Central bank governor of the year 1998: Gustavo Franco's bold use of power

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Central bank governor of the year 1998: Gustavo Franco's bold use of power

Brazil long needed a heavyweight in the central bank chair and now it's got one. Gustavo Franco earned his spurs in last October's Asian meltdown. His policy regime, especially the use of capital controls, is being studied around the world. Brian Caplen reports.

Highly commended: Luis Angel Rojo, Central banker, Spain

Highly commended: Gyorgy Suranyi, Central banker, Hungary


Brazil's textbook response to last October's Asian crisis turned central bank governor Gustavo Franco into a figure of world renown. The doubling of interest rates together with fiscal cuts kept Brazil stable and gave credence to the current policy regime - fixed exchange rate with crawling devaluation and capital controls in an otherwise market-oriented environment - that Franco is associated with.

The Russian crisis is putting Brazil to the test again and the final outcome remains uncertain. While no-one is invincible, Brazilians can rest assured that in the current turmoil they have an experienced technician at the helm, who is cool in a crisis and not afraid to use the full weight of his powers to see off trouble.

"Gustavo Franco advised the president at the time of the Asian crisis that the government had to go for a very orthodox response," says an analyst with a Brazilian investment bank. "This earned him huge respect in the markets."

But Franco's resolute stance has not always made him popular. "Gustavo Franco believes deeply in what he stands for and is prepared to fight with all his strength for it.


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