Brazil’s Supreme Court expected to confirm law establishing Central Bank’s autonomy

RIO DE JANEIRO, BRAZIL – The Federal Supreme Court (STF) should confirm the law passed by Congress establishing the Central Bank’s autonomy, contested in a lawsuit brought by opposition parties and recently supported by the Attorney General, Augusto Aras, three sources with knowledge of the matter said.

STF Chief Justice Fux met last month with Central Bank president Roberto Campos Neto, who urged the maintenance of the passed law. The case will be judged through an online session – when the Justices vote remotely, with no public debate – that will begin Friday and run for the next 7 days.

The lawsuit is a cause of concern for the Bolsonaro government’s economic team at a time when the Central Bank has started to raise the basic interest rate to contain inflationary pressure. On Wednesday, the monetary authority raised the SELIC for the third consecutive time by 0.75 percentage points, to 4.25 percent per year.

In February, PT and PSOL political parties challenged the law recently passed by Congress and sanctioned by Bolsonaro, on the grounds that establishing fixed terms of office for the Central Bank’s president and directors that do not coincide with that of the president of the Republic undermines the government’s authority over a central instrument for defining economic policy.

Another objection from the opposition is that the law has a formal defect. The law was based on a bill that started in the Senate, whereas proposing a change in the structure of the Executive branch should be the exclusive prerogative of the president of the Republic, according to the complainants.

In late April, Federal Prosecutor General Augusto Aras sent an opinion to the STF agreeing with this technical argument of the opposition parties. According to him, the law is unconstitutional because it should not have been proposed by parliament, but by the president.

“The key point is that the Federal Senate did not decide on the bill initiated by the president of the Republic. The entire processing of the matter in the Federal Senate occurred solely on the records of Bill No. 19/2019, authored by parliament,” said Aras.

According to sources, the trend is for the majority of Supreme Court Justices to overrule these objections – particularly the one regarding the defect in initiative – and confirm the passed law, which is currently in force.

Behind the scenes, the votes of Justices Nunes Marques, Alexandre de Moraes, Luís Roberto Barroso, Dias Toffoli and the president of the STF, Luiz Fux are expected to be in favor of the Central Bank’s autonomy. Other votes along these lines cannot be ruled out.

Fux met last month with Central Bank president Roberto Campos Neto, who urged the maintenance of the passed law. This week, the bank’s technical team sent a statement to the Supreme Court reiterating its position.

It is expected that this likely majority will lead to a disagreement and prevail over the vote to be cast by the rapporteur of the case, Justice Ricardo Lewandowski. He is expected to vote in favor of the lawsuit, according to two sources heard, who concede that he will be defeated in the final decision.

“There is a majority aligned to this ‘economic analysis of law’ and that the law can be upheld,” acknowledged one of them.

Attorney Camilo Onoda Caldas, partner of Gomes, Almeida e Caldas Law Firm, said that the STF will probably not rule the law unconstitutional, but considered that an understanding along these lines would be perfectly possible.

“So, I believe that there may be differences, because it is a very open issue and largely depends on the particular viewpoint of each judge, especially because there is no express regulation in either direction, either to restrict or expand this autonomy,” he said.

“It is a very open case, different from others in which we already have a more express, more direct ruling. But even when the Constitution has more express and direct rulings, this leaves room for interpretation. So, in these cases where there is no clear and direct ruling, an even higher chance of the most diverse understandings possible is present,” stressed attorney Caldas, who holds a PhD in Law from the University of São Paulo (USP).

The Central Bank’s autonomy was one of then-presidential candidate Jair Bolsonaro’s campaign pledges in 2018.