The head of Brazil's central bank
resigned Wednesday, one day after the president sought to calm
investors by pledging the nation would honor all its foreign debt
Citing personal and "chiefly" professional reasons, Gustavo
Franco said today from Brasilia, the capital, that he was leaving
his post because "I feel an obvious tiredness after five years of
non-stop work (in the public sector)."
|Franco confirmed his resignation for personal and professional reasons
"It's time to give room for new people ... to consolidate the
Real Plan," Franco said.
Central Bank monetary policy director Francisco Lopes, who was
named to replace Franco, said today that there would be no major
change in policy. Finance Minister Pedro Malan canceled a trip to
Portugal because of the economic turmoil at home.
Franco's resignation comes at a delicate time for Brazil.
Investors have pulled more than $40 billion from the country since
July, and reserves have plunged to about $35 billion. On Tuesday
alone, $1.2 billion left the country.
The real, Brazil's currency, was off by 8 percent against the
U.S. dollar in trading today.
In November, international lenders put together a $41.5 billion
aid package to shore up the economy. But to get the funds, Brazil
must sharply reduce its $65 billion deficit a goal that looks
ever more elusive.
Franco, who became head of the country's top monetary authority
in 1997, has strongly defended high interest rates to attract
But that policy is increasingly under fire from businessmen and
workers, who claim it strangles growth and raises unemployment.
The move follows President Fernando Henrique Cardoso's promise
that debt obligations would be honored.
"The market can rest assured," Cardoso said. "We know what we
will do, we know what we are doing, we will pay all our debts."
His comments, however, failed to stem losses on the Sao Paulo
The Sao Paulo exchange Latin America's largest closed down
7.6 percent Tuesday.
Today, the Central Bank allowed the real to devalue against the
U.S. dollar by changing the "band" within which the two
currencies trade. The new "wide band" is 1.20-1.32 reals to the
dollar, up from 1.12-1.22.