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Fraga tries to look on the bright side

Investors fearful that the crisis in Argentina might spill over into the largest Latin American economy, Brazil, generally draw some comfort from the fact that the country’s central bank is led by former speculator Arminio Fraga. Fraga, who took up his post just after the floating of the real in 1999, has implemented an inflation-targeting system, enhanced bank supervision, and garnered universal respect and admiration. Brazil might have been hit by Argentina, but now the country should be seen as a turnaround story, he tells Felix Salmon

Arminio Fraga

Euromoney caught up with Arminio Fraga in his hometown, Rio de Janeiro, where he spends his weekends. It was August - the middle of winter - but even so the breeze coming through the open windows from the Atlantic did little to cool his corner office at the central bank building. Come summertime, a lack of air conditioning is likely to be unbearable; in Brasilia, the capital, where the central bank is based, it will be even worse.

And Fraga is starting to feel the heat, as worries grow that Argentina's problems may be transmitted to its northern neighbour. Weighed down by worries about the US and world economy, a growing regional crisis, a slowing domestic economy with electricity rationing and uncertainty over forthcoming elections, the Brazilian real is weakening and that has pushed up interest rates.

Even in rolled-up shirtsleeves, chinos and brown loafers, Fraga was much more the central banker than he was the former trader for Salomon Brothers and Soros Fund Management.

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