry. Inflation, which should close the year close to 10.5%, will fall in the coming months, but should remain at a high level, around 5%. And the economy will grow very little, with a rate close to zero.

Unemployment will remain high, aggravated by a significant loss of income. Wages failed to keep up with inflation in many sectors. The economic picture is very bad, which could harm Bolsonaro and perhaps open a window for another alternative in the elections.

How was your approach to Sergio Moro?I’ve always admired his trajectory and that’s why I looked for him when he started to move. I called some people to talk to him and it was really good. There was no unanswered question. In subjects where he has no security, he made it clear that he is studying. He has already indicated that he will follow a liberal economic line, with which I identify.

Moro is new to politics, he joined an inexpressive party and many doubt his ability to articulate. Why mr. Think you’re making the right bet this time, and not making another mistake?He is concerned about the need to build a solid base of support for governing. We know that it’s no use being a reasonable guy with good ideas if there’s no way to implement them. He’s been worrying about it since now, he won’t leave it until after he’s elected.

Luiz Fernando Figueiredo, 57

Director of monetary policy at the Central Bank from 1999 to 2003, at the end of the Fernando Henrique Cardoso administration, he is a founding partner and main executive of Mauá Capital, which manages R$ 5 billion in investments. He was a partner at the former BBA bank and at Gávea Investimentos.