Anyone who was wondering whether Guido Mantega was on the way out need only read Valor Econômico on Wednesday for an answer. The indomitable Brazilian finance minister was there on the front page of Brazil’s leading business daily in fine form, delivering another salvo in the currency war, this time owning up to Brazil’s “dirty float” (of which more in a moment).

Readers will recall that the latest rumours that Brazilian President Dilma Rousseff might be readying to dump Mantega, possibly in a cabinet reshuffle next year, surfaced in a blog in a Brasília newspaper this week.

The extent of the government’s wrath on seeing the re-emergence of such reports can be gauged by an angry complaint letter sent by the palace to the paper, which said the blog had already reported this “other times, always erroneously”.

“The publication of rumours, without taking the proper care to check them, benefits speculative interests,” the letter, seen by beyondbrics, said.

Who or what these speculative interests might be and why they would want to topple the finance minister is difficult to establish. Mantega is part of a government based on a ruling coalition of more than 10 parties. In the murky world of Brasília, such rumours could issue from a myriad of rivals within and outside of the coalition, or beyond, in the world of business.

But one thing seems certain, Rousseff is behind the minister. Reuters offered this evaluation of his performance:

Mantega has a mixed relationship with financial markets. He is often derided for making overly optimistic predictions about Brazil’s economy, especially as growth slowed to near zero over the past year. He has also earned the wrath of some investors for the government’s frequent, ad hoc interventions to aid local companies or weaken Brazil’s currency, the real.

On the other hand, the Italian-born Mantega also oversaw Brazil’s relatively smooth path through the global crisis, which culminated in 7.5 per cent growth in 2010 — the best performance in a quarter century. Despite the recent slowdown, unemployment remains near an all-time low at 5.3 per cent and polls show most Brazilians are happy with the state of the economy.

At any rate, it is impossible not to see a note of defiance in his appearance Wednesday on the cover of Valor Econômico.

For those unhappy with his hands-on approach to markets, he delivered a clear rebuke, saying the government was controlling the exchange rate and so be it. After approaching a strongpoint of R$1.50 against the dollar, this year the currency has been hovering at R$2.

Since everyone else in the world was manipulating their exchange rates, Brazil, which preferred a floating rate mechanism, would have to do so too and maintain what he called a “dirty float”. He was only stating what everyone already knew but to put it so bluntly was a hallmark of his helmsmanship of the ministry.

This old currency warrior has a bit of fight left in him yet.

Related reading:
Guido Mantega: history man?, beyondbrics
Guido Mantega’s positive picture, beyondbrics
Brazil’s finance chief attacks US over QE3, FT
Mantega says Brazil’s economy resilient, FT

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