Henrique Meirelles: The Inflation Tamer.(The Last Word)(Interview)

Byline: Mac Margolis

Everything changed when the Brazilian economy became stable. Now people say, 'What can we learn from Brazil?'

Running Brazil's Central Bank used to be about spinning explanations for one of history's worst cases of hyperinflation and some of the highest interest rates. That was then. Today, Latin America's largest economy has the lowest inflation of any emerging market, and it is one of the only countries worldwide where price rises haven't surpassed official targets. The credit belongs largely to Henrique Meirelles, a lonely hawk in the dovish world of money minders. The former BankBoston executive talked with NEWSWEEK'S Mac Margolis. Excerpts:

MARGOLIS: Brazil recently was promoted to investment grade by two major ratings agencies. What did the trick?

MEIRELLES: The country has reduced sovereign debt in terms of its share of gross domestic product, and the Central Bank has built up $200 billion in international reserves. Brazil is also showing it can grow, but with stable inflation.

Brazilian inflation is substantially lower than in other emerging markets. Why is that?

From the beginning we adopted a very severe disinflation program, so inflationary expectations were under control before the recent cycle of commodity price increases got underway. Since the first quarter [of 2008], the Brazilian Central Bank also made it clear that it wouldn't hesitate to tighten monetary policy if necessary.