Ruy Baron/Reuters Lopes' replacement used to work for international financier George Soros

Francisco Lopes will be replaced by Arminio Fraga, who has a doctorate from Princeton University and was called "one of Brazil's best economists" in a news conference today by Finance Minister Pedro Malan.

The Finance Ministry said the government decided to overhaul the central bank to strengthen the institution following the recent shift in Brazil's foreign exchange policy.

Last month, the central bank formally adopted a policy allowing the local currency, the real, to float freely against the dollar.

Since restrictions were lifted on Brazil's foreign exchange trading, the real has depreciated 32 percent against the dollar. The real weakened further today on news of the change at the Central Bank but stabilized in later trading.

"The reorganization of the central bank board of directors represents no change in the free-float forex policy, nor in the general direction of the government's economic policy, which will be maintained with determination," the Finance Ministry said in a statement.

Malan said that both he and Lopes had offered to step down amid the economic turmoil facing the country, but that President Fernando Henrique Cardoso wouldn't accept the finance minister's resignation.

The ministry statement made it clear that Fraga, who worked for the Soros Foundation run by international financier George Soros, is no longer associated with Soros.

Malan said that Fraga's views don't necessarily correspond with those of Soros, who has been a sharp critic in recent days of Brazil's decision to maintain high interest rates.

Until Fraga is confirmed, Demosthenes Madureira de Pinho of the central bank will serve as interim president.

Currency dealers said today the market was relatively calm, awaiting further details of the changes, as well as developments on the talks between the International Monetary Fund and the economic team, led by Malan, in Brasilia.

Brazil, which has Latin America's largest economy, has been in talks with the IMF over the release of the second installment of a $41.5 billion international aid package.

In December, Brazil received $9 billion from the IMF and used it to bolster its sagging currency reserves, now at $36 billion — down from $74 billion last July. A second parcel might help restore the confidence of skittish investors.