Summary: It remains to be seen whether the Fed Governor is the nation’s superego.
On the agenda is the issue of “Central Bank Independence or Autonomy”. The new government has sharply criticized the BC’s performance. After all, the interest rate in Brazil is twice the rate of inflation, exceeding what happens with other interest rates in the world (see US and European Union).
What can the law say beyond economics? Gilberto Bercovici was the one who best covered the subject in the About the Independent Central Bank article [1]. The article must be read. By lawyers, economists, journalists and journalists.
Bercovici reconstructs the institutional history of the phenomenon. It shows the factor of “privatization of state banks” that appeared in the 1990s as an initial element of the centralization of monetary authority in the central bank. He also says that the problem with this monetary policy restructuring process was the fact that the recomposition of the public intervention capacity in an attempt to control public spending was exhausted. He also talks about the oddity of equating the role of Governor of the Central Bank of Brazil with that of Minister of State in 2004. This led to some institutional confusion: a president of a federal selfsufficiency linked to the Treasury (Article 8 of Law 4.595/1964) is equated with a Minister of Statei.e. with the same functional privileges as the one who is supposed to be his hierarchical superior in public administration, the finance minister.
But something more complex came along: the socalled autonomy of the central bank (Supplementary Law 179 of February 24, 2021). Under the new legislation, the president and directors of the Central Bank now have fixed mandates that are not consistent with the mandate of the President of the Republic, who loses the power to appoint and dismiss the holders of these functions whenever he sees fit.
Bercovici calls this entity a “Frankenstein” in the Brazilian administrative structure: a selfsufficiency that does not report to the President or any minister, an authority that hovers in the air, without ties, without control.
That’s the catch.
The Supreme Court had a chance to put an end to this Frankenstein. However, in the direct action of unconstitutionality ADI 6696 ruled for constitutionality.
A short time passes and new facts emerge. Stratospheric interest rate that puts the newly elected President and the Central Bank Governor at opposite poles.
The question is: what would be the constitutional instrument that would support the law granting autonomy to the central bank? To the argument that he must be autonomous to stabilize the economy, it is worth asking: Does the BC President have more capacity at the stroke of a monetary pen than the entire economic team of a President of the Republic? The constitution determines who should take care of the economy. And that includes stability and social responsibility towards the population.
If we examine the constitutional text, we find that this is the case Standards for conducting public policies that must aim to eradicate poverty and establish social justice (e.g. Article 3). This is without regard to the core of what we call the “economic constitution”.
We seem to have forgotten that our constitution has a clear leadership profile. The CF88 is binding and leading, the daughter of the leading constitutions of the second postwar period, especially when we think of peripheral countries like Brazil.
I remember in the 1990s coining the thesis of a CDAPP Appropriate Leading Constitution for Peripheral Countries, following the already criticized Leading Constitution of the constitutionalist JJ Gomes Canotilho.
I then said, accompanied by Gilberto Bercovici, Martonio Barreto Lima and Marcelo Cattoni, that our Constitution, together with Canotilho’s own criticism of the original dirigisme remained leader [2]. Moreover, the thesis of constitutional dirigisme remains valid for my part until we resolve the dialectical triangle propounded by Canotilho himself, inspired by Johan Galtung (lack of security, poverty and lack of political equality). The constitution still applies. And it says nothing about an independent or autonomous central bank. The Banco Central appears eight times in the constitutional text. Not once is its autonomy or independence hinted at beyond the powers of the President of the Republic suffice it to say that the regime remains presidential.
It is about analyzing the role of the state in the economy. And the government. Until we solve these problems (Poverty, security and political equality), we still need strong government action to achieve these constitutional goals. That is, here in Brazil, the landmark constitution has not died. And that’s why we need a constitution that tells us what to do. What rescue obligations. That saves the modern promises unfulfilled to this day. And ours clearly says how to do it. If we want to or not. The Constitution is a fact. Or does it only apply when it comes to immunities and exceptions?
It does not seem constitutional for an organism like the Autonomous Central Bank, whose president sets the guidelines for economic development without popular mandate, without legitimacy. Because deep down, that’s what’s happening. The central bank commands more than the president.
Brazil is a representative republic. Presidential. The President is elected to formulate public policy. They must be compatible and obey the constitution. Now, if the central bank governor decides to triple the interest rate relative to the rate of inflation (it’s already doubled) and this creates more poverty, that means the action of the central bank governor is unconstitutional because the constitution says the opposite. Worse still, blame and responsibility are placed on whoever is elected President. from the republic. And not the central bank. I know it seems like a platitude to say that. But here it is necessary to state the obvious which is hidden in the anonymity.
One has the impression that we are in the world of seizures. There is an almost fratricidal argument in the elections. There was almost a coup. The President is elected. And when he wants to impose his governing platform willynilly, the central bank governor acts as the nation’s superego.
It remains to be seen whether the central bank can become this superego, a kind of talking cricket of the politicaleconomic system.
In conclusion, I would like to come back to Bercovici to say that, beyond the whole constitutional issue, the issue of central bank “independence” is less legal and essentially political. The question that needs to be asked is: central bank independent of whom?
Apparently, the BC is independent of the political system and any democratic control which brings us back to the constitutional question.
After all, someone will say that this question has already been decided by the STF. I answer and say: But the STF did not say that the previous model was unconstitutional. Consequently, in the worst case, the constitution would allow for more than one possible configuration. Also, just because the Supreme Court says last doesn’t mean it’s always right. And decisions are not eternal.
That is, the President of the Republic, as well as the Congress, can understand that this model of “independence” from the central bank has created a problem from a political and economic point of view.
Or, ironically, would the ability to review decisions that structurally affect people’s lives be unconstitutional?
Therefore, in view of the problem that has arisen, it is necessary to change the model of the central bank. Because changing the model is not unconstitutional. On the other hand, would conform to the constitutional model Compromiser and leader inscribed in the Constitution of Brazil.
[1] In the Financial and Economic Law Forum magazine. Year 11 No. 21 | March/Aug. 2022
[2] I recommend reading this article dealing with the Inverted Ruling Constitution, in which I quote the three authors: https://www.conjur.com.br/2016out27/sensoincumomrumonorundi bordocdi constituicao rulervice versa
Lenio Luiz Streck is a lawyer, professor, doctor of law, author of Legal Hermeneutics E(m) Crisis and Truth and Consensus.