BCRA Reform: Key Points of Javier Milei's Project and Changes

The government seeks to modify the Organic Charter of the Central Bank (BCRA) to strengthen the independence of the monetary authority, limit financing to the state, and concentrate its mission on preserving the value of the currency. The project has already begun to be debated in Congress and has several points that generate discussion between the ruling party and the opposition.

The reform of the Organic Charter of the BCRA is on track to become one of the main economic initiatives of Javier Milei's government for the second half of the year. The project proposes to substantially change the functioning of the monetary authority and establish stricter limits on its financial relationship with the public sector.

The initiative aims, in general terms, to consolidate a Central Bank with greater autonomy from political power, eliminate the mechanisms of monetary financing of the Treasury, and redefine what its central objectives will be. The project has already received a favorable opinion in the Chamber of Deputies with 42 signatures from 73 legislators present and now faces debate in the chamber.

BCRA Reform: What are the main changes promoted by Milei

A single objective: preserve the value of the currency

One of the central changes is the modification of the mandate of the Central Bank. The project establishes as its primary and fundamental mission to preserve the value of the currency. In this way, it seeks to leave behind the scheme incorporated with the 2012 reform, which, in addition to monetary stability, included objectives related to financial stability, employment, and equitable economic development.

The change implies concentrating the actions of the BCRA on monetary stability and, particularly, on the fight against inflation. Javier Milei seeks to give the Central Bank a central mission: preserve the value of the currency. The initiative also proposes greater limits on monetary financing of the deficit, changes in the distribution of profits, and a more demanding mechanism for removing authorities.

End of financing to the Treasury

Another of the most relevant points is the prohibition of financing the public sector by the Central Bank. The project eliminates the possibility of granting temporary advances to the national government and establishes restrictions for other forms of direct or indirect financial assistance. The prohibition also extends to financing provinces and municipalities.

The government's objective is to close one of the historically used avenues to finance the fiscal deficit through monetary issuance. According to the official argument, preventing the BCRA from covering fiscal imbalances is a necessary condition to consolidate price stability.

What Will Happen to the BCRA's Profits

The reform also modifies the treatment of the profits of the monetary authority. The project aims to prevent the Treasury from receiving as financing merely accounting profits generated, for example, by variations in the value of assets or by financial operations.

The intention is to avoid results that do not necessarily represent realized gains from becoming available resources to finance public spending.

Greater Protection for the Board

The initiative also incorporates an important change in the way authorities of the Central Bank can be removed. To displace the president or members of the board, a two-thirds majority will be required in both the Chamber of Deputies and the Senate. The modification aims to raise institutional barriers against leadership changes resulting from political cycles.

However, the terms do not extend. The project maintains the current duration of six years and aims to reinforce the stability of the authorities through a more demanding removal mechanism.

Goodbye to Non-Transferable Bills

Another point included in the reform is the prohibition of using new Non-Transferable Bills. These instruments were used for years by the Treasury to obtain international reserves from the Central Bank in exchange for titles that remained within the assets of the monetary authority and could not be traded in the market.

The project seeks to prevent this mechanism from being used again as an indirect way for the Treasury to access the BCRA's reserves.

Changes in Operations and Reserves

The reform also updates the operational tools of the Central Bank. The project allows it to intervene in the markets through operations with public securities, currencies, and other financial assets, always under market conditions, with the aim of regulating monetary, exchange, financial, and credit policy.

At the same time, it incorporates specific protection for international reserves and establishes more precise rules regarding the external assets that can be part of them, including gold and liquid financial assets.

Political Debate in Congress

The main challenge for the Government will now be to convert the support obtained in the commissions into a sufficient majority to approve the reform in the Chamber of Deputies.

The opinion received support from La Libertad Avanza, the PRO, sectors of the UCR, and other blocs, while Unión por la Patria and the left remain opposed to the initiative.

One of the points that concentrates the most attention is precisely the new mechanism for the removal of BCRA authorities. The discussion also revolves around the scope of the entity's autonomy and the possibility that a monetary policy focused exclusively on price stability may come into tension with other economic policy decisions.

What Milei Seeks with the Reform

In political and economic terms, the Government's bet is that the new rules survive the current administration. The intention is to establish institutional limits to prevent future administrations from using the Central Bank again as a source of financing for the Treasury.

The proposal is part of a broader strategy by the Government to consolidate fiscal balance and eliminate what it considers mechanisms that have historically contributed to monetary issuance and inflation.

The central question will be whether the restrictions envisaged by the reform manage to become permanent rules of Argentine economic policy or if, as happened with other amendments to the Organic Charter, they remain subject to future changes in government.

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