Upheaval at Brazil’s Central Bank
President Luiz Inácio Lula da Silva promoted Henrique Meirelles, president of Brazil’s Central Bank, to the cabinet in August as the Brazilian media focused on Meirelles’ personal finances and tax planning. Politicians and the media have called for an official inquiry into the former banker’s financial affairs and demanded he be fired and sued for tax evasion; his new ministerial status means he can only go on trial before the Supreme Court. Millionaire Meirelles has won few friends in his unbending fight against inflation. He has held interest rates at a punishing 16% since April, and business leaders have accused him of slowing the country’s recovery. Vice President José Alencar joined the fray, calling Brazil’s interest rates “outlandish.”
Meirelles hired Rodrigo Azevedo, a US-educated economist at CSFB in São Paulo, as the Central Bank’s new monetary policy director. Azevedo replaces Luiz Augusto Candiota, who resigned following media allegations of tax evasion. Candiota denied the allegations but resigned “to protect the Central Bank’s reputation.”
Former Pemex CEO Fights Extradition
Rogelio Montemayor, a former chief executive officer of Pemex, was arrested in Houston, Texas, in July, after prosecutors feared he might flee the US to avoid extradition to Mexico. The Mexican government accuses Montemayor of transferring nearly $170 million in loans to Pemex’s labor union, then illegally channeling those funds into the Institutional Revolutionary Party (PRI) presidential campaign during the 2000 election. A US court approved Mexico’s extradition request.
Kirchner Snubs HP’s Fiorina
Argentine President Néstor Kirchner cited “agenda problems” when he failed to show up for a meeting with Carly Fiorina, chairperson and CEO of Hewlett Packard, in August. All the same, Kirchner managed to squeeze in an unscheduled visit from former Argentine soccer star Diego Maradona, who asked the president to lobby against a court ruling that bans Maradona from leaving the country. HP, one of the world’s largest technology companies with revenues of $73.1 billion last year, had planned its meeting with Kirchner months in advance. Most foreign investors have stayed well away from Argentina since its $100 billion default in 2001. Fiorina had better luck with Argentina’s neighbors. She met with Brazilian President Luiz Inácio Lula da Silva and Ricardo Lagos of Chile and announced fresh investments in both Brazil and Chile – but not Argentina.
Deutsche Hires Merrill Bankers
Deutsche Bank has hired Iván Santillán as a director and Keith Cunningham as a vice president in its structured and investment products group, part of the bank’s Global Equities Derivatives department. Santillán will be responsible for Latin America product coverage. Cunningham will be part of the origination team led by Michael Chun, a director. Chun is responsible for origination, hedge fund sales and institutional client solutions. Santillán and Cunningham both join Deutsche from Merrill Lynch.
Fernández Pledges Austerity
Leonel Fernández, head of the center-left Partido de la Liberación Dominicana (PLD), was sworn in as the Dominican Republic’s president on August 16. He will lead a country struggling through its worst economic crisis in decades. The country has a $7 billion foreign debt burden, worsening power outages, heavy unemployment, rising inflation and a currency that has lost half its value in two years.
Fernández is trying to revive a $600 million loan agreement with the International Monetary Fund that was suspended in May. The new president acknowledged the difficulties facing the country and promised to cut spending, eliminate many government jobs created since 2000 and reschedule its debts. He urged Congress, controlled by outgoing president Hipólito Mejía’s party, to double taxes on tobacco, telecommunications and international travel, making them 20%.
AHMSA Chairman Arrested
Police in Menorca, Spain, arrested Xavier Autrey, the former chairman of bankrupt Mexican steelmaker Altos Hornos de México (Ahmsa). Autrey, who had been on the run since March amid charges of tax fraud, was arrested along with Ahmsa board member Juan Carlos Carredano. Ahmsa’s collapse led to one of Latin America’s most protracted and acrimonious debt restructurings. Ahmsa declared bankruptcy in 1999, affecting $1.86 billion in debt, and the company’s board has failed to reach a deal with creditors, which include Mexico’s two largest banks, Banamex and BBVA Bancomer. Police began hunting Autrey after he and former Chief Executive Officer Alonso Ancira left Mexico to negotiate with foreign creditors. Autrey and Ancira together own about 73% of Ahmsa. Ancira is still a fugitive, as are seven Ahmsa board members.