Brazilian presidential candidate Aecio Neves will end a central bank currency swap program that has cushioned losses in the country's currency, the real, if he is elected later this month, Neves's choice for finance minister, Arminio Fraga, told Reuters on Wednesday.
Neves, a centrist who has promised to rescue the economy from recession, is running neck-and-neck with left-leaning President Dilma Rousseff in Brazil's tightest presidential election in at least two decades. Fraga, a former central bank chief whom Neves has said will be his finance minister, said the program would end immediately and that the central bank's stock of currency swaps would be wound down as contracts expire.
"We would certainly not have that program," Fraga said in a telephone interview. "The government is intervening to prevent the depreciation of the currency and that should not happen except in times of great uncertainty. The best policy for Brazil is to have a free-floating exchange rate." Since last August, Brazil's central bank has intervened daily in the foreign exchange market by selling currency swaps, derivatives designed to support the real. Fraga, a Princeton-educated economist, said that Neves would likely include academics and market economists in the next central bank board if he is elected.
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