Like many nations around the world, the function of the banking system in Brazil includes a central bank. This bank, the Banco Central do Brasil, serves as the primary force behind monetary policy within the country. Formed in 1964 and functioning under the direction of the Department of the Treasury, the institution enjoys a wide range of powers that make a huge impact on all things financial within the nation.

One example of how the central bank influences the movement of the economy is the role that it plays in the chartering of banks. Since the bank is considered a part of the government, it has the ability to set standards for all other financial institutions. Simply put, the seal of approval from the Banco Central do Brasil is essential if an institution wishes to have any hopes of establishing a presence within the nation.

Headed by Alexandre Antônio Tombini, the banks sets the standard in terms of interest rates. Whether the financing has to do with mortgages, car loans or personal loans of some type, other banks will follow the lead of the central bank when setting the rates and terms. Shifts in the position of the central bank will have an immediate impact on the rates that other banks around the country will assess any floating or variable rates on certain types of loans, as well as influence how much interest will be charged on any new fixed-rate loans.

Even when it comes to increasing the flow of cash within the economy, the central bank serves as a key force in deciding when to print more money and when to reduce the amount in circulation. This makes the bank an effective resource for the government when it comes to attempting to deal with whatever trends are projected for the national economy.

In some cases, the impact of the central bank is much more indirect. For example, many of the more popular lottery systems within Brazil are managed by Caixa Ecomica Federal, which is government-owned and easily one of the largest banks in the country, rather than by the central bank. In spite of the substantial resources of the CEF, there is no doubt that even this bank looks closely at what is happening with the central bank and adjusts its policies and procedures accordingly. As with any country’s central bank, the scope of powers exercised may work for the benefit of the nation as a whole or as a means of creating significant gaps between economic classes within that country. In the case of the Banco Central do Brasil; opponents abhor what they see as the exceedingly high level of interference the bank exerts on the general economy, while proponents see it as being one of the most effective tools in keeping the country’s economy safe from many of the issues that plague other nations.