Brazilian Supreme Court Justice Grants Central Bank 48 Hours to Justify R$200 Bill

RIO DE JANEIRO, BRAZIL – Federal Supreme Court (STF) Justice Cármen Lúcia has granted the Central Bank 48 hours to provide information supporting the release of the R$200 banknote (US$40), scheduled for the end of this month. The request is included in a ruling published on Monday, August 24th.

The Justice is the rapporteur of a Claim of Breach of Fundamental Precept, filed jointly by three left-wing opposition parties: PSB (Brazilian Socialist Party); Podemos (We Can – former National Labor Party); and Rede Sustentabilidade (Sustainability Network), claiming that the release of the R$200 banknote is unconstitutional.

According to the parties, the release of the banknote has a “serious motivational defect” and may facilitate “criminal activity”.

“The Central Bank has not submitted any study or structured document that would provide detailed information on the measure’s motives and implications,” the parties argue. “The only document provided to support the decision was a simple slideshow used before the press conference granted by the institution’s Administration Director.”

On July 29th, the Director, Carolina de Assis Barros, announced the release of the bill during a press conference. According to the Central Bank, the printing of the bill is justified by the greater demand by Brazilians for physical currency during the novel coronavirus pandemic. Furthermore, emergency aid payments have increased the circulation of money.

Data from the Central Bank show that, in fact, there was an increase in cash in circulation during the pandemic. In late February – before the crisis triggered by Covid-19 – the monetary base totaled R$303.197 billion. On August 14th, it stood at R$419.258 billion.

To address this increase in the monetary base and ensure Brazilians’ access to physical money, the Central Bank decided to print 450 million R$200 banknotes in 2020, for a total of R$90 billion.

However, the announcement was criticized by some sectors in Brasília. The perception is that a higher value bill will simplify corruption and money laundering.

“The Central Bank’s own graphic presentation points out that the European Union is doing the opposite, removing its highest denomination bill from circulation, – €500 euros – which has not been issued since April 27th, 2019,” argue the parties in the Claim of Breach of Fundamental Precept.

“The increase in the face value of paper money does indeed play a significant role in crime. One only has to consider that the transfer of cash outside the financial system and state controls will be facilitated,” added the parties in the claim.

For its part, the Central Bank has argued that printing a bill of higher value will not imply a slackening of the fight against money laundering.

In her order, Cármen demanded information from the Central Bank with “urgency and priority, to be provided within forty-eight hours”.

The Central Bank has not commented on the matter.

Source: Estadão Conteúdo