QIA invests across nine sectors: retail and consumer; technology, media and telecoms (TMT); liquid securities; infrastructure; financials; funds; healthcare; industrials; and real estate.

Key investments aiding the energy transition:        

Key Europeans investment examples:

Key US investment examples:

Key APAC investment examples:

Further key investments:

Global Finance: When you took the role of CFO at QIA at the end of 2022, what were your initial areas of focus?

Niall Byrne: When I joined in 2022, QIA was a very well-established organization with a strong finance team. We’ve embarked on a transformation journey to create the state-of-the-art finance function, which hopefully is going to serve QIA for many years to come.

What I want to do is put in place a function, a team, technology systems, an operation that can support the future growth of QIA. Get the right technology in place that’s scalable, that can cope with the increasing size and complexity of everything.

We are migrating our core accounting and investment platforms to a best-in-class, front-to-back solution, and that’s a huge project for QIA. It doesn’t just impact the finance function, it impacts all of the investment teams across the whole organization.

Then I need to create time for my team to do new things that add new value to QIA as an organization. And it’s not about cost-cutting. In fact, my team has grown since I’ve arrived, and I expect it to continue to grow. It is now just over 80 people, and I expect it to grow probably north of 100 over the next couple of years.

GF: Where have you had the most success in QIA so far?

Byrne: The technology journey is probably the most complex part of what’s going on at the moment. And we’ve already seen some successes there. It’s a multiyear journey. As we roll into 2025, we’ll have the core accounting platform in place. And then we’ll be adding things that will be much more visible to the investment teams, such as the way we report on performance.We obviously already have a performance management system, but we’ll have a new cloud-based system.

GF: Is there any concern about moving to the cloud, from a security point of view?

Byrne: Obviously that’s always a focus for any organization. We follow best practices in terms of the security that we demand of our vendors. We’re doing this in a measured, considered way and making sure that it meets all of our requirements, and we don’t jeopardize the security of any of our data.

GF: What are QIA’s key focus areas for investment in terms of geographies and industries?

Byrne: Our mandate is to protect and grow the state’s financial assets and to help diversify the local economy. We invest on a global scale, across multiple sectors, geographies, and we build up strong partnerships with our investee companies, because we’re a long-term investor, we’re able to do that. We have a diversified investment approach, and we really focus on sectors that we think will shape the future global economy, such as technology, healthcare and solutions that power the energy transition.

GF: During your career as a senior financial figure, what have been your best and worst moments?

Byrne: I would say the best is coming to QIA. I’ve worked in many different roles over my career. I was at JPMorgan Chase for a long time. I’ve worked in front-office and support functions, different locations, different businesses. At QIA, I have the opportunity to bring all of that together, leverage all of my experiences, and really deliver value at a level that can positively impact an entire organization. It’s great to be able to do that in such a complex role as the one I have here, and everything I’ve done before essentially prepared me for that task.

Leaving JPMorgan after 25 years was a big step, obviously, for me and my family. I wanted that fresh challenge, a new organization, new set of colleagues, new country and region.

The worst moments involve recognizing when a role isn’t providing the expected challenge and taking action to address it. And that doesn’t sound like a bad moment, but those moments are actually pretty challenging, because you’ve got to recognize that you’re in that situation and then take action to address it.

GF: What can you suggest to a young person aspiring to a career as a CFO?

Byrne: If you’re starting out knowing that you want to be a CFO, it’s great to have that clarity. Number one, invest in yourself. I would also be flexible: you may have a plan, but you need to adjust your plan as opportunities come up. If something different comes up, embrace it, because over time, you’ll build a portfolio of experiences that will make you a stronger candidate for bigger and more complex roles. Generally, building your portfolio of experiences is really important. I would also say, be confident, even when you’re right at the beginning. Be confident in your abilities, but stay humble, ask lots of questions. Admit when you don’t know something, it’s fine to make mistakes, but learn from your mistakes. Probably the most important thing of all is just do things that you enjoy, you get satisfaction from, because you will do your best work when you love what you do.

With the new government led by President Javier Milei, who assumed office near the end of 2023, the Argentine central bank may have changed. It is slowly moving from a little-used institution unable to set credit conditions for the country, toward becoming a modern central bank.

Much more is needed: The Central Bank of the Republic of Argentina (BCRA) still lacks independence from the government, and the ongoing economic and financial changes are part of a radical deregulation and modernization agenda that will take time to implement. In the meantime, the country risks remaining short of foreign reserves, and new waves of aid from the International Monetary Fund (IMF) may be called upon.

Santiago Bausili’s appointment in December 2023 as the head of the BCRA is too recent to warrant a rating. Still, policy watchers are optimistic about his moves.

Ash Khayami, senior Latin America risk analyst on the BMI Americas Country Risk team at Fitch Solutions,says, “It’s important to highlight that the BCRA is not an independent entity, like most other central banks in the region. Given all these caveats, we do believe that under his direction the BCRA has made some progress in alleviating some economic distortions.”

The Bahamas economy enjoyed a strong post-pandemic expansion, mostly linked to a rebound in tourism. Still, the rate of GDP expansion is petering out, from 17% in 2021 to 14.4% in 2022 and 4.3% in 2023, as the economy is facing its natural constraints.

“Unemployment is at its lowest level since 2008, while inflation has been on a downward path and is lower than in regional peers,” says the IMF in its February report. Public finances are improving, although debt remains high. The country needs structural reforms to improve the potential growth rate and improve climate resilience and social equity.

The GDP is expected to expand by 2.3% in 2024, and inflation this year to be at 2%. The Bahamian dollar remains pegged 1:1 to the US dollar, so the actual room for the Central Bank of the Bahamas is limited, and the discount rate is kept steady at 4%.

Foreign reserves improved slightly from 2023, to $2.8 billion at the end of April, from $2.7 billion in the same month last year.

The central bank has been involved in reforming the public debt market. Recent amendments to the Central Bank Act prohibit the central bank from financing the government via the primary bond market, imposing a limit of 15.5% of the government’s ordinary revenues. “This limit on central bank financing is well above that of regional peers with pegged regimes,” says the IMF, suggesting a reduction of this threshold.

According to IMF estimates, the Bolivian economy grew at 2.5% in 2023 but is expected to slow down to 1.6% in 2024. The Central Bank of Bolivia (BCB) maintains the currency (the boliviano) pegged to the US dollar, helping to keep inflation in check. However, the political situation remains very fragile, and how long the peg to the dollar can be maintained is unclear.

Last February, Fitch downgraded Bolivia’s long-term foreign currency issuer default rating (IDR) to CCC from B-. Fitch notes, “The downgrade reflects a significant decline in usable international reserves to very low levels, heightening risks to macroeconomic stability and debt service capacity. Wide fiscal deficits, largely financed by borrowing from the central bank, and the absence of a concrete consolidation plan are likely to continue to put pressure on reserves. This has resulted in foreign exchange rationing and the emergence of parallel-market exchange rates in the context of a stabilized currency regime.”

With elections scheduled for August 2025 and a deeply divided political scenario, neither the government nor the central bank will likely be able to significantly adjust to the fiscal and monetary situation in the short run.

The Central Bank of Brazil (CBC) raised interest rates by 25 basis points to 10.75% on Sept. 18, citing a stronger-than-expected economy and concerns that inflation will remain stubborn. In June, the CBC had paused its easing cycle, following seven consecutive reductions over the past year that lowered the country’s benchmark Selic interest rate to 10.5%. The June decision to hold off on future cuts was based on worse-than-expected inflation data, greater uncertainty about the economy, and a weakening of the Brazilian real.

Since his appointment was approved by the Senate in February 2019, Campos Neto has gained considerable credibility for the professional way he conducted monetary policy. However, President Luiz Inácio Lula da Silva has voiced sharp criticism, requesting a more accommodative monetary policy supporting economic expansion. Campos Neto’s mandate ends in December, and the markets’ attention is on who will replace him.

“It has been a very challenging time to be a Brazilian central bank governor,” says William Jackson, chief emerging markets economist at Capital Economics. “They had challenges by the government, which had been loosening fiscal rules, and the president harassing the central bank for keeping interest rates high.”

“The politicization of the central bank has been a big concern amongst investors for next year when [Campos] Neto will be gone,” says Jackson.

Four of the nine central bank board members have been appointed by the current government and five by the previous government. In August, Brazil’s President Luiz Inacio Lula da Silva picked central bank monetary policy director Gabriel Galipolo to replace Campos Neto when his term ends in December.

According to Jackson, it is still likely that the Brazilian central bank will maintain some form of independence from the government.

The Bank of Canada has had a convincing monetary policy in the past 12 months. Analysts who applauded its action in the previous rate-raising cycle expected a new cycle of cuts given the economy’s weakness.

In September, the bank lowered its key interest rate 25-basis points to 4.25%, its third consecutive 25-bps cut since June.

At the beginning of July, “suddenly there was a different economic backdrop to deal with. The key thing really is that we’ve seen a much larger rise in the unemployment rate. And the GDP growth has been weaker,” said Stephen Brown, deputy chief North America economist at Capital Economics.

According to analysts, the issue now is whether they will continue cutting interest rates, and how fast. “We think that given how quickly inflation is coming back to target, we should be seeing a rate cut at every meeting, but it could also be at every other meeting—a pace that risks being too slow,” says Brown. He adds that the bank has been acting on its forecasts more than on data, anticipating the trend.

“In comparison to the Fed [US Federal Reserve Bank] and other central banks, I would say that the Bank of Canada still compares quite favorably now,” says Brown.

After pushing interest rates to a high of 11.25% in October 2022, the Central Bank of Chile (BCC) began an aggressive series of interest rate cuts in July 2023, as inflation continued falling throughout the year. Policymakers led by Rosanna Costa slashed the country’s key interest rate by more than half, bringing it down to 5.5% after September’s 25 basis-point cut.

But with growth rebounding in Chile this year and headline inflation remaining above the 3% target for several months, Costa may need to reconsider additional rate cuts.

Analysts, though, say Costa’s actions and conduct of monetary policy have been the best possible, building on the country’s ample credibility and the solid traditions of Chilean central bankers.

“I have been positively impressed throughout the monetary cycle,” says Capital Economics’ Jackson. “They increased the interest rates aggressively when inflation was high, and the central bank has also been very aggressive in their interest rate cuts; but I think that what has been even more important is that they have been very clear in their signaling and communication.”

The Colombian central bank (Bank of the Republic, or BanRep) started a little late to the region’s current easing cycle, beginning a series of cuts in December and maintaining a relatively steady policy of easing since, and in July cut rates again by 50-basis points to 10.75%.

“Colombia’s inflation dynamic has been following a slightly different pattern than the rest of Latin America,” says Jackson, and because of this the central bank has been slower than other peers in the region.

The good news is that inflation should trend lower in the future, which should mean that BanRep will continue its easing cycle. However, most analysts still expect an excess of caution. Some applaud this attitude, but others say that the central bank in Colombia should be able to communicate its moves better.

“BanRep was one of the last markets in the Americas to engage in its rate-cutting cycle and has been one of the most cautious in loosening policy. While inflation has started to exhibit more stickiness in Q2 2024, we believe that Leonardo Villar will continue to advocate for continued caution in order to ensure price and currency stability,” says BMI’s Khayami. “Leonardo Villar’s leadership through one of the largest spikes in inflation—not just in Colombia’s recent history, but in the region more broadly—has been instrumental.”

The Central Bank of Costa Rica (BCCR) has been aggressively reducing its key monetary rate from a top level of 9% reached in October 2022. In April 2024, the rate was cut to 4.75%, with a cumulative rate cut of 425 bps through nine successive reductions that began in March 2023. Since April, BCCR has been on hold because of a modest pickup in inflation.

The IMF projects that GDP will grow 4 % in 2024, down from 5.1% in 2023; while inflation will be 0.3% in 2024, slightly down from 0.5% in 2023 and well below the central bank’s 2% to 4% target range.

“The central bank has appropriately lowered the policy rate, and its data-dependent, forward-looking approach should continue to help inflation rise back to target. It is critical to institutionalize the central bank’s autonomy as well as clarify its mandate and decision-making processes through comprehensive legal reforms as soon as circumstances are propitious,” said the IMF in its June executive board review.

“Risks to the inflationary outlook are skewed to the downside; the BCCR expects headline inflation to stay below the lower bound of its 2.0–4.0% target range this year. Hence, the Bank deemed a rate cut necessary to bring inflation within target,” said FocusEconomics in a July report, concluding that “our panelists expect the Bank to continue with its easing cycle by year-end.”

The Central Bank of the Dominican Republic (BCRD) led by Héctor Valdez Albizu, its longtime governor, was one of the first in the region to start the cycle of monetary easing; it has been closely following the evolution of other countries, particularly the US.

Last year, as the country’s inflation rate had been falling for some time, the central bank reduced its key interest rate in a series of five stages, from a peak of 8.5% in May to 7% in November of 2023. Since then, the monetary policy rate remained unchanged until a further 25 bps cut in August.

The rate cut reflected a loosening of global financial policy and strong domestic economic performance. FocusEconomics, a global provider of macroeconomic intelligence, said in its report on the August cut, “In addition, the BCRD noted that inflation has remained at the lower end of the target range of 3.0%-5.0% so far this year.”

Capital Economics forecasts that the Dominican Republic’s GDP will expand at 4% in 2024, up from 2.3% in 2023, with an inflation rate of 3.3% from 4.8% the year before. The consultancy says that government action is supporting sustained growth.

“The outlook for the Dominican Republic’s economy is bright as President [Luis] Abinader’s pro-business policies, a strong tourism sector and robust consumer spending continue to drive strong growth in the coming years,” wrote Capital Economics in a note.

The Eastern Caribbean Central Bank (ECCB) is the monetary authority for eight island economies: Anguilla, Antigua and Barbuda, Dominica, Grenada, Montserrat, Saint Kitts and Nevis, Saint Lucia, and Saint Vincent and the Grenadines. The Eastern Caribbean dollar is pegged to the US dollar.

The economy of the islands continued a strong recovery after the pandemic. According to the ECCB, “The recovery is firmly entrenched, with real GDP growth estimated to have averaged 7.3% over 2021 to 2023.” The IMF forecasts 2024 GDP growth at 4.3% and 3.3% in 2025.

In 2023, inflation was at 3.9% in the region after reaching a peak of 5.6% in 2022, according to the IMF. This was mostly due to an increase in commodity prices. Since the currency is pegged to the dollar and US inflation has been under control, inflation in the area is expected to remain low in 2024.

The pilot project on DCash, the digital version of the Eastern Caribbean Dollar, was completed in January 2024. The ECCB has now announced the transition to DCash 2.0. “This version is expected to be a more advanced and user-friendly iteration, enhancing utility for customers, developers, businesses, and financial institutions. DCash 2.0 is anticipated to be launched in the next 18 to 24 months.”

Ecuador remains mired in a deep political and economic crisis. The economy is wholly dollarized, so the margins for monetary policy are quite restricted. As expected in a dollarized economy, inflation has been low in 2023 and is forecast to remain low: The latest estimate by the IMF is that it will be at 1.4% in 2024, down from 2.2% last year. GDP growth is doing poorly, with essentially zero growth expected in 2024 after the 2.3% reached in 2023.

The criminal gang violence that has characterized the country in the past few years continues, making it difficult to pursue policies leading to stabilization and growth. According to the World Bank, “In recent months, the economy has slowed substantially, owing to an increase in insecurity caused by organized crime, disruptions in oil production, climate-related events, and political uncertainty.”

In Spring 2024, the government reached an agreement with the IMF, giving access to $4 billion to help a stabilization and fiscal consolidation program. The results remain uncertain.

Given El Salvador’s fully dollarized economy, the Central Reserve Bank has limited instruments for its monetary policy. The country faces a high level of poverty and a fast-growing public debt that is crowding out private investments, with lower prospects of future economic growth. The IMF has been very critical of introducing bitcoin as an official currency.

Inflation has been slowing down in 2024 toward 0.9% from a peak of 7.2% in 2022, while real GDP growth is estimated at 3% for 2024. The IMF projects growth to decline to 2.3% in 2025, below the historical average, because of high public borrowing costs. President Nayib Bukele started his second term in June, saying he would focus on the economy after having improved the level of security in his first term. More than a quarter of Salvadorians live in poverty. El Salvador’s public debt has skyrocketed on Bukele’s watch, reaching over $30 billion or about 84% of GDP.

El Salvador has been the first country to adopt bitcoin as an official currency—the Chivo Bitcoin Wallet—with some role in promoting financial inclusion. However, the IMF has been highly critical due to bitcoin’s high price volatility. The IMF says that risks to financial stability, added to the risk that crypto assets could open the door to illicit money, largely outweigh the benefits.

The Guatemalan economy has shown stability and soundness with few changes since Alvaro Gonzáles Ricci was appointed governor of the central bank (Banguat) in October 2022.

In May 2024, the IMF praised the country’s “remarkable stability and soundness,” attributing the trait to “a legacy of prudent monetary and fiscal policies—with the inflation rate on target, ample international reserves, contained fiscal deficits, and a low public debt/GDP ratio that continues to fall. In line with the country’s goals, the administration needs to advance in the structural reform agenda.”

This year, the GDP is expected to grow 3.5%, in line with 2023, despite high political uncertainty. Inflation fell sharply over 2023 from a peak of almost 10% (9.9%) in February to 3.3% in February 2024. The IMF projects 4% for this year, within the 3% to 5% set by the central bank.

Despite the decline in inflation, Banguat left its policy rate unchanged, with a key monetary rate steady at 5% since May 2023.

“The Bank determined that the currently tight monetary policy backdrop is congruent with inflation remaining within its 3% to 5% target range in 2024-2025. Price pressures rose to 3.8% in May but remained below the midpoint of the Bank’s target range. Moreover, Banguat highlighted that inflation expectations remain within its target band,” writes FocusEconomics in a note.

Honduras maintains a crawling band for its currency, the lempira, with the US dollar. The commitment to the crawling band, which has a margin of 7% in either direction, has been maintained. The crawling band regime reduces the space for active monetary policy.

The country remains poor and has many structural problems, but its GDP growth rate in 2023 was 3.5%. It is expected to perform similarly in 2024, when the forecast is 3.6%.

Honduras was hit by the global wave of inflation after the pandemic, with a peak of 9.1% for 2022. The situation has subsequently improved. Inflation was 6.7% in 2023, and the IMF forecasts it lowering to 4.4% in 2024.

Jamaica is undergoing a stabilization program to create an environment with stable growth, low inflation, and a stable public budget. Its monetary policy had been particularly tight, but it reversed course in August with its first rate cut since 2019, lowering interest rates from 7% to 6.75%.

Trading Economics’ global macro models and analysts’ expectations see interest rates going down another 25 basis points by the end of this quarter.

That long period of stable rates brought significant progress in reducing inflation, which fell to 5.1% in July 2024, marking the fifth consecutive month within the target range. With inflation expectations stabilizing and wage pressures moderating, the Monetary Policy Committee (MPC) unanimously agreed to gradually ease monetary policy, starting with reducing the absorption by the Bank of Jamaica (BOJ) of liquidity from deposit-taking institutions.

The Jamaican economy grew by 1.4% in Q1 2024, with balanced GDP growth risks. The bank said that future MPC decisions would hinge on sustained inflation control within the target range.

Core inflation remains sticky amid tight labor markets and domestic demand pressures.

In its March country report, the most recent, the IMF states, “Inflation has been low and stable. … Over the last five years (2019-23), inflation was in single digits averaging 7 percent. The credibility of the monetary regime was strengthened by enacting amendments to the BOJ Act in 2020 that enhanced the BOJ’s mandate, autonomy, and governance arrangements. Global shocks have pushed inflation above the target band during August 2021-23.”

The IMF report goes on to say, “The BOJ adopted an appropriate monetary policy, which together with prudent fiscal policy brought inflation close to the upper target band by end-2023.”

The Bank of Mexico (Banxico) had kept interest rates the same over a 12-month period before cutting them in March of this year and again in August. This year’s cuts lowered the rate by a total of 50 bps to a current 10.75%.

Analysts say Banxico’s prudent attitude is explained by the greater impact of its close neighbor, the US, in terms of GDP and inflation, adding to a more difficult political situation. Some criticized the bank for its lack of a forward-looking stance.

“Like the Fed, Banxico has taken its time with its cutting cycle,” says Conor Beakey, head of Americas Country Risk at BMI, a Fitch Solutions company. “This decision made sense given the resiliency in domestic demand that prevented inflation from making steady progress toward its target through most of last year.”

“I think they also have a very complex political environment to navigate,” says Capital Economics’ Jackson. “They had their own election in June, and I think they are also looking at the US election in November. They are likely to be affected by the US presidency in terms of trade policy, but also inflation and interest rates.” He adds that Banxico should be more forward-looking instead of reacting to current economic data.

“The minutes from June’s policy meeting suggest that the central bank is aware that underlying price pressures are not quite what they were,” observes Beakey, “but officials have wisely opted against rushing into a major easing cycle against a backdrop of heightened political uncertainty. This prudent approach has helped to mitigate downside risks to the peso in what have been fairly challenging circumstances,” he concludes.

Nicaragua’s economy has maintained relatively good GDP growth and an inflation rate under control. The Central Bank of Nicaragua (BCN) keeps the national currency, the córdoba, at a fixed exchange rate with the US dollar. It was previously held at a narrow crawling peg.

According to the IMF Staff Country Report, “Substantial foreign exchange inflows and prudent macroeconomic policies are fostering reserve accumulation and have allowed to maintain the monetary reference rate unchanged since December 2022, despite the tightening by the Federal Reserve.” The BCN raised its monetary reference rate to 7% in December 2022, doubling it since the start of the tightening cycle in April 2021. Given the fixed exchange rate regime, the BCN’s actions have a limited impact. The economy remains highly dollarized, with emigrant remittances playing an important role. A strong current account surplus has increased international reserves. The government also increased the general government surplus, 2.8% of GDP in 2023.

The prudent macroeconomic policy led to an overall improvement in access to financial markets. In May, Fitch upgraded Nicaragua’s IDR to B from B-. While many vulnerabilities persist, the country’s overall economic and financial situation is improving. According to Fitch’s note, “Inflation has moderated significantly to 5.4% [year over year] as of April, after experiencing the greatest shock in Central America in the past several years. The BCN has kept its monetary policy at 7% since the end of 2022, maintaining a positive differential relative to the US Fed, and as of 2024, has reduced the pace of depreciation under its crawling peg regime to 0%.”

Paraguay is another Latin American country that surprised the markets by suspending its monetary easing process in April. It left its reference rate unchanged at 6% at August’s meeting. Since the start of the easing cycle more than a year ago, the central bank has lowered borrowing costs by 250 bp.

A mission by the IMF in June concluded that the strong growth in 2023 was led by agricultural production and electricity generation following a severe drought in 2020-2022. The IMF also praised the central bank’s action in maintaining inflation around or below the 4% inflation target.

The appointment of Carlos Carvallo Spalding in August 2023 did not change the ongoing stance of monetary policy. “Paraguay continues to benefit from a robust inflation targeting framework, complemented by a transparent and flexible exchange rate system. They welcomed the data-driven approach to monetary policy, with the central bank continuing to respond to inflation dynamics and inflation expectations as needed,” says the IMF in its June report.

After two consecutive climate shocks and social turmoil at the start of 2023, inflation has receded in Peru, thanks to the bank’s “decisive monetary policy tightening, while the fiscal position and financial system remain strong,” the IMF said in its Article IV consultation report last May.

Julio Velarde Flores, who has been leading the Central Reserve Bank of Peru (BCRP) since 2006, has been steadily driving monetary policy in a tough political situation in which President Dina Boluarte and the government are struggling with a low level of public approval following the violent suppression of protests.

The rate cut trend had been put on a brief hold, similarly to what has happened in other countries in the region. However, at their August and September meetings, policymakers resumed with a 25 bp cut each month, lowering the rate to 5.25%.

“The Banco Central de Reserva del Perú has surprised markets this year with unexpected pauses in March and June, but we think these moves have been prudent due to Peru’s growth rebound (hot April and May economic activity readings) and hotter than expected core inflation readings,” says Julia Sinitsky, analyst on the BMI Americas Country Risk team at Fitch Solutions. “Already, rates in Peru are lower than in neighboring markets, and the BCRP has been conscious of rate differentials in the last few months.”

Suriname had a period of economic turmoil, which included default on government debt and the condemnation in 2022 and years of jail for the previous central bank governor for charges including money laundering. While the economy is still fragile, the IMF stated in August that “the authorities’ commitment to maintain prudent macroeconomic policies and difficult reforms is showing results in terms of macroeconomic stability and investor confidence.”

In December 2023, the government emerged from bankruptcy and regained access to the bond market. The structural reforms had some positive results. According to the IMF, “Growth is projected to reach 3 percent this year, inflation is on a steady downward trend, donor support is increasing.” The IMF adds that “international reserves are increasing.”

Regarding monetary policy, the IMF notes that the “implementation of a restrictive monetary policy stance has been instrumental in reducing inflation,” adding that “It is important for the central bank of Suriname (CBvS) to continue monitoring monetary developments and to continue diligently implementing open-market operations to maintain the reserve money path consistent with the program targets. The CBvS remains committed to a flexible, market-determined exchange rate and is working to improve the functioning of the foreign exchange market.”

Alvin Hilaire has been reappointed governor for the third time, until 2026. He has been leading the Central Bank of Trinidad and Tobago (CBTT) since 2015 when his mandate was initially five years and was then reduced to a three-year term in 2020.

A heavily managed exchange rate and a small open economy are limiting the role of monetary policy, while the central bank has been trying to reduce bureaucracy for banking accounts and increase financial inclusion.

During the pandemic, the central bank brought the repo rate to 3.5% in March 2020. It has not increased since then, and the rate was confirmed in the June 2024 meeting of the Monetary Policy Committee and has remained there through mid-September. This has created some tension, especially during the period in which interest rates were increasing in the rest of the world, especially in the US.

In its Article IV Consultations in June, the IMF states, “While these differentials have narrowed more recently, they incentivize potential capital outflows. Although capital outflows currently remain contained, the CBTT is encouraged to remain vigilant and stand ready to increase its policy rate if this risk intensifies.”

The good news is that inflation started to decrease, alleviating the pressure on interest rates. “After peaking at 8.7 percent in December 2022, headline inflation has declined to 0.3 percent in January 2024, mainly due to declining food and imported goods inflation,” says the IMF.

Despite a drought of historic proportions, authorities in Uruguay managed to maintain sound macroeconomic policies and a resilient economy. The central bank, led by Diego Labat until his resignation on July 26, was able to start reducing its key interest rates in April 2023 as inflationary pressures declined.

From that point, the Central Bank of Uruguay brought its benchmark policy rate to 8.5% in April of this year, from its peak of 11.5%, with six more consecutive cuts, then put the declining phase on hold since April 2024. Inflation is hovering above 5%, while the central bank has an objective of 4.5%. The IMF has lauded its action, while sovereign debt ratings and sovereign spreads stood at historically low levels.

“In 2023, Uruguay confronted the impact of a once-in-a-century severe drought and external headwinds; but the economy remained resilient, owing to the authorities’ sound macroeconomic policies, the country’s political stability, and strong institutions. Despite the challenging environment, Uruguay maintained favorable market access with improved sovereign debt ratings and sovereign spreads at historically low levels, including the lowest spreads in the region,” according to the IMF’s July report.

In this context, the central bank’s action has been vital to keep inflation under control and help keep long-term borrowing costs lower. “Monetary policy should remain contractionary to ensure that inflation and inflation expectations stay within the target range in a sustained manner. Sustained monetary policy vigilance is crucial for continuing to build credibility and supporting de-dollarization efforts by delivering low and stable inflation rates,” says the IMF.

After being criticized by economists and Wall Street for its slow approach to rising inflation, the Fed roared ahead last year with one of the most aggressive and unequivocal cycles of restrictive monetary policy in its history.

The results did not take long to arrive. Year-over-year inflation fell 12 consecutive months from its 9.1% June 2022 peak to just 3% by June 2023. The rate has bounced up and down a bit since then but settled at 2.5% in August, its lowest in three and a half years.

The Fed has debated in excruciating, and at times confusing, detail throughout this year when and whether to cut its benchmark rate from a 23-year high of 5.5%, a level held since July 2023. This September, the Fed finally turned the monetary ship toward a policy of easing, with a 50-basis point cut, which was at the higher end of forecasts.

Prior to the rate cut, economists agreed that confusion in the markets was a case of bad communication by the Fed, but Powell’s overall handling of policy has been praised.

“It is difficult to find much fault with the Fed’s approach to policymaking over the past year. Powell faced some criticism in the early part of 2024, with some arguing that an overly dovish message at the last [Federal Open Market Committee] meeting of 2023 was to blame for the uptick in price pressure we saw over Q1. However, it was the market that took the Fed ending its hiking cycle as a green light to price in substantial cuts,” says BMI’s Beakey. “The Fed has appropriately changed its tone in response. More-substantial easing in the following months will be crucial to avoid a policy mistake and to secure Powell’s legacy.”

After the July presidential election, the official electoral authorities declared Nicolás Maduro the winner and gave him a third term in office. Independent observers called the vote undemocratic, and tensions are running high. Several countries and international bodies, including the EU, the US, and several Latin American countries, have refused to recognize the results.

As long as the government remains the same, no changes are expected at the level of the central bank, which remains isolated and lacks independence.

Before the election, Venezuela had experienced some economic improvement after years of financial difficulties. The IMF estimates a growth rate of 4% for 2024, based on improvements in trade and services, driven by the oil and mining sectors and the growth of sectors such as food processing and pharmaceutical production. Inflation has been falling this year, though still extremely high compared to most countries, as rates settled at 35.5% in August, down from 107.4% in January.

Asdrúbal Oliveros, director of Caracas-based firm Ecoanalítica, inflation is likely to stay elevated through this year after the government executed, without announcing it, a severe fiscal and economic adjustment. “The government has more money, it has been increasing its revenues; but public spending is still far below the levels of other years,” says Oliveros.        

Global Finance: What is your view of the Costa Rican economy in the coming 12 months?

Róger Madrigal López: Costa Rica’s economy is set to maintain its positive momentum in the coming months, with growth expected to hover around 4%. This growth trajectory builds on several favorable developments observed in recent years.

First, the country’s trade surplus has been improving significantly, reflecting a strong export sector. This trend is likely to continue, based on robust foreign direct investment [FDI] thanks to Costa Rica’s appeal as a destination for international capital, and complemented by the tourism sector returning to its pre-pandemic levels. Additionally, the services sector continues to gain prominence, evidencing the shift toward more service-oriented economic activities, which allows more economic diversification in products and markets.

However, there are some short-run challenges to address. Higher interest payments are putting pressure on fiscal resources, potentially limiting the government’s expenditure. This situation requires careful management to ensure that essential services and investments are not adversely affected.

Moreover, there are ongoing issues in the labor market, particularly with the integration of the female workforce. Addressing these issues through targeted policies will be crucial for fostering inclusive economic growth. Additionally, there are long-term challenges like improving human capital, enhancing infrastructure, and fostering competition.

In summary, while Costa Rica is on a positive path with continued growth and improving economic indicators, tackling the challenges related to fiscal constraints and employment will be key to ensuring a sustainable and equitable economic future.

GF: How important is it to institutionalize the central bank’s autonomy, as demanded by the International Monetary Fund?

Madrigal López: Institutionalizing the Central Bank of Costa Rica’s autonomy is crucial, which has been noted not only by the IMF but also by other international bodies, such as the Organization for Economic Co-operation and Development [OECD]. These organizations have consistently emphasized the importance of this measure for ensuring effective and independent monetary policy.

The empirical observation is that, in the long run, independent central banks are more successful in achieving price stability and autonomy.

There is a proposed legislative initiative that aims to address these recommendations by adding a final paragraph to Article 188 of the Costa Rican Constitution. This amendment would grant the BCCR administrative and governance autonomy, thereby safeguarding its essential functions. It ensures that the bank can set its own objectives and targets without undue external interference.

GF: What is your view on the economic outlook of the Central America region?

Madrigal López: The economic outlook for the Central America region is quite varied, as each country faces its own unique set of challenges. For instance, some countries share similar characteristics with Costa Rica, such as a shift toward a services-based economy and notable growth in recent years.

In contrast, other countries in the region are grappling with the need for greater economic integration and accelerated growth to enhance their average income levels. Notably, these other nations have benefited significantly from remittance flows, which play a crucial role in their economies. All our economies have also simultaneously faced the challenge of increasing their debt-to-GDP ratios following the pandemic shock.

Overall, there are opportunities for growth and improvement across the region. The path forward involves addressing these diverse challenges and leveraging the benefits of economic reforms. They also need to convince the rest of the world that they can become good commercial partners, which will inevitably benefit our integration as a larger market.

GF: What keeps you up at night?

Madrigal López: The Central Bank of Costa Rica remains committed to fulfilling its primary objective of maintaining price stability. Ensuring this stability is crucial for fostering a predictable economic environment and supporting sustainable growth. This sounds like a trivial concern for central banks, but for BCCR, to have low inflation is a relatively recent achievement that must be protected. To attain this objective, the autonomy of the BCCR’s governance must be effectively de jure and de facto guaranteed. This autonomy is needed to safeguard the bank’s ability to manage monetary policy independently and effectively. There is a concern regarding the risk to the BCCR’s management capabilities, particularly related to the availability of skilled technical personnel. Addressing this concern is important to uphold the bank’s operational efficiency and decision-making.   

Global Finance: You have been the financial head of Iveco Group for almost a year now. What has been the biggest challenge so far?

Anna Tanganelli: Iveco Group is navigating through a rapidly evolving external market and geopolitical context, bearing new and disruptive complexities which affect the very way in which we do business: from supply chain interruptions to fluctuating market demand, from volatile macroeconomic fundamentals to operating in a “polycrisis” global scenario, while remaining at the forefront of innovation and leading the automotive industry’s transformation journey towards electrification.

As CFO, the biggest challenge has been—and is still today—to ensure that our financial objectives and processes fully align with Iveco Group’s long-term growth ambition, and at the same time enable the company to safely weather any storm and complexity that may lay ahead.

And since the Iveco Group 2024-2028 Strategic Business Plan was scheduled to be presented a little more than three months  [March 2024] after I joined, I had to come up with a solid financial strategy quickly.

GF: Most of your career has been in the automotive industry. Are there specific aspects of this business and industry for a Chief Financial Officer?

Tanganelli: Everyone who works for the automotive sector knows that this industry is not “for the faint of heart.” It’s cyclical, labor-heavy, capital and R&D-intensive, fiercely competitive, and in the midst of a remarkable, all-encompassing transformation—it never stands still.

This requires a CFO to be flexible in adapting financial processes and strategies to changing external and internal conditions, and quick in making decisions, sometimes accepting a reasonable, calculated level of risk.

At the same time, you must have a constant focus on cost control, operational efficiency and cash flow management. In an industry with tight margins, significant capital investments and sometimes long supply chains, optimizing cash generation and ensuring a disciplined liquidity management is vital.

The rapid pace of technological advancements and regulatory changes highlight the need for a forward-thinking, more strategic approach to financial planning and risk management. CFOs must understand the importance of factoring less traditional financial metrics in their decision-making process, such as innovation, connectivity and ESG.

GF: Where do you devote most of your energy and time?

Tanganelli: Besides my core, day-to-day finance-related activities, I spend most of my energy and time on people and processes. This includes identifying and developing our finance leaders of the future, attracting and nurturing talents within the organization, stepping up accountability and strategic thinking, and, above all, being a female leader in a still substantially male-dominated industry—fostering and widening diversity. 

GF: How do you see the use of artificial intelligence (AI) evolving in finance?

Tanganelli: AI has the potential to revolutionize finance by enhancing data analysis, improving forecasting accuracy and automating routine tasks. I see AI evolving to become an important part of the decision-making processes, providing deeper insights and enabling more strategic, data-driven decisions. At Iveco Group, we are exploring ways to leverage AI to optimize our financial operations and drive innovation.

President Joe Biden initially announced the new tariffs in May, proposing to quadruple the existing 25% duty on EVs, double the tariff on solar cells, and add a new 25% tariff on lithium-ion batteries and other strategic goods, including steel. The White House originally stated that the new tariffs would take effect on August 1, but implementation was delayed, allowing the US Trade Representative’s office to review over 1,100 public comments.

“Today’s finalized tariff increases will target the harmful policies and practices of the People’s Republic of China that continue to impact American workers and businesses,” says Trade Representative Katherine Tai. “These actions underscore the Biden-Harris administration’s commitment to standing up for American workers and businesses in the face of unfair trade practices.”

Following a four-year review of tariffs originally imposed by former President Donald Trump, the Biden-Harris administration has maintained duties on over $300 billion worth of Chinese goods ranging from toys and t-shirts to internet routers and industrial machinery, with rates primarily between 7.5% and 25%.

Additionally, both the European Union and Canada have introduced new tariffs on Chinese EVs, with Canada matching the US 100% duties.

Concerns from producers about the potential disruption to supply chains and warnings from economists that the new tariffs could raise consumer prices and eventually cost US jobs have largely been ignored. The so-called trade war with China began in 2018 when Trump introduced the first set of tariffs as part of his “America First” policy aimed at reducing the trade deficit. Much of the US political establishment has shown support for new and higher tariffs on China, although they differ on the appropriate levels and their enforcement.

That dynamic has carried over into the presidential campaign season. While the current presidential candidates have different views on many issues, Donald Trump and Kamala Harris share similar positions on trade with China. Their main differences relate to the severity of the proposed tariffs, with Trump advocating for even higher duties.

Global economic growth will continue expanding this year and hold steady next year, with some weakness in the United States and China and some rebounding in the euro area, according to global forecasts. These say that doomsayers will be proved wrong, and recession avoided, with central bankers slowly but steadily restoring more neutral monetary conditions as inflation falls to desired levels.

But geopolitical tensions are creating risks, with an expanding conflict in the Middle East on one hand and war in Ukraine on the other, and with spreading protectionism that likely won’t abate regardless of who wins the US presidential election in November.

According to the July World Economic Outlook Update published by the International Monetary Fund (IMF), global growth will likely be 3.2% this year, slightly down from 3.3% in 2023, and projected to slightly increase back to 3.3% in 2025.

“We’ve seen the global economy show remarkable resilience to this very fast rate-hiking cycle, and we expect that resilience to endure as monetary policy returns to normal,” Elena Duggar, chair of the Moody’s Macroeconomic Board, tells Global Finance. “Global growth is stabilizing, but declining a little bit as we go through the year in the United States, and rebounding in the euro area; but overall, it’s really stabilizing to this new post-pandemic equilibrium, and we expect a soft landing for most of the G20 economies.”

Most economists expect a US soft landing, with GDP growth slowing to around 2% in 2025 from 2.6% this year. Moody’s forecasts global growth slowing to 2.7% in 2024 and 2.5% in 2025, from 3% in 2023. Moody’s also sees a deceleration in the advanced G20 economies to 1.7% in 2024 and 1.6% in 2025, from 1.8% last year, and a decline in growth in G20 emerging markets to 4.1% in 2024 and 3.8% in 2025, from 4.7% in 2023.

“I think the US economy is in good shape for a soft landing,” says James Bullard, dean of the Mitchell E. Daniels School of Business at Purdue University and former president of the Federal Reserve Bank of St. Louis (the St. Louis Fed). “To me, a soft landing means that output grows at the potential growth rate, that the job market is in pretty good balance, and that inflation is moving back toward target and isn’t too far from target. All those things are happening.”

“And you know, GDP growth looks to me like the run rate is maybe between 2% and 2.5% for 2024,” Bullard adds. “That’s pretty close to the potential growth rate, or a little above the potential growth.”

Since the end of last year, the Federal Reserve has consistently debated when or if it should cut its benchmark rate from a 23-year high of 5.5%, a level maintained since July 2023. After August’s annual inflation report showed the rate falling to 2.5% from 2.9% in July, the Fed finally shifted toward an easing policy in September, cutting interest rates by 50 basis points to 5%, a more aggressive move than many forecasts had anticipated.

“It is difficult to find much fault with the Fed’s approach to policymaking over the past year. Powell faced some criticism in the early part of 2024, with some arguing that an overly dovish message at the last FOMC meeting of 2023 was to blame for the uptick in price pressure we saw over Q1. However, it was the market that took the Fed ending its hiking cycle as a green light to price in substantial cuts,” says Conor Beakey, Head of Americas, BMI, a Fitch Solutions company. “The Fed has appropriately changed its tone in response.”

The probability of a recession appears lower than it did 12 months ago, say several economists who place it well below 10%.

But David Andolfatto, chair of the Department of Economics at the University of Miami’s Patti and Allan Herbert Business School, says, “One cannot forecast recessions. When recessions come, they are usually triggered by unforecastable events; they come as surprises. You know, the Covid-19 shock, for example. The reason why a recession risk might be elevated over the next year, in my view, might be because of the geopolitical concerns.”

Andolfatto, who is also a former senior vice president of research at the St. Louis Fed, warns that the risk of recession comes from the energy spike that would be associated with an escalation in the Middle East conflict—an event that Moody’s is also highlighting in its recent forecasts. But barring such an event, economists do not expect a recession to hit.

A big change in the world economy is coming from China, where the outlook is weaker than usual and where a real estate crisis is holding back economic expansion.

“I wouldn’t say that China is crashing. I wouldn’t say that China is improving. It’s bumping along at a lower level of economic activity. We’ve seen some attempts for stimulus, and those stimulus attempts haven’t really shown a lot of results. That’s probably going to be compounded with continued trade friction,” says Joe Fitter, director of the MBA Strategic Finance Academy at the Kelley School of Business, Indiana University.

Moody’s sees China growth at 4.5% this year, down from 5.2% in 2023, and falling to 4% in 2025. Fitter observes that US businesses are exiting China gradually and moving to other emerging markets.

“I think the decoupling trend will continue,” says Fitter. “I think it’s going to continue at a slow and steady pace, rather than something that is massive and happens overnight. Manufacturing will shift out of China to potentially avoid tariffs; so some emerging economies will continue to benefit from that shift, such as Mexico, Vietnam, and some of the other countries,” like India, he added.

According to the Moody’s forecast, India and Indonesia are the two countries with the highest expected growth in 2024, with 7.2% and 5%, respectively.

In 2023, India did better than China, with a respective GDP growth of 8.2% and 5.2%, according to the IMF’s July World Economic Outlook Update. The IMF projects this trend to continue, with India’s GDP up 7% and China’s up 5% in 2024. But economists caution that it is difficult to predict if the trend is sustainable.

“China is richer than India, and the two countries have such a different level of income that India [would need to] grow at 8% for 20 or 30 years to catch up and become a high-income economy,” (which is currently defined by the World Bank as a country with a gross national income above $14,000 per capita), says Partha Chatterjee, professor of economics at Shiv Nadar University, outside of New Delhi near the satellite city of Noida.

“We cannot now take growth as granted. There’s a sense among some that, no matter what, India will grow; but I don’t think we should be complacent in that sense,” Chatterjee adds. “I think there are certain reforms, maybe certain policy changes, that India has to undertake to ensure that in the short run, we do not face any crises. More important is the long-term growth, which is the next 20 to 30 years, when the demographic transition will finalize itself in some ways so that happens. As a corporate economist would say, we have to be cautiously optimistic about the growth.”

India’s very high ranking for the number of new startup companies, as reported in recent success stories, remains an isolated trend that does not extend the availability of funding to more-traditional industries, Chattarjee points out.

Prime Minister Narendra Modi’power was weakened in his third term, after his Bharatiya Janata party lost its singular majority in the June election. Now reforms in India appear less likely and more difficult to implement.

Investors will focus on the US presidential election in November; but pundits do not see a big difference between the two parties on how the deficit issue will be handled, despite the big question mark on the potential for renewal of some tax breaks in the 2017 Tax Cuts and Jobs Act passed by the Republican-controlled Congress.

The tax code overhaul cut the corporate tax rate to a flat 21% from a tiered rate ranging from 15% to 39%, among other changes. The bill is expected to add more than $2 trillion to the deficit by 2028, according to estimates by the Congressional Budget Office (CBO); but many provisions will expire in 2025, and one of the big decisions of the new president will be whether to extend or eliminate them.

What is different from the recent past is that, depsite recent rate cuts, long-term interest rates will probably be higher for longer. “The pre-Covid world with superlow interest rates is over,” says economist Riccardo Trezzi, founder of Underlying Inflation, a consultancy for private equity and hedge funds on macroeconomics and economic policy, “and this means that public fiscal deficit will become more relevant, with higher spending to fund the public debt as a consequence.”

In a paper published in July with co-authors Guido Ascari, Giancarlo Corsetti, and Tilda Horvath, titled “The US Fiscal Mess: Some Unpleasant Fiscal Simulations,” Trezzi showed how “the US federal debt is expected to grow to historic highs over the next decade.”

“Across all fiscal consolidations considered, the debt/GDP ratio and interest will increase at least until 2026-2027. Growth is not a way out: Without corrective measures, nothing short of unrealistic growth of 4% or more would work, and recession risks remain. A decade-long plan ending in 2034 could work but would require [bipartisan consensus on] ambitious fiscal reforms over the period,” they write.

The paper cites a CBO estimate that “the US federal debt (held by the public) is projected to grow from 99% of GDP in 2024 to 122% in 2034—‘higher than at any point in history.’”

On November 10, 2023, Moody’s lowered its outlook on the United States’ credit rating from Stable to Negative, while reaffirming the nation’s top credit rating of Aaa. The move signals an increased risk that the rating could be downgraded over the next year or two. The two other major credit rating agencies, S&P and Fitch, had both already downgraded the nation’s rating—S&P in 2011 and Fitch in 2023.

“Among the G20, the three worst countries where fiscal strength is a concern are Italy, the US, and China,” says Moody’s Duggar. The rating agency has a negative outlook on the sovereign ratings of China also, but a stable outlook on the sovereign ratings of Italy. “There are debt concerns with all three countries, but the issues are slightly different. In Italy, government debt levels are high. In the US, debt levels and debt-servicing costs are projected to rise materially over the coming years. In China, total economy debt has risen materially over time, especially in the corporate sector and the local and regional governments sector.”

Besides the longtime concern over Italy’s debt, “the US and China are more worrying because of the trajectory and because the service of debt—the cost in interest payments—is becoming higher. Especially in the US, interest payments as a share of government revenue will rise quickly going forward,” Duggar says. “The other big part of the equation is you have this political polarization in Washington with parties facing troubles in agreeing on fiscal correction.”

Economists often count on the US because of the international demand for assets denominated in dollars, and they stress that the best solution could come from a weak presidency.

“This election has a lot of uncertainty around it, because not only is the White House up for grabs in a close election, but also the House of Representatives and the Senate. It’s not clear to me that either party will be able to win all three of those,” says Bullard. “I think divided government is a distinct possibility for the ultimate outcome. And in the US, when there’s divided government, that usually means not too much gets done. And usually financial markets like that outcome.”

The excessive deficit in the US would eventually manifest itself as inflation, because that’s how the Fed would handle a case where the demand for US Treasuries is lower than its supply.

“If this problem comes home to roost, it’s going to manifest itself primarily as inflation. That’s not good, but it’s not the end of the world either,” remarks the University of Miami’s Andolfatto. “This side is very, very unknown and not forecastable. As things stand today, the global demand for US Treasuries continues to be very robust. But of course, the million-dollar question is: How long can that last?”

Longer term, economists are optimistic and point out that GDP growth could expand, and technology might help economic growth in the US and abroad.

“The potential growth rate of the US economy could be something like 2.25% from now until the end of the decade. That is slightly stronger than what we’ve seen over the past couple of years, which is at 2% or slightly below 2%,” says Michael Pearce, deputy chief US economist at Oxford Economics.

“We’ve seen this big surge in a kind of dynamism in the US economy, accompanied by increased investment in areas which have been associated with stronger productivity and growth in the past,” Pearce says. “So that leads me to think the rise in productivity growth of the last few years is not just a cyclical phenomenon, but instead reflects some underlying dynamics changing in the economy.”

Global Finance: What has been the most challenging time of the 10 years you have been CFO at Groupe Berkem?

Anthony Labrugnas: The most challenging time as the financial head of Groupe Berkem was at the beginning, because of the company’s financial situation at that time. Back then, there was a significant level of debt, and the company’s profitability was not high enough. I had to find ways to refinance and find solutions to increase the Group’s capital, to bring in new cash flow. After that, it was easier to build a financial strategy and to achieve acquisitions and finance the capex. To give you a bit of background, we evolved from a small, Dordogne, France–based SME [small and midsize enterprise] to an international player with nearly 300 employees over the past decade, so a lot has changed in that respect. My job is to adapt to ever-changing environments.

GF: Groupe Berkem operates as a bio-based chemical group. Are there specific aspects of this business and industry for a CFO?

Labrugnas: Today, the financial system is very focused on the topic of corporate social responsibility, or CSR. If you are not strong on ESG [environmental, social, and governance] priorities, it will be very difficult to finance your company in the future. A company’s valuation is now fundamentally connected to its CSR, and not only in terms of profitability. It’s a way of growing differently, and luckily CSR is intimately linked to what we do as a manufacturer in the plant-based chemical industry, helping industrial companies replace everyday chemicals with bio-based, ecologically responsible solutions.

GF: What do you spend most of your energy and time on?

Labrugnas: This year is very rich for me, with many challenging operations to manage. One was the acquisition and integration of a new company in Spain, Berkem Ibérica. Another challenge was managing the withdrawal from the stock exchange market for Groupe Berkem. We also managed the multisite implementation of new enterprise resource planning for the group, as well as the latest acquisitions. Finally, there was the task of providing KPIs for the new organization of the group, where we merged all the companies into one and created four distinct business areas.

GF: What is your view on ESG?

Labrugnas: As I mentioned, ESG is key for the company at large and for all of my teams, regardless of where they are based. This is also part of Groupe Berkem’s DNA: Our core mission is to advance the environmental transition of companies producing chemicals used in everyday life. We are constantly integrating plant chemistry into each of the areas we are operating in from Construction and Materials, Hygiene & Protection, Health, Beauty & Nutrition to Industry.

GF: What is your view on the use of artificial intelligence in finance?

Labrugnas: I’m not very confident in the use of AI in finance. I think that AI can’t replace the human relationships that make our jobs interesting and challenging, nor can it replace the bonds that are so important between the banks, analysts and companies we interact with. These connections and relationships remain a must-have in finance, and they are key for me.

GF: Groupe Berkem has been listed on the Euronext since December 2021. How did your role change since the listing?

Labrugnas: Being listed requires much more effort on our part, to close our accounts with the auditors. We have also many more meetings with analysts and investors, so it can be very demanding and time-consuming in that respect. Being listed has also allowed me to improve my presentation skills, in terms of the way I present the group and the figures.

With Campos Neto’s term ending December 31, President Luiz Inacio Lula Da Silva recently picked current Deputy Governor for Monetary Policy, Gabriel Galipolo, as Campos Neto’s successor. The Senate will vote on whether to confirm Galipolo to a four-year term, which start in January.

In this interview, Campos Neto shares his insights on the global economy, Brazil’s economic outlook, the resilience of Latin American economies, and the importance of central bank independence. Campos Neto discusses the challenges and opportunities in a world marked by economic uncertainty, inflationary pressures, and evolving global trade dynamics. He also provides an update on Brazil’s innovative financial initiatives, including the development of DREX, the country’s digital currency. This interview has been edited for clarity. 

Global Finance: The global economy is facing a lackluster period, according to recent IMF comments. What is your view? 

Roberto Campos Neto: In the global environment, central banks of major economies remain committed to bringing inflation back to its targets in an environment characterized by labor market pressures. Currently, the external environment is marked by less synchrony in monetary policy cycles across countries and uncertainty about the effects and extension of the easing cycle in the US. 

Globally, we have made significant progress in the fight against inflation, but the job is not finished yet. Recently, US Fed chair Jerome Powell announced that the time has come to cut rates. Thus, the institution is expected to initiate the loosening cycle in the next meeting, in September. However, the length and depth of the cycle will depend on data. Looking ahead, an important variable will be the fiscal policy. In my view, the fiscal policy in the US will most likely remain under pressure after the presidential election. The fiscal rhetoric from the presidential candidates points to this scenario. To the extent that fiscal measures and other proposals, from tariffs to immigration policy, discussed during the election campaign have potential inflationary effects, it is difficult to imagine that interest rates in the US will return to pre-pandemic levels in the near future.

Recently, we have observed greater volatility in the global scenario. For some time, weak US data had been seen with optimism as it was an indication of a soft landing. However, even weaker economic data, pointing to a risk of a stronger-than-expected deceleration, contributed to higher volatility. In my view, these movements were a little too hasty. At the same time, in Japan, the undoing of carry-trade operations also provoked a strong adjustment in financial markets. This further contributed to the observed greater volatility in the external scenario. 

One important question seems to be whether the economic slowdown will occur in an organized way or not. The baseline scenario points to a mild deceleration, in an orderly manner, but we should be aware of the risks. One important risk is related to global trade. In advanced economies, discussions on trade protectionist measures, especially against China, have gained momentum. For instance, the European Union recently substantially increased import tariffs on Chinese electric vehicles. In the US, proposals from the presidential campaign emphasize large tariff increases on China imports. In late August, the Canadian government announced a 100% tariff on electric vehicles imported from China and a 25% tariff on Chinese steel and aluminum. Other countries have also opened antidumping investigations against China.

Essentially, we are moving away from efficiency, and this may severely impact global trade and growth as well as inflation. Especially if we consider the apparent new Chinese economic model, less focused on domestic consumption growth and more on exports. It is difficult to estimate the impact of these protectionist measures, but a stronger slowdown in China should have a major effect on global activity, and potentially the biggest impact should be on emerging market economies.

Another source of concern is that, in a scenario of a stronger slowdown in activity, there is little room for economic policy, both fiscal and monetary. This happens because government debt is at very high levels globally and projected to rise. Critically, when combined with high interest rates, especially in advanced economies, this poses policy challenges and can drain liquidity from corporations, emerging market economies and low-income countries.

Likewise, the space for monetary policy is limited. Central banks have very large balance sheets, and many of them experienced meaningful losses from changes in the price of assets they had bought during the last tightening cycle. So, there is not much room for purchasing assets, as many central banks did in the recent past. Currently, the only instrument left for central banks is the traditional tool, i.e., interest rate policy. In my view, part of the recent bouts of market volatility are due to these risks to global growth and the market perception of little room for countercyclical economic policies in most countries should a stronger slowdown materialize. 

Ultimately, in this new scenario of desynchronized policies, one important remaining challenge is to find a path to sustainable growth with low inflation and controlled fiscal accounts. In my view, a factor that could be key to achieving this path is the degree of coordination of global economic policies in the future.

GF: What are your thoughts on the importance of the independence of the central bank?

Campos Neto: I believe the autonomy of the BCB was one of the most important institutional developments in Brazil in the last few years. The autonomy allowed us to do the job we needed to do, for example, during the last elections. At that time, we managed the greatest rise in interest rates in an election year ever seen in emerging economies – from 2% to 13.75%, which proved essential to curb inflation in Brazil. We were actually able to bring about lower inflation than our peers, despite our long history of higher inflation than other countries in Latin America.

Of course, the autonomy of the BCB is recent, and it is natural that both the government and ourselves at the BCB are still adjusting to this new environment. However, I think eyes should remain on the benefits of this institutional advance: recollecting that preserving central banks’ independence is key to monetary policy credibility and inflation stability.

That said, we continue to fight to increase the scope of our independence, by including financial and administrative autonomy. These two dimensions are crucial for complete autonomy. A study by Tobias Adrian at the IMF asked independent central banks what aspect of independence they believed is the most important, and 74% of them said their financial independence was even more important than operational independence.  

In this sense, we are working on an initiative in which the central bank would be financed through its revenues, like most other central banks. In this project, the budget still needs to be approved by Congress, and the BCB still needs to explain all its expenditures and the reasons for them. However, with financial independence the BCB should have enough money for technology and innovation, which is imperative.

At the same time, in our current framework, our human resources – hiring, firing and remuneration levels – depend on the government. However, doing innovation sometimes means competing with the financial sector for people. In the recent past, with Pix [Brazil’s instant payments system] and Open Finance, for example, we have lost people to the financial system. We need to be able to pay more competitively to retain people and expertise for other innovative projects. This touches both the administrative and financial autonomy that we seek.

GF: What are your expectations for the Brazilian economy over the next 6-12 months?

Campos Neto: In the last few quarters, monetary policy has succeeded in bringing inflation down, while still maintaining economic activity and a robust labor market. Headline inflation fell from a peak of 12.1% in April 2022, to 4.5% in July 2024. However, more recently, this disinflation trend has slowed, while various measures of underlying inflation are above the inflation target in recent releases. In fact, some volatile prices have ticked up recently, particularly food prices. But also, services inflation proved to be resilient, in part due to the strength of the labor market. Inflation expectations for 2024 and 2025 collected by market agents are currently de-anchored, at 4.2% and 3.9%, respectively, while the projections from the Monetary Policy Committee (Copom) stand at 4.2% and 3.6%. That is why the Banco Central do Brasil (BCB) decided to pause its easing cycle in June and has kept interest rates constant since then.

Turning to activity, GDP growth and employment figures have continuously surprised to the upside in the last years. This view has not changed in the more recent period and the dynamism of higher frequency indicators, such as of retail and services, reinforces the prospect of resilience in domestic activity and sustained consumption over time. The median of market agents’ expectations for GDP growth this year went up from 1.5% at the beginning of the year to 2.4% in the most recent data. 

In the case of the labor market, current high dynamism is translated most notably into stronger than expected figures for the level of occupation and income. Unemployment rate forecasts have also been continuously shifting downwards: while at the beginning of the year market agents were expecting an 8.2% rate for the end of 2024, this number now stands at 6.7%. 

Notwithstanding, market analysts expect a deceleration in activity in 2025. The median of market expectations for GDP growth next year stands at 1.86%. I also believe there will be some slowdown next year, driven by reductions in fiscal spending.

Summing up, the disinflationary process has slowed down, inflation expectations are de-anchored and current inflation levels are above the target. This happens in a context characterized by still strong economic activity, which makes inflation convergence to the target more challenging. In such a scenario, we have stressed that monetary policy should continue being contractionary for sufficient time at a level that consolidates both the disinflation process and the anchoring of expectations around the target. 

GF: What is your view on the Latin American region’s economy?

Campos Neto: In recent years, Latin American economies have been surprisingly resilient, recovering faster-than-expected from the Covid-19 pandemic. Growth in the region reached 4.1% in 2022, but moderated to 2.7% in 2023, partly due to the partial unwinding of fiscal support and more restrictive policies since late 2022, according to the IMF.Many economies are now operating close to potential growth.

During the Covid-19 pandemic, Latin American central banks were the first to tighten monetary policy to control the build-up of demand pressures and secondary effects of supply shocks. The early and prompt monetary tightening by the region’s central banks supported regional asset prices and capital flows, even in the face of rising interest rates in advanced economies (AEs).

As the region began to experience a gradual disinflation process, main local central banks initiated a monetary easing cycle in 2023, even before central banks in AEs. 

More recently, the disinflation process has lost momentum and overall inflation trends have started to diverge from country to country. The recent uptick in headline inflation in some countries has been mainly due to the rise in food and energy prices, with core inflation remaining relatively stable. There is no sign of upward pressures on international prices of agricultural and energy commodities, which could alleviate domestic inflation pressures in coming months. However, inflation expectations remain above targets in some countries.

Looking ahead, improvements in some underlying structural factors are crucial for countries’ future growth. Overall, productivity in Latin America is low, especially compared to Asian emerging market economies. Investment rates are also low. At the same time, the region faces huge challenges to improve infrastructure, reduce poverty and advance the energy transition. In this context, it is imperative to boost potential growth and increase productivity. Improving the business environment, attracting foreign investment and developing labor skills are crucial steps to achieve more sustained, long-term growth. 

In this realm, fiscal policy is another important issue. With public debt at relatively high levels in many countries, it is important that policymakers adhere to credible long-term fiscal policy frameworks and commit to rebuild fiscal space, reducing the cost of financing for the private sector.

On the positive side, the current situation in the global economy brings opportunities for the region. Historically, the region has been, from a geopolitical point of view, a stable and credible partner, with good relations with the world’s main economies. In addition, over the last years Latin American countries have made progress in strengthening free markets, enhancing the rule of law, respecting property rights, and improving central bank independence. These advancements enable the region to benefit from recent trends such as nearshoring and friendshoring. Therefore, the current challenge for countries is to promote further advances in structural reforms to insert themselves in a more relevant way in the evolving global production chains.

GF: Can you talk about your country’s digital currency DREX and its status of development and potential future?

Campos Neto: Over the last few years, the BCB has been implementing several innovation projects within our agenda of structural reforms of the financial system, known as Agenda BC#. DREX is one of the four fundamental blocks of this agenda, which also includes Pix, the Open Finance initiative, and the currency internationalization. 

The BCB has been developing DREX with the aim of tokenizing the economy. Such a strategy will allow obtaining benefits in three dimensions. First, DREX will enable greater banking efficiency in risk management, collateralization, financing, asset management, data analysis, and settlement, as well as allowing new types of digital financial products and services. The second dimension of benefits is related to efficiency in digital payments. Tokenization initiatives such as DREX work as a bridge to the De-Fi environment and brings decentralized finance to the regulatory perimeter. Besides that, it also allows greater efficiency in financial intermediation, through programmable digital services that use smart contracts. With smart contracts, transactions are completed automatically when predetermined conditions occur, adding security to all parties involved in the business. A third dimension of benefits are improvements in the contract registration process, since DREX will allow the registration of legally valid contracts through programmability.

DREX is currently in a pilot phase, focusing particularly on ensuring the privacy of personal data. The pilot is working well, but we still have some issues related to the scalability. We do not yet have the technology that allows us to have a system that transacts hundreds of millions of trades a day with the desired level of privacy. Central Bank Digital Currency technologies are at the frontier of knowledge and some technological issues such as privacy versus scalability are still open problems. Recently, the pilot has entered a new phase that includes the selection of new participants and the inclusion of new assets in the platform, such as corporate bonds and bonds issued by financial institutions.

To conclude, it is important to emphasize that these innovations are related to financial inclusion. At the BCB, we believe that innovation projects like DREX not only bring efficiency and modernization but are also one of the most powerful tools to promote financial inclusion.

GF: How do you see the status of the US economy in the next 12 months?

Bullard: I think the US economy is in good shape for a soft landing. To me, soft landing means that output grows at the potential growth rate, that the job market is in pretty good balance, and that inflation is moving back toward target and isn’t too far from target. All those things are happening. And you know, GDP growth looks to me like the run rate is maybe between 2 and 2.5 percent for 2024, that’s pretty close to the potential growth rate, or a little above the potential growth rate. Inflation has been coming down toward target, and that’s going to enable the Federal Reserve to get going on the interest rate cuts.

GF: Do you then expect a rate cut in September?

Bullard: The committee was pretty clear at the last meeting and in the chairman’s press conference, that they are ready to go at the September meeting, unless something really dramatic happens. I think, you know, they’re about as clear as you can be for a central bank. I do think they’ll start in September with 25 basis points, and then the question is how fast do they want to move to get back toward a more-or-less restrictive stance of monetary policy, and so even when they lower the policy rate a little bit, the policy rate will still be restrictive. They have to continue to lower from that point. And I think it’s probably 25 basis points per meeting for several meetings in a row, until you can get down to a lower level of the policy rate, and then at that point, you could decide whether inflation is continuing to go to 2% or not, and whether you want to continue to normalize the policy rate.

GF:  You see a cut of 75 basis points between now and December, right?

Bullard: Right.

GF: Do you expect big policy differences depending on who will win the US presidential elections in November?

Bullard: One thing I’ve said about this, is that this election does have a lot of uncertainty around it, because not just the White House is up for grabs in a close election, but also the House of Representatives and the Senate are very close. It’s not clear to me that either party will be able to win all three of those. I think divided government is a distinct possibility for the ultimate outcome. And in the US when there’s divided government, that usually means not too much gets done. And usually financial markets like that outcome. And so, I think that that’s been a factor that’s been driving financial markets during the summer here, but the election could change direction very quickly and either party, I would say, could still sweep. If one party sweeps, it will be able to do more, and probably wants to do more. And so that would be a little bit different.

GF: How do you explain the market crisis we had on August 5^th?

Bullard: I would say that the dramatic sell off in US equities and global equities was partly due to the jobs report in the US. But if you look at that report, it was weak, but it was not that weak. I think what really exacerbated the downturn was events in Japan over the weekend and into Monday morning.

I think the [Bank of Japan] is trying to pull back some on its policy. It’s a very dovish policy that’s been in place for many years and, you know, attitudes have changed in Japan some, where they now think that a too weak yen is maybe counterproductive.

And I think that upset some of the carry trade that has been based on the idea that Japan will never do this.  I think that’s what caused the big sell off, especially in Japan. I think the US jobs report was over interpreted, and then that was all exacerbated by the Bank of Japan.

GF: Why are financial markets so stressed?

Bullard: The geopolitical risk is very serious, and I do think we’re living with the [Gaza and Ukraine] wars going on, but they could easily metastasize into larger conflicts, either one of them, and markets do worry about that and that could be a big risk.

I think also maybe more pedestrian is just that the market is up a lot. The equity market is highly valued in the US and … I think that makes people nervous. They think that, you know, maybe those are overvalued, and the air will come out of that level. So, in that sense, they’re right to worry about that, and right to worry about these great companies, but do we really want to value them as how these were valued?

GF: Are you talking about a company like Nvidia?

Bullard: Nvidia, would be a classic, you know, classic one that went way, way up this year. You know, it’s a great company, and they’ve got a great product, and they’re selling a lot of it, but what’s the right valuation, I think, is the question.

GF: How do you see the global economic landscape beside the US?

Bullard: I would say the global landscape is less rosy than the US, because you’ve got China, which I think is struggling, at least by Chinese standards. China is struggling, not growing as fast as they used to. They’ve got clear fundamental problems in their real estate market, maybe elsewhere, and then Europe, which has not had as much growth as us, and has the war going on in Ukraine and has been more tied to, at least the leading economies have been, more tied directly to China. So China slowing down, it’s very clear more than the US. I would say that for global growth, it’s not as clear that we can get the kind of numbers that we’ve had in recent years. It’s a little bit slower there, and there’s more recession risk there than in the US economy.

GF: Do you expect trade tensions, and the decoupling between China and the US continuing?

Bullard: I think both parties in the US have decided that a more protectionist stance on global trade is something that they want to pursue. One of the hallmarks of the Biden administration was that it didn’t really reverse any of the policies of the Trump administration with respect to trade, and I would expect that to continue going forward.

[The attitude toward global trade] fundamentally, it’s more protectionist. It’s less globalist than it would have been even a few years ago, or certainly during the Reagan-Bush years. And I don’t see that turning around. I think we’re going to have more volatility from that dimension going forward, and I’m a little concerned that you could have markets anticipating a trade war even before one actually occurs because both parties, both political parties are talking about getting tougher on tariffs, maybe not only China, but everyone in the world. That would invite retaliation or threats of retaliation that could lead to a lot of volatility.