higher productivity is the element that underpins economic growth. to achieve higher productivity growth, it is essential to increase the public sector's savings rate, thereby allowing society to invest in production as opposed to primarily financing the public sector. aside from its effect on output growth, a permanent reduction in inflation inherently and unmistakably brings about a reduction in poverty, with the consequent social inclusion, in addition to sowing the seeds for reducing inequality. this government is committed to price stability, the inflation targeting framework, fiscal austerity, a realistic economic policy, and a quest for management excellence. my level of comfort has increased with every meeting in which i have participated, with every speech and the first decisions made by minister palocci, as well as by our friends at the other ministries and by the president of the republic. in regard to the autonomy of the central bank, i would like to emphasize that this is a proposal of the government, and not the central bank. this issue was not part of the discussions i had when i was invited by president lula and minister palocci to take this position. the central bank's autonomy as proposed by minister palocci aims at institutionalizing the central bank's role as a guardian of the currency and signals brazil's permanent commitment to price stability. the modern central banks in the world count on clear rules in regard to their roles, composition and renewal of the board of directors. in this context of the transition to a new central bank law, it was important to count on the contribution of the entire board of directors of the brazilian central bank, so as to avoid problems in the conduct of their actions. this is the case of the inflation targets that are defined by the government. this government is entirely committed to democracy, to the federal constitution, and to the codes of law. we will honor the laws of the nation and our international agreements. there will be no imprudent adventures. the social and political choices will be carried out within the federal budget, with a review in priorities and a quest for excellence in management of the resources. i am positive of this evaluation. as the head of a financial institution for 28 years, of which 12 were served as president in brazil, i have carefully followed the president's and his party's trajectory since 1989, when i first met with the president and his team. i had many chances to interact with the party, including in successful partnerships in the social area. this allowed for increasing

henrique de campos meirelles : inauguration speech inauguration speech delivered by mr henrique de campos meirelles, governor of the central bank of brazil, at the ministry of finance in brasilia on 7 january 2003. * * * i am honored to take up this position that requires permanent and rigorous defense of the currency. in these past elections, society expressed its legitimate wishes. we all want high economic growth, low inflation, a stable exchange rate, high levels of international reserves, a low external deficit, low interest rates, abundant credit, and a fair distribution of income. these are certainly goals of both the government and society at large. the ultimate target of any policy is economic growth and social welfare. among the several government entities and institutions that seek to fulfill society's wishes and achieve the government's targets, the task assigned to the central bank is to maintain a low level of inflation. the outgoing government chose price stability as a priority target, or at least that is what was perceived by society. there were several consequences of this choice, among which we highlight the extraordinary public attention drawn to central bank's role. we will work to keep price stability as a centerpiece of the brazilian economic landscape, and we will work with resoluteness and long term horizons. president luis inacio lula da silva's government has clearly stated its objectives of economic growth and social inclusion. many misunderstood this as a precipitously abandonment of monetary discipline and fiscal austerity. this analysis contains an important misperception. stability is not an end to itself. it is a necessary condition for growth and social justice. an environment of stable prices establishes a necessary condition for output growth by reducing uncertainties and distortions, lengthening decision - making horizons and allowing for an increase in investments and productivity gains. there is no dichotomy between price stability and economic growth, as stability paves the road for growth. price stability allows the country to plan government actions. moreover, it should be made clear that there is no such thing as a choice of higher sustainable growth with higher inflation. no country in the world has experienced prolonged periods of economic growth with high rates of inflation. nonetheless, examples abound of short periods of growth driven by mistaken policies, usually inflationary, which were followed by recession and stagnation that lasted for much longer periods. the central bank's goal is, therefore, to contribute to economic growth by maintaining price stability. in the long run,