Complementary Law sanction on Central Bank autonomy is expected today

The prediction that the presidential sanction of PLP No. 19/2019 on today’s date, 23/02/2021, was announced on social networks. The wording, originating in the Federal Senate, was approved by the Chamber of Deputies in the first half of February by 339 votes to 114, all the highlights being rejected. It intends to grant formal autonomy to the Central Bank of Brazil (BCB) in the exercise of its activities through the creation of fixed mandates. Indeed, it is expected that the changes will translate into the guarantee of monetary stability, increased confidence and improvement of the business environment with a reduction in legal uncertainty.

The Complementary Law Project, in summary, deals with the legal nature, objectives and competences of the institution; monetary policy; accountability; composition, form of nomination, approval, appointment, renewal, resignation and duration of the mandates of the members of the collegiate board, together with prohibitions, in the form of professional restrictions, to the subjects who occupy such positions. In addition, the text referred to the presidential sanction contains the revocation of rules that restricted or linked the BCB’s activities.

The BCB, according to the approved wording of the PLP, is characterized by being an autarchy of a special nature, without ties, tutelage or hierarchical subordination to any Ministry, providing technical, operational, administrative and financial autonomy. The institution will be in charge of conducting monetary policy, as well as regulating operations carried out as instruments of exchange and monetary policy, in addition to those of rediscount and loan with public and private financial institutions.

The BCB’s fundamental objective is to ensure price stability, however, the purposes of ensuring the stability and efficiency of the financial system, smoothing fluctuations in the level of economic activity, and promoting full employment have also been indicated. To this end, an accountability mechanism was organized, consistent with the presentation to the Federal Senate in the first and second semesters of each year of inflation and financial stability reports.

As for the reflexes of formal autonomy in the structuring of the Collegiate Board of Directors, it is emphasized that the hypotheses of dismissal are limited to the request made by the office holder; disabling illness; final and unappealable decision regarding the conviction for the practice of administrative improbity or crime that prevents access to public office. The last possibility concerns insufficient performance, however, in this case, the exoneration proposal must be made by the National Monetary Council and previously approved, by an absolute majority, of the Federal Senate.

The terms of office of the President and of the directors of the BCB will have a duration of four years, however the initial term is disconnected from the period of the President of the Republic. In the case of directors, the presidential term begins each year for two different directors, while that of the BCB President begins in the third year of the President of the Republic. As a form of transition, the appointment of the Collegiate Board of Directors was established, 90 days after the publication of the complementary law, dispensing new approval by the Federal Senate to the nominees who are already in office, so that the scale of the mandates fit the new legal provision.

Wilson Sales Belchior