BRASILIA: The Brazilian central bank backtracked on Tuesday and decided not pursue a lawsuit against a market economist who said the bank was "incompetent" and "subservient" to President Dilma Rousseff.
The bank said it will not appeal the ruling by a local court that threw out a lawsuit filed May 16 against Alexandre Schwartsman, a former central bank director and partner at consulting firm Schwartsman & Associados.
In comments published on Monday by newspaper Valor Economico, the central bank's attorney general, Isaac Sidney Menezes Ferreira, had said he would appeal the ruling because Schwartsman's comments had the intent of "tarnishing" the image and honor of the bank.
The case is the latest public clash between the Rousseff administration and market economists who are critical of what they consider interventionist policies that have pushed the economy into recession.
In July, the Brazilian unit of Spain's Santander SA was publicly criticized by officials from the ruling Workers' Party and Rousseff herself after it emerged that the bank had sent around a client note suggesting that a rally in local asset prices would fizzle if the president recovered in opinion polls. Santander fired at least one analyst over the incident.
The top economic advisers of opposition candidates Marina Silva and Aecio Neves signed a public petition by 59 economists that called the suit an "act of repression that undermines democracy and its institutions." Both opposition candidates, who will face off against Rousseff in her re-election bid in October, support full independence of the central bank, which under Brazilian law enjoys only operational autonomy but is under the Finance Ministry's jurisdiction.
Former Deputy Finance Minister Nelson Barbosa, who is under consideration by the Rousseff administration to be economy chief for a second term, also signed the petition.
"Never before did the central bank try to sue an economist for his opinions.
The central bank has to respect all opinions," Carlos Thadeu de Freitas, a former central bank director between 1986 and 1990, told Reuters.
"This was a mistake." A very outspoken critic of the central bank, Schwartsman said in an April interview published in a local paper that the central bank was "reckless" in its handling of monetary policy. In a Facebook post on Tuesday, Schwartsman thanked other economists for rejecting the bank's suit.
"The central bank dropped its appeal to a decision by the judicial system that guarantees our right to free speech," he wrote.
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