BC independence is not complete without a free budget, say former directors

For José Júlio Senna, former director of Public Debt and Open Market at the BC (Central Bank), "you just had to negotiate your budget with the federal administration, independence is not complete."

The veteran economist is emphatic when asked about the impasse surrounding the PEC (Constitutional Amendment Proposal) which consolidates the autonomy of the autarchy, also promoting its financial independence from the Union Budget.

"Bargaining for resources for your institution is a very strong indication of a lack of independence", highlights Senna.

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Today, the BC's accounts are linked to those of the government, and depend on its management to release cash. "Major difficulties" regarding personnel and budget management are some of the setbacks generated by this relationship, according to Alexandre Schwartsman, former director for International Affairs at the Central Bank.

In this way, the "success in the future" of the autarchy depends on the institutionalization of its full autonomy, says Reinaldo Le Grazie, former director of Monetary Policy at the BC and partner at Panamby Capital.

Senna also reinforces that, to the extent that the BC has financial autonomy, it will be able to have much more freedom for necessary investments, for example, in maintaining Pix. For him, the "technology aspect is fundamental."

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"If the budget is tight, it's difficult to move forward", he points out.

Last Wednesday (20), the Senate's CCJ (Constitution and Justice Committee) postponed the vote on the PEC that consolidates the BC's financial autonomy. The delay comes amid a movement by the Ministry of Finance with the government leadership to prevent the proposal from moving forward at this time.

CNN Brasil found interlocutors who claim that the Palácio do Planalto prefers the discussion to be held after the elections, given the concern about the impact of the measure on the municipality's political and budgetary control.

To CNN Brasil, the Minister of Finance, Dario Durigan, stated that, despite identifying problems in the PEC that consolidates the BC's autonomy, he sees a way to expand the autarchy's financial independence.

"I have been dealing with this topic and I believe it is possible to discuss ways to strengthen the BC and avoid situations like those that occurred in the previous administration, such as the case involving Banco Master", said the minister in an exclusive interview on Thursday (21).

Galípolo: I worry about the Central Bank being suffocated by not getting into the political game

PEC 65/2023 transforms the BC into an institution of a special nature, with technical, operational, administrative, financial and budgetary autonomy. In practice, the BC would no longer be an agency linked to the federal public administration and would begin to operate without subordination to ministries.

The text foresees a significant expansion of the already existing independence of the monetary authority. Currently, the agency has operational autonomy, with fixed terms of office for the president and directors.

The new proposal guarantees greater administrative freedom, its own budget and less dependence on the National Treasury for expenses, structure and personnel.

Within the government, there is fear that the measure will set a precedent for other authorities, such as Cade (Administrative Council for Economic Defense) and the CVM (Securities Commission), to also start claiming similar financial autonomy.

Galípolo in the Senate
On Tuesday (19), Galípolo was heard by the CAE (Economic Affairs Committee) of the Senate and appealed "for the love of God" that the house approve the BC's financial autonomy.

In a session marked by a debate with the president of the commission, senator Renan Calheiros (MDB-AL), in relation to the sale of Banco Master to BRB (Banco Regional de Brasília), the president of the BC told the senators that there is a concern that the monetary authority could be "asphyxiated" if it does not "enter the political game", depending on the text that is approved of the PEC.

"The BC will not put its mandate at stake. It will not negotiate its mandate at all.

My fear is that the fact that the BC does not negotiate its mandate will result in the BC being stifled by not entering the political game or perhaps being presided over by someone who is willing to [enter the political game]. Either situation is very serious," said Galípolo.

With information from Larissa Rodrigues, from CNN Brasil

See the 5 signs that Brazil's public accounts are at risk

Source: CNN