I received on May 8th, in a WhatsApp group, the . Newspaper articles spoke of the brilliant economist, a student of the phenomenon of hyperinflation, who had a prominent participation in all so-called heterodox economic plans, from until , and who was later responsible for the implementation of the (Monetary Policy Committee), a fundamental body in the governance of our monetary policy.
I was very sad.
I remembered the shy man, with an easy smile, who I met in 1985 in , at a dinner at my father’s house, Fernão Bracher, then president of . There were other brilliant young economists there —Persio Arida, André Lara Resende, Edmar Bacha— involved in the conduct of the Cruzado Plan, to whom I listened with fascination and great admiration, which has only grown stronger since then.
A few years later, in 1988, I would support my father in founding a corporate bank, BBA Creditanstalt, which would start its activities with just 20 employees. These were times of enormous volatility; To attract corporate clients and help them navigate uncertainties, we held weekly open lectures, in which a renowned economist sought to evaluate possible scenarios. After the lecture, there was almost always a small dinner with economists at my parents’ house, where the discussion was expanded and deepened.
Chico Lopes, who had an important consultancy called Macromédia, participated several times as a speaker and as a dinner guest.
His shyness did not hide his good humor and the pleasure he felt at those dinners, where the food was very good and the discussions always had a constructive character, common among people with an authentic public spirit.
With the advent and success of the Real Plan in 1994, interest in the lectures gradually reduced and they became more spaced out. The speakers also changed, as many of the economists now held government positions. However, market volatility proved to be stubborn. After two years of relative calm, markets were shaken by the 1997 Asian crisis, followed by the 1998 Russian crisis.
At that time, Brazil still carried a large external debt, so international liquidity crises immediately put pressure on the country and required an increase in interest rates. To protect themselves from these market fluctuations, companies and the financial system relied on the BM&F futures markets (today), where it is possible for someone, who has a debt in dollars, for example, to guarantee in advance the exchange rate at which they will settle the operation.
Naturally, it is not just companies that use this future market; Financial agents willing to speculate on rising or falling interest or exchange rates provide liquidity to the market at all times.
BM&F then fulfilled the role of “central counterparty”, essential for market balance. For the Central Bank, ultimately responsible for maintaining this balance, it was convenient to have a single central counterparty, as this facilitated its supervision: it was enough to ensure that BM&F’s risk control mechanisms were robust, so that all participants had collateral deposited in sufficient value to guarantee possible losses in the event of adverse market movements.
At the beginning of 1999, the exchange rate in Brazil had been virtually frozen for four years and there was strong pressure for the devaluation of the real; On the other hand, opponents of the measure were concerned about its inflationary impacts, even citing the Argentine example, whose exchange rate had been fixed for even longer.
It was in this context that the devaluation took place in mid-January 1999 and the entry of Chico Lopes into the role of president of the Central Bank. He therefore assumes the responsibility of managing the transition to the floating exchange rate regime.
Upon taking office, it was revealed that two small banks, Marka and FonteCindam, from stock brokerages, had set up disproportionately sized positions on the BM&F, betting against the devaluation of the real. Given the rise caused by exchange rate fluctuations, the inability of these banks to cope with their losses would threaten the liquidity of BM&F itself, compromising the entire settlement system and causing a systemic crisis of colossal proportions, in a scenario already very weakened by exchange rate fluctuations.
To overcome this risk, the Central Bank took the extreme decision of compulsorily liquidating the positions of the two banks below the market price (which greatly mitigated the losses of the two banks and resulted in losses for the Central Bank).
I remember thinking at the time that the decision was justified and essential to preserving market balance; I still think that way. As Chico Lopes himself says, in a 2019 statement: “there was no banking crisis, there was no recession and inflation was very low”. It is worth remembering that Argentina, when it implemented the floating exchange rate three years later, caused a crisis so acute that it had five presidents of the Republic in the space of two weeks.
It turns out that the controller of Banco Marka sought to blackmail the Central Bank, claiming to have received — and paid — for privileged information from people linked to Chico Lopes.
The situation is truly Kafkaesque: how can you break through with privileged information? There is only one possible answer: having the wrong privileged information (a didactic and fun demonstration of this situation is in the film “Switching the Balls” with Eddie Murphy). In this case, Banco Marka would have purchased the information from those who did not have it, thus proving Chico Lopes’ innocence.
Despite ending up being acquitted, the scandal that followed deeply shook Chico Lopes. I remember about a year later a friend told me that he had heard that he, Chico, “thought he was okay, considering he had been hit by a bus”. He, who was already naturally shy, became a recluse, reduced his consultancy to the point of having just one secretary and imposed himself a certain ostracism in relation to the financial world.
I still met him a few times, but opportunities became scarcer as I became more intensely involved professionally.
Clearly my sadness was not just for his death; It was because I realized that I had lost contact as a result of the enormous injustice of which he was a victim.
