Page 15 - MONTT LATIN AMERICAN MAGAZINE, MARCH, 2018, ENGLISH

Brazil: Autonomy of the Central Bank and Open Skies with the USA
Due to the failure of the Pension Reform, the Brazilian government promotes the processing of an initiative that, for the first time, grants independence to the Central Bank to establish parameters of growth and inflationary goals. In parallel, after seven years an important air navigation agreement with the United States materialized.
The representative of the Government before the Brazilian Senate, Rombero Juca announced that the legislative body is studying the possibility of approving an initiative on the autonomy of the Central Bank, as a necessary measure to keep investors interested in the country, in view of the failure of the Recent Pension Reform promoted by President Michel Temer.
It would be a constitutional amendment that for the first time would formally consecrate the independence of the financial institution. In this way, the new law would grant the entity authorization to use all the instruments it deems necessary to meet its objectives, including financial stability and compliance with inflation targets set together with the government.
Credibility Before the Markets
The new legislation would aim to improve the credibility of the agency in the markets, because it would diminish the perception that the institution is vulnerable to political interference.
According to the proposal, the President of the Republic could no longer dismiss the directors of the Central Bank at will. Instead, they would serve fixed four-year terms and could only be discharged with the approval of the Senate. In addition, the bank’s mandate may be be expanded with growth objectives that would add to the current goal of controlling inflation.
As a constitutional amendment, the measure would need approval by both the Senate and the Lower House.
Open Skies
On the other hand, the Brazilian Senate approved an open skies agreement with the United States, after seven years in the legislative branch.
The deal was signed between the former President of Brazil, Dilma Rousseff and her US counterpart, Barack Obama, in March 2011. The treaty establishes that the opening or closing of new air routes between Brazil and the United States will become free, according to the decision of the airlines of those countries, while the current limit is 300 flights per week. Other elements included in this agreement, such as the creation of new flights, based on secondary cities and the expansion of shared code arrangement, were already in force through a Memorandum of Understanding previously signed between the two countries.
This will benefit the passengers with the creation of new flights and the reduction of prices and will help improve the economic growth of Brazil.
Tolling Agreement in Paraguay
Likewise, the Brazilian Senate warned about the massive migration of Brazilian industries to Paraguay and one of the congressmen requested to create an external commission to find out the scope of the tax exemptions of the tolling agreementregime in that country.
In 2015, 40 industries were installed in Paraguay and last year, it was learned that seven out of 10 new factories in were of Brazilian origin. Some senators like Eduardo Baga considered that the government should study the case and legislate or create mechanisms to stop it.
“You can place a quota system and this is nothing against Paraguay, which is a friendly and allied country; but it is an unequal situation for the industries that are producing in Brazil to sell to the national market, “he stressed.
He recalled that when there was a differential in the exchange rate between Argentina and Brazil, the Argentines created a quota system to protect their local industry.
Montt Latin American Magazine p15