Independent Central Bank?

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The independence of the Central Bank is nothing more than one more measure that aims to guarantee the privileges of the financial system in relation to democracy

The autonomy or “independence” of the Central Bank is a project of the Brazilian financial elites that, with some mishaps, has been built since 1964. democratic control over monetary policy in the country.

One of the main reforms implemented by the PAEG (Government Economic Action Plan) by Roberto Campos and Octávio Gouvêa de Bulhões, in 1964, at the beginning of the military dictatorship, was the creation, by Law No. Central Bank of Brazil as an organ for the defense of the national currency, together with Banco do Brasil, also endowed with some functions of economic promotion and with an “independent” board, with a fixed mandate, not coinciding with the presidential mandate. This first attempt to establish an “independent” central bank, however, already failed in the government following that of Marechal Castelo Branco (4.595-31), that of Marechal Costa e Silva (1964-1964). During the military period, the Monetary Budget consisted of the piece in which the quantitative targets of the two monetary authorities, the Central Bank and the Bank of Brazil, were set. do Brasil, created in March 1967.

This financial structure lasted until the world economic crisis of the 1970s, when the standard of functioning of the world economic system changed. From the crisis of the 1970s onwards, a series of reforms were structured to change the financing pattern of the Brazilian State, in a context of seeking greater control and balance of public spending. At the end of the dictatorship, there was even a frustrated attempt to make the Central Bank the only monetary authority, without the functions of promoting development that it had then, focusing the bank's performance on combating inflation.

With redemocratization, the process of financial restructuring accelerated, motivated by the deep economic crisis inherited by the New Republic. In 1986, the National Treasury Secretariat was created, which began to manage the funds and development programs until then managed by the Central Bank. In 1986, the Banco do Brasil movement account ended its activities, and, with the “Bresser Plan”, of 1987, with Decrees nº 94.443 and 94.444, both of June 12, 1987, and Decree-Law nº 2.376, of November 25, 1987, public debt management leaves the sphere of competence of the Central Bank, passing to the Ministry of Finance. In addition, the Central Bank also ceases to be a financier of the National Treasury and its promotion functions are extinguished, measures that would later be consolidated in article 164 of the 1988 Constitution[1]. The financial relations between the Federal Government and the Central Bank of Brazil, as well as the regulation of the portfolio of securities held by the Central Bank for conducting monetary policy, were regulated by Laws No. 11.803, of November 05, 2008, and No. 13.820, of May 03, 2019, with attribution of broad autonomy to the Central Bank.

Still under the 1988 Constitution, the centralization of the monetary authority in the Central Bank was effectively guaranteed after the policy of encouraging the privatization of state banks that took place during the 1990s. that the recomposition of public intervention capacity was exhausted in the attempt to control public spending.

The function of President of the Central Bank of Brazil was even made equivalent to that of Minister of State from the Lula Government, with the edition of Provisional Measure No. 207, of August 13, 2004, converted into Law No. December 11.036. This generated a veritable institutional “jabuticaba”: a president of a federal autarchy linked to the Ministry of Finance (Article 22 of Law No. who is supposedly his hierarchical superior in Public Administration, the Minister of Finance.

To complete the administrative confusion, the so-called autonomy of the Central Bank was approved, a measure proposed, until then without success, since the Fernando Henrique Cardoso government. Under the new legislation, the president and directors of the Central Bank now have fixed mandates that do not coincide with the mandate of the President of the Republic, who loses the power to appoint and dismiss the occupants of these functions whenever he sees fit.

It is not the purpose of this article to make legal and political criticisms of the new legislation, which creates a “Frankenstein” entity in the Brazilian administrative structure: an autarchy not subordinated to the President or any Minister, a body that hovers in the air, without ties, without controls. . The intention is to draw attention to the fact that the approval of this expansion of the Central Bank's autonomy is the end of a cycle, which began in 1964, of emptying the power of the Presidency of the Republic over monetary policy and removing any and all democratic control over the action of the monetary authority. Or would anyone have the illusion that the sabbath held at the Federal Senate with the nominees to occupy posts on the board of the Central Bank would be something more than a mere game of scene?

Perhaps they understand that the Senate's sabbath is a political and democratic control over the Central Bank, the same ones who think that the performance of the "independent" Central Bank will have greater concerns with the growth of the economy because it was introduced in the complementary law, among its objectives, the promotion of full employment. It is enough to recall that the 1988 Constitution has among its foundations the social value of work (Article 1, IV), provides that the appreciation of work is also the foundation of the constitutional economic order (Article 170, caput) and has the pursuit of full employment as a principle of that same economic order (article 170, VIII). None of these constitutional devices, that is, hierarchically superior to any other law, managed to prevent the adoption of the recessive policies of recent years, much less the implementation of a labor reform contrary to the provisions of the Constitution (articles 7 and 8, especially) and which destroyed the organization of work and removed basic rights from workers with the massive support of the National Congress and the approval and complicity of the Federal Supreme Court. But, who knows, the good intentions of the future “technical” directors of the “independent” Central Bank will not change this situation…

The question that must be asked is: Central Bank independent of whom? Apparently, independent of the political system and any and all democratic control. The so-called independence of the Central Bank is nothing more than another measure aimed at guaranteeing the privileges of the financial system in relation to democracy. Regardless of who the polls elect, monetary policy will always privilege private interests to the detriment of any development and income distribution policy. These privileges granted to the financial sector are therefore absolutely unjustifiable. Incidentally, liberalism itself does not admit them. On the eve of the French Revolution, in his text Essay on Privileges ( "Essai sur les Privileges”), published in November 1788, Sieyès states that the inequality belonging to privileges is the result of an arbitrary sphere that must be eliminated by the rights of man. The modern nation is an economic institution, founded on the hierarchy of market values, and the political sphere must privilege the economic-productive dimension. Freedom is the possibility for each one to pursue and satisfy his own vital interests, through the division of labor, exchange and reciprocal dependence of men.[2]. That is, not even the great liberal thinkers defend the privileges that classes or social groups, such as the rentiers, are assured in countries like Brazil.

Finally, by way of conclusion, is there any possibility of reversing this situation? Yes, the articulation of an alternative political project that seeks to resume national development and reconstruction is essential so that, if victorious at the polls, the representative of that project can end this cycle of guaranteeing the privileges of the financial system. Legally, the solution is very simple. Nothing that a provisional measure revoking these measures cannot solve. The problem, however, is not legal, it is political and social. For this to happen, a President of the Republic with enough courage and political and popular support is needed to rebuild Brazil.

*Gilberto Bercovici Professor of Economic Law and Political Economy at the Faculty of Law of USP. Author, among other books, of Applied economic law: studies and opinions.

Originally published on the website The Brazilian Industrial Revolution.


[1] Article 164 of the 1988 Constitution:“The competence of the Union to issue currency will be exercised exclusively by the central bank. Paragraph 1 – The central bank is prohibited from granting, directly or indirectly, loans to the National Treasury and to any body or entity that is not a financial institution. Paragraph 2 – The central bank may buy and sell securities issued by the National Treasury, with the aim of regulating the money supply or the interest rate. §3 – The Union's available cash will be deposited at the central bank; those of the States, the Federal District, the Municipalities and the bodies or entities of the Public Power and the companies controlled by it, in official financial institutions, except for the cases provided for by law”.

[2] Emmanuel-Joseph SIEYÈS, Essai sur les Privileges. In: Emmanuel-Joseph SIEYÈS, Écrits Politiques, Bruxelles, Editions des Archives Contemporaines, 1994, pp. 93-111.



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