Brazil’s Central Bank now an autonomous institution

During a ceremony at the Planalto presidential palace, President Jair Bolsonaro sanctioned the law establishing the autonomy of the country’s Central Bank and introducing four-year tenures for its president and directors. These mandates will follow cycles non-coincidental with the term of office of Brazil’s president.

“Empirical evidence shows that countries that have a more autonomous Central Bank have lower inflation—not just lower inflation, but also a lower inflation variable; inflation fluctuates less,” said Central Bank President Roberto Campos Neto in a statement at the sanction ceremony Wednesday (Deb. 24).

President Jair Bolsonaro and Central Bank President Roberto Campos Neto - Fabio Rodrigues Pozzebom/Agência Brasil

Under the new law, the president will appoint names as directors. These, if approved by the Senate, are to take office on the first business day of the third year of the country’s president’s term of office. In practice, this format may make the president have to work together with the Central Bank leaders appointed in previous administrations during three years of their government.

“Giving up power is a sign of greatness and democracy, the way I see it,” Bolsonaro said after signing the new piece of legislation.

The new law classifies the Central Bank as an autonomous government agency of a special nature, characterized by the “absence of a link to a ministry and of tutorship or hierarchical subordination.” Until then, the Central Bank had been associated with the Ministry of the Economy.