BdP. Álvaro is the next governor

After considerable suspense, the name of the next governor of the Bank of Portugal has been announced. Álvaro Santos Pereira will replace Mário Centeno, whose term ended last Friday. Despite his willingness to be reappointed, Centeno was never on Luís Montenegro's list to continue leading the regulatory body. Centeno's tenure as governor was the shortest in the last 30 years. "This is our choice, our proposal for the country," stated Minister of the Presidency António Leitão Amaro, hinting at Álvaro Santos Pereira's independence. "He comes neither from within the bank nor from the government; he is independent. He is, with great merit, both personally and through his talent, a highly recognized economist," he said.

The minister also justified the choice as being "new blood", also drawing attention to the fact that he has a "deep knowledge of the national and international economy" and an "internationally renowned voice".

An argument echoed by economist João César das Neves. "He's a good economist, with academic, government, and international experience," he told Nascer do SOL . And while he acknowledges that he has no experience in monetary policy or the banking system, he admits that "he's a prudent and sensible man and certainly has the skills to be a good governor."

For economist António Mendonça, Santos Pereira, "is someone with an academic background and political experience," and he confessed to our newspaper that he hopes he does his job "because times are going to be tough." And he doesn't hesitate: "The current situation is particularly difficult, in which everyone will certainly be put to the test. Everyone, not just in Portugal, but in Europe as a whole and beyond, but I believe he has all the capabilities to hold the position."

But this choice is far from generating consensus. Sources interviewed by Nascer do SOL state that "he is the least qualified person" to take on this role, considering the names on the table, namely Vítor Gaspar and Ricardo Reis.

Who is Santos Pereira

The former chief economist of the Organization for Economic Cooperation and Development (OECD) served as Minister of Economy in the Passos Coelho government between 2011 and 2013, now returning to Portugal to lead the central bank for a five-year term. Before being approved by the Council of Ministers, the new governor will have to be heard by the Budget, Finance, and Public Administration Committee. While Parliament's opinion is not binding, it is mandatory, which could delay the process, as parliamentary proceedings are suspended during the holiday period.

Committee meetings are only scheduled to begin in early September, which could mean the current governor will still be able to participate in the next European Central Bank meeting on the 10th and 11th of that month. "Until then, Professor Mário Centeno will be performing his normal duties representing the Bank of Portugal, carrying out his duties, and the Bank of Portugal will naturally be in a state of institutional tranquility," said Leitão Amaro.

Previously, Santos Pereira taught at Simon Fraser University (Canada), the University of British Columbia (Canada), and York University (UK). He holds a PhD in Economics from Simon Fraser University, Burnaby (Canada), a Master's degree in Economics from the University of Exeter (UK), and a Bachelor's degree in Economics from the University of Coimbra.

His brief time in government was marked by several informal moments, such as asking to be called Álvaro, noting that in Anglo-Saxon, everyone is on a first-name basis. He became known for his challenge to internationalize pastel de nata (custard tart) to increase exports. At the time, he argued that sales could reach the same level as hamburgers. Also controversial was the presentation of a measure in Parliament to eliminate cars and drivers in public bodies and companies.

From the outset, he was considered the weakest link and susceptible to change, but he achieved a major victory by signing a social concertation agreement with the UGT (Workers' Union) and the employers. Santos Pereira was eventually replaced by António Pires de Lima, in an effort by Passos Coelho to maintain government stability.

Countless challenges

Álvaro Santos Pereira does not have an easy task, as economists interviewed by our newspaper have already admitted when they consider that "the challenges are countless in an international panorama marked by high uncertainty, dictated by global geopolitical tensions."

According to Paulo Rosa, senior economist at Banco Carregosa, the Bank of Portugal "should further strengthen the banking sector's resilience to external shocks, whether geopolitical, energy-related, or technological. At the same time, it will be crucial to adapt banking supervision to digital transformation and the growing importance of fintechs and cryptoassets in everyday life, ensuring that financial innovation does not compromise the security and stability of the system. Furthermore, it will be essential to strengthen the credibility and independence of the Bank of Portugal, ensuring effective communication and defending national interests within the context of the European banking and monetary union."

And he acknowledges that central banks will tend to assume an even more central role in managing systemic risks, given an unstable economic climate marked by two wars, and in preserving financial stability. "Although their primary mission—price stability—will remain, they may be forced to 'change course' in certain areas, adopting more flexible policies that reconcile fighting inflation with supporting economic growth and strengthening the resilience of the financial system," he says, admitting that regulatory bodies will need to strengthen coordination with governments to deal with external shocks—energy, technological, and military—to ensure that monetary policy does not conflict with the needs of economic and social security.

XTB analyst Henrique Tomé states that the role of the governor of the Bank of Portugal has been losing relevance "partly due to failures and a lack of transparency towards the public," adding that "their powers in monetary policy are quite limited, since the main decisions are made by the European Central Bank." However, he warns: "With the economy showing signs of acceleration, inflation declining, and interest rates falling, the challenges awaiting the next governor appear, at first glance, to be less demanding than those of his predecessors." He argues that the next governor should be "a person who is completely transparent and capable of communicating," adding that "it is essential that they can clearly explain forecasts regarding interest rates, inflation, wage trends, and changes in purchasing power – crucial factors for citizens to make informed economic decisions."