Brazil Eyes Closer Regulatory Cooperation with New Central Bank Leadership

• Brazil's government is preparing to cooperate more closely with the central bank on regulatory issues like cryptocurrencies and meal vouchers next year when the bank gets new leadership, following occasional differences over policy on such matters.
• Incoming central bank chief Gabriel Galipolo, whose term starts in January following his appointment by President Luiz Inacio Lula da Silva, has delivered a hawkish message on monetary policy, showing he is not shy about hiking interest rates despite Lula's repeated demands for lower borrowing costs.
• However, the two are likely to find more common ground on regulatory matters, where the central bank has sometimes been at loggerheads with the Finance Ministry in recent years.
• Three Finance Ministry officials described on condition of anonymity a series of frustrated discussions with the central bank on matters ranging from regulation of crypto assets to allowing global trading platforms to list Brazilian public debt. Two of the ministry sources said that collaboration had suffered as the central bank became more withdrawn from policy discussions since gaining formal autonomy under a 2021 law.
• One official pointed to concerns about crypto asset regulation, which is being handled by the central bank without coordination with the government. That has complicated Finance Ministry policy on regulating online gambling since many sites are operating with cryptocurrencies, the source said. The central bank said earlier this year it expected to finalize its proposed crypto regulations by the end of the year.
• On another front, the government plans to resolve a long-standing impasse over new regulations to open up competition in the 150Bn reais (US$26.5Bn) meal voucher market. For years, tech companies, including Mercado Libre (MELI.O), have been looking to take a bigger bite of the market dominated by companies such as Sodexo and Edenred (EDEN.PA), for meal cards that firms must provide for full-time workers.
• Despite the impasses, the ministry sources expressed hopes for more collaboration with Galipolo in charge. A central bank source said improved cooperation would reset the "tone" of the relationship. "I really hope we'll have more integration on issues that don't affect the central bank's core (inflation) mandate," said another ministry source. "I'm not saying we want a seat on the Monetary Policy Committee - that's not it.

(Source: Reuters)