Brazil Central Bank Officials Fear for Autonomy Bill in Congress

(Bloomberg) -- Brazil’s central bankers are worried by mounting signs that a bill protecting their autonomy to set interest rates won’t pass through congress after a new lower house speaker is elected next month, according to three people familiar with the matter.

Prospects for the proposal, which economists say would eliminate the risk of political interference in the bank, don’t look great under neither of the two main candidates: Arthur Lira, backed by President Jair Bolsonaro, has said he is personally against giving more freedom to the central bank; Luiz Felipe Baleia Tenuto Rossi, backed by outgoing Speaker Rodrigo Maia, could put the bill on ice in exchange for votes from left-wing parties that oppose the plan, the people said.

The head of the lower house has great influence over the reform agenda by defining which bills go to a vote and when.

Brazil’s central bank has de-facto autonomy to carry out monetary policy in order to reach an inflation target agreed upon with the government. Yet the head of bank is appointed by the nation’s president with the status of a cabinet member -- and can be fired by him at any moment. The current proposal, which sets four-year terms for all board members and establishes strict rules for their removal, has been approved by the senate last year and is now awaiting a vote in the lower house.

It didn’t make it to a floor vote even with Maia’s backing. Prospects for any advancement seem poised to fade no matter who is elected in early February, the people said, requesting anonymity as the discussion isn’t public. The central bank declined to comment.

Read More: Brazil Senate Backs Central Bank Autonomy With Dual Mandate

Central bank chief Roberto Campos Neto hasn’t voiced support for any candidate and has vowed to discuss the proposal with whomever wins the election, but the concern is that the bill could get delayed by other discussions and eventually fall off the radar, the people added.

Not a Priority

Lira, the candidate backed by Bolsonaro, said in a Monday interview that he remains skeptical of the bill, but insisted he wouldn’t impose his opinion on lawmakers if elected. He had previously said that the proposal wasn’t a priority and the central bank shouldn’t have that much power.

Meanwhile, Rossi has forged an alliance of parties that oppose the Bolsonaro government with Maia’s help. One of them, the leftist Workers’ Party that’s the largest in the lower house, expects Rossi to block the central bank bill if elected.

“The central bank already has great political autonomy to decide, there is no interference from the government. Full autonomy would be madness,” Enio Verri, the Workers’ Party leader in the house, said in an interview. Asked whether Rossi has committed to block or slow the bill, Verri said the candidate has agreed to further discuss the matter.

Rossi didn’t reply to a request for comment.

Plinio Valerio, a centrist senator who is the author of the central bank autonomy bill, regretted that the outgoing speaker didn’t fulfill his promise to put the bill to a vote before the end of 2020.

“We’ll have a hard time getting this bill approved now,” he said.

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