Brazil Seeks Technical Fix to Prevent Debt Spike From Central Bank Autonomy Plan

Overview

• Government and Banco Central leaders held direct talks on Tuesday and instructed technical teams to negotiate a consensus alternative to the current constitutional amendment text.
• Senator Plínio Valério's relator text, drafted with input from the AGU, would reclassify the central bank as an 'entidade pública de natureza especial' and cause Treasury securities on the bank's balance sheet to be consolidated as public debt.
• Officials say that accounting consolidation would mechanically raise measured public debt by roughly 10–15 percentage points, which prompted the Finance Ministry to reject the CCJ version as not agreed with the economic team.
• The working discussions focus on technical fixes that preserve the BC's funding, hiring capacity and oversight role without changing its autarchy status or forcing consolidation of Treasury holdings into public debt.
• The outcome will shape supervision of the financial system, the future of Pix investments and political precedent for other regulators after a year of public tensions between BC president Gabriel Galípolo and Finance Minister Dario Durigan.