MercoPress. South Atlantic News Agency

Brazilian Central banker resigns for alleged tax evasion.

Brazil's Central Bank powerful Monetary Policy Director quit his job this Wednesday following a report in a local magazine indicating he was being investigated, together with the bank's president for alleged tax evasion.

Isto E, a respected Sao Paulo weekly magazine reported that the Brazilian Internal Revenue Office was investigating Luiz Augusto Candiota and Central Bank president Henrique Meirelles for alleged tax irregularities.

Both denied the charges which they described as "inconsistent" but Mr. Candiota resigned and Mr. Meirelles said he would remain in his post because at the time of the alleged evasion he was living in the United States where he was president of Fleet Boston Financial Corporation.

However Mr. Meirelles situation remains in confusion since his 2002 financial statements to the Internal Revenue Office and the Electoral Board (he ran for the Lower House that year) do not coincide.

Last Monday a spokesperson from the Prosecutors Office confirmed that an administrative investigation into Mr. Meirelles assets in Brazil and overseas, and possible tax evasion, had been initiated.

Mr. Candiota exit is the first high official in the 19 months of President Lula da Silva administration that resigns in the midst of a scandal.

Nevertheless markets reacted naturally and interpreted Mr. Candiota's exit as a "positive signal of transparency" in the Central Bank's operations.

Mr. Candiota blamed the "press licentiousness" for his resignation but also admitted that if he remained, "it would be negative for the image of the Central Bank".

Mr. Meirelles underlined that Mr. Candiota's had not been forced to resign, on the contrary.