Brasilia - At a time when the Central Bank (BC) has been the subject of several projects in the National Congress, such as the PEC of financial autonomy and the Bill (PL) of banking resolution, the new leader of the Workers' Party (PT) in the Chamber, federal deputy Pedro Uczai (SC), has just submitted a proposal that alters the autonomy model of the monetary authority currently in force.
At the heart of the matter is the idea of re-linking the agency to the Ministry of Finance, as in the past, and also increasing the quarantine period for former presidents and directors of the Central Bank to two years.
Within a few days, the bill, filed on March 17, has already been criticized by former directors and even employees of the Central Bank interviewed by NeoFeed , who are concerned about possible political interference in the recent autonomy of the institution, which has only existed for five years in Brazil. The first president of an autonomous Central Bank in the country was Roberto Campos Neto, established by Complementary Law 179 of 2021.
According to the bill proposed by the current leader of the Workers' Party (PT) caucus in the Chamber of Deputies, if approved, the term of the president of the Central Bank would begin on March 1st of the first year of the elected president's term. Currently, the term begins in the third year of an elected government, decoupled from the presidential term, with the intention of shielding the institution from political pressure.
During the new two-year quarantine period (the period in which former public officials must cease working in the private sector), former presidents and directors of the Central Bank will not be able to work for or hold controlling shares in financial sector institutions or in companies that have provided services to them in the previous two years.
This prohibition would also apply to former employees in the areas of financial supervision, prudential regulation, monetary policy, or "other strategic positions" at the Central Bank. Currently, the legislation imposes a quarantine period of only 6 months for presidents and directors at the end of their term, if they are dismissed or resign.
Furthermore, the proposed law also prevents presidents, directors, and those holding strategic positions within the monetary authority from participating in any "deliberation or decision-making process involving an institution authorized, regulated, or supervised by the Central Bank of Brazil with which they have maintained a professional relationship in the two years prior to their appointment."
Finally, the proposal also states that the Central Bank "aims to ensure price stability, maintain full employment and smooth out fluctuations in the level of economic activity, and to safeguard the stability and efficiency of the financial system."
Speaking to NeoFeed , Uczai defended his bill, arguing that a government's economic and fiscal policies need to be in sync with the monetary policy adopted by the Central Bank every four years. He also stated that his bill prevents potential unwanted interference from the market or the private sector in the financial system's regulatory body.
“The current autonomy decouples the mandate of the Central Bank president from elected governments, but we want relative autonomy from now on and to return somewhat to what it was like before autonomy,” says the congressman. “The financial system must be solid, profitable yes, but the Central Bank cannot be tied to or subordinated to a single economic logic, which is speculative.”
The author further argues that the bill actually represents a "partisan vision" of the PT and has the support of party leaders, such as the Minister of the Civil House, Gleisi Hoffmann, the congressman and former PT leader in the Chamber, Lindbergh Farias (RJ), and even Fernando Haddad , who left the Ministry of Finance 10 days ago.
According to him, Haddad, who will be a candidate for governor of São Paulo in this year's elections, received the idea positively and also "agrees that economic policy is moving in different directions from the Central Bank." He added that he is open to a "serious conversation" with the president of the Central Bank, Gabriel Galípolo , to explain his project. "They [the Central Bank] are mistaken [regarding autonomy]," he warned.
Finally, Uczai also criticized the current level of the Selic rate, at 14.75% per year, and believes that the current model of autonomy makes it difficult for the Central Bank to lower the basic interest rate to more acceptable levels. According to him, the autonomous Central Bank, in its current form, without stricter rules for the term of office of directors and presidents, also led to the Banco Master scandal, the target of a Federal Police operation that revealed a fraud scheme exceeding R$ 12 billion.
“Neither Congress, nor the Public Prosecutor's Office, the government, the Federal Audit Court, or the Central Bank controlled this bank. The Master Bank case is the biggest denunciation of how this absolute autonomy of the Central Bank generates inequality, imbalance in the financial system, and even corruption, as in the case of the Central Bank employees,” warned the congressman. “My bill is also to prevent fraud.”
When contacted, the Central Bank declined to comment on the PT leader's proposal.
Negative reaction
In just 13 days, however, the project is already facing resistance. The general argument is that the proposal undermines the autonomy of the Central Bank, a hard-won achievement that has positioned Brazil among the majority of countries in the world, despite the significant delay in this progress.
Former Central Bank director Luiz Fernando Figueiredo , a partner at Jubarte Capital , referred to the PT leader's project as a "huge setback." He also pointed out that Brazil was one of the last countries to have an autonomous Central Bank.
“There is no civilized country where the Central Bank is not autonomous or independent. The Central Bank is a state institution, meaning it cannot and should not be associated with any specific government, because it serves the interest of society in maintaining the purchasing power of the population, which is independent of the government,” Figueiredo told NeoFeed .
According to him, keeping inflation low is not a prerogative of a government. "Every time something comes along in that direction [of the PL], it's madness," says Figueiredo.
Figueiredo, who served in Armínio Fraga 's administration during the government of former president Fernando Henrique Cardoso, also questions the PL's intention to re-link the Central Bank to the Treasury. According to him, before the Central Bank became autonomous in Brazil, there was informal autonomy, but it lacked legal power and was not a good thing.
“It’s a huge mistake to go back, really. What happened in our time is that there was already an informal and tacit agreement that the Central Bank would be independent, and in practice this link wouldn’t exist. But when that link ended, it was a very important step.”
Another former director of the monetary authority, who preferred to speak on condition of anonymity, believes that aligning the mandate of the president and board of directors of the Central Bank with that of the President of the Republic and subordinating the body to the Ministry of Finance are measures that will lead to less independence for the Central Bank and greater government control over the institution. "And the two-year quarantine period will make it impossible for well-prepared people from the private sector to join the Central Bank," he states.
According to Thiago Cavalcanti, president of the National Association of Auditors of the Central Bank of Brazil (ANBCB), this discussion is politically polarizing a debate that should be technical.
"There are studies that demonstrate that autonomous central banks reduce inequality, decrease unemployment, improve the economy's capacity, and are able to deliver lower interest rates," says Cavalcanti.
"Imagine every government trying to influence interest rates and other aspects of monetary policy? The government continues to influence policy, including setting the inflation target, but the Central Bank should pursue that target autonomously and independently using the instruments it has," he adds.
Lula vs. Autonomy
Since assuming his third term as president, Luiz Inácio Lula da Silva (PT) has been involved in fierce clashes with the then-president of the Central Bank, Campos Neto, who had actually been appointed by the previous government of former president Jair Bolsonaro (PL).
In leveling several criticisms at the former head of the institution regarding the Selic rate hike at the time, Lula even signaled that the government intended to dismiss the president of the Central Bank. The law that granted autonomy to the Central Bank (Complementary Law 179 of 2021) allows such a move, provided that the National Monetary Council (CMN) submits a request for dismissal to the President of the Republic and the Senate subsequently approves it.
At the time, Lula's repeated attacks on Campos Neto also sounded like a possible intention by the government to change the law on the autonomy of the Central Bank, which ultimately did not succeed. The president of the Central Bank ended up fulfilling his term until December 31, 2024, without seeking reappointment, as the law stipulates, due to political pressure.
