Meirelles sees no impact of Greece woes on Brazil

The sovereign debt crisis affecting Greece and other countries of the euro region is unlikely to have an impact on Brazil’s economy, which is well prepared to withstand a sizable global credit event, central bank President Henrique Meirelles said on Thursday.

The problems facing Greece, Portugal and other nations in the euro region that are under the burden of large fiscal shortfalls and investors’ reluctance to refinance their debts will not trigger a crisis similar to that seen late in 2008, Meirelles said at a presentation in Sao Paulo.

The collapse of credit markets following the demise of investment bank Lehman Brothers in Sept. 2008 plunged the global economy into recession and cut access to capital to all but the most credit-worthy borrowers. In Brazil, the impact of such events lingered for six months, in which a few companies with high exposure to complex derivatives instruments endured heavy losses and led the government to engineer state-sponsored mergers to avert their bankruptcy.

“Any losses are already known and understood,” he said.

“Brazil showed that it was prepared to weather any crisis and our resilience was magnified once the crisis was past,” Meirelles added.

Meirelles defended a stricter set of oversight rules upon financial and securities firms as a way to ensure stability in global markets.

“The mayhem is created not during periods of economic contraction. All the opposite, they are born in the midst of hefty expansions,” he said.

The former FleetBoston Corp executive did not comment on the bank’s decision on Wednesday to raise the benchmark overnight Selic rate for the first time in 19 months to head off inflation.

The bank’s Monetary Policy Committee, which Meirelles presides over, raised the Selic by 0.75 basis points to 9.5 percent. One basis point is one-hundredth of a percentage point.

Meirelles added that a recent move by the central bank to buy dollars in the spot currency market have the aim of removing excess foreign exchange liquidity and not setting a floor or a ceiling for the currency.

The bank earlier on Thursday held two separate auctions by which it soaked up dollars from the markets. Yet, the real gained 1.2 percent to 1.732 to the dollar, the highest since January 8.