The Four Pillar of Central Banking In

South “Latin” America

The New law on central banking in Latin America was focused on four major pillars.

 Definition of a clear and narrow mandate.

 Formulation of central bank policies independent of the executive branch.
 Autonomy of monetary policy implementation.
 Accountability of central banks.

 This narrow mandate was raised to a legislative one. Levels in a variety of

countries including Chile, Colombia, Mexico and Peru. Assigning a strong
mission has encouraged the role of keeping Central Banks responsible. Instead
of actively encouraging economic growth, Central Banks have been called upon
to do so. Legislatures are concentrating on the battle against inflation as a
method of indirectly boosting economic growth and hence the enhancement of
social security.

 In South America, Chile was a leader in the transformation of the constitution and
the central bank. The law of 1989 many nations have quickly follow suit. El
Salvador accepted the new central office Banking laws in 1991; Mexico and Peru
in 1993; Bolivia, Costa Rica, Paraguay and Uraguay in 1995; Honduras in the
1996; and 2002 in the Dominican Republic and Guatemala. Brazil has not, as an
exception, after its inception in 1964, the statute of its central bank has been
revised, whereas other countries (Argentina, Bolivia, Ecuador, and Venezuela)
have been backtracked by passing legislative amendments impaired the
independence of the former central bank.

 In order to fulfill the mandate for market stabilization, the latest law has also
introduced a central bank. Freedom in the formulation of monetary policy. The
reason was to distinguish monetary policy decision reached by an independent
board on the short-term effect of the election cycle. This could give rise to
inflationary bias in comparison, the proposed laws omitted them. Government
officials from the central bank board of directors (with the exception of a new
 countries such as Colombia and Guatemala). In a number of nations, the
foundations of this constitutional sovereignty is that the members of the board
can only be excluded for infringements that are specifically codified in statute
shall be open to judicial or congressional scrutiny. Moreover central banks are, in
most cases central banks were allowed to establish an autonomous exchange
rate strategy.

 The fourth pillar of the return was the central bank accountability. Usually this
includes the central banks shall sent a report to the executive and legislative
branches and general to the commission. Disclose openly the decisions and
measures taken to achieve their policy goals in each of them the governor of the
central bank is also expected to appear before the congress to report on conduct
monetary policy and clarify the success of the central bank in achieving monetary
policy at constitutional priorities.

Countries of South “Latin” America

And their Pillars of Central Baking

Brazil

 Containing government deficits of non-priority expenditures and rationalizing tax

system.
 Limiting the rise in real wages to increase in productivity and acceleration and
development.
 Controlling the credit policy to prevent to excesses of cost-push inflation and, at
the same time, being realistic in order to adapt to it.

Chile

 The first pillar is essential to generate the conditions necessary to apply

monetary policy appropriately. It signals to economic agents that the bank is
aware of monetary policy’s limits and that it is committed to price stability, thus
reinforcing its credibility and effectiveness.
 The second pillar is responsible, predictable fiscal policy approach, which
guarantees public sector solvency and eliminates any chance of monetary policy
being subordinate to fiscal policy. This also increases macroeconomic policy’s
overall credibility and effectiveness among economic agents in Chile and abroad.
 The third pillar is regulatory and supervisory framework governing the financial
system is based on a series of prudent and standards, in line with international
 recommendations, and supervision by specialize bodies, whose goal is to ensure
to appropriate governance of financial institutions.
 The fourth pillar is the Chilean economy’s integration into international markets.
Free capital inflows and out flow improve access to external saving and diversify
risks facing Chilean economy. Integration offers many advantages, but also
exposes the economy to external shocks, whether they arise in financial or goods
markets. To deal with these and limit their consequences, relative prices have to
be corrected. A flexible foreign exchange approach is vital to making these
corrections in the least costly manner possible and opening up room for
monetary policy to support these efforts.

Bolivia

 The first pillar is sustainable productive development.

 The second pillar is climate change and disaster risk management.
 The third pillar is Human development and access to basic services, and
 The fourth pillar is Public sector effectiveness. In additional, gender, governance,
and anti-corruption are identified as cross-cutting themes.

Ecuador

 The first pillar is bring fiscal accounts to a sustainable position, re-build fiscal
buffers, and put in place fiscal institutions to adequately manage oil windfall.
Improve the efficiency of public spending at different government levels, shifting
resources towards priority social spending. Increase efficiency and neutrality of
the tax system; broadening bases, phasing out distortive taxes and rationalizing
tax benefits. Address external imbalance and rebuild international reserves to
safeguard the dollarization regime.
 The pillar two is lifting barriers to private sector development, align labor cost to
productivity, modernize labor regulations, and increase effectiveness of safety
nets. Integrate the economy to the rest of the world by revamping policies to
attract foreign investments and reducing barrier to trade. Reduce cost and
uncertainties associated with business regulation and its reinforcement. Reduce
distortions associated with financial regulation and strengthen regulatory
institutions.
 The third pillar is expanding economic opportunities, improve quality of
education, and address skill gaps in the labor market. Strengthen coordinated
effort to address high levels of malnutrition and stunting, and strengthen
preventive and primary health care. Strengthen gender-based violence
prevention efforts. Enhance integration of vulnerable groups and ethnic
minorities.
  The fourth pillar is improving the use physical and natural capital, rethink
strategically the use and the sustainability of recently built infrastructure, and
resolve how to deal with unfinished projects. Improve quality of water, sanitation,
and irrigation services. Invest in long term resilience and adaptation mechanism
to address high exposure to exogenous natural hazards and climate risks.
Improve investments in natural capital stocks and environmental services to
address traditional and emerging challenges und (current) fiscal constrait.

Guyana

 The first pillar is to promote a sustained and non-inflationary growth of the

economy.
 The second pillar is maintained the integrity and value of the Guyana dollar.
 The third pillar is to secure the credibility of the financial system, including
payments arrangements, through supervision and oversight.

Peru

 The first pillar is to create awareness and educating different groups about the
value of money and savings through financial education lessons and workshop.
 The second pillar is disseminating evidence and best practices, under in this
pillar, a high-level International Conference, titled “How do young people save?”,
was organized by SBS and representatives of the academic, public and private
sector. This event allowed the SBS to highlight what the youth preferred when in
comes to financial services, savings habits and digital financial services, as well
as local and international experiences to promote saving habits.
 The third pillar is generating a space to facilitate access and use formal savings,
insurance and pension financial products. Allowed financial institutions to
promote the opening of formal savings accounts, focusing both of the responsible
usage of traditional channels.

Uruguay

 The first pillar was intergenerational solidarity defines as benefit, and the benefits
of the liabilities are financed by contributions from active workers, employers,
taxes affected and, if necessary, with the state’s financial assistance.
 The second pillar was compulsory individual savings, defines as contribution:
each worker accumulates individuals contribution and return personal savings
account.
Venezuela

 The first pillar is slash five zeros from prices, so a product that cost 100,000
bolivares would now cost 1 bolivar, and give a different name, the “sovereign
bolivar”.
 The second pillar is devalue the currency by 95 percent; and
 The third pillar is peg the bolivar to the petro, Venezuela’s digital currency
backed by oil introduces in February 2018.

Argentina

 The fist pillar is the monetary reform, based on the convertibility law, had as its
mean objective to eliminate inflation and reestablish confidence in the peso.
 The second pillar is a reduction of the fiscal deficit sought to consolidate price
stability and eliminate the need to print money to finance the fiscal deficit.
 The third pillar is structural adjustment reforms, such as deregulation, the
opening of the economy to international trade, and the privatizations, aimed to
generate the bases of economic growth.
 Finally the fourth pillar was the institutional framework was strengthened with
measures like the independence of the central bank, the creation of institutions to
regulate the recently privatized utilities, and strengthening of the Securities and
Exchange Commission.

Suriname

 The first pillar is returning the public finances to a sustainable path.

 The second pillar is rebuilding international reserves.
 The third pillar is strengthening the monetary and exchange rate policy
framework to promote domestic price stability and strengthen Suriname’s
resilience to external shocks.
 The fourth pillar is to enhance the business environment and medium-term
growth through structural reforms.

Colombia

 The first pillar is minimum capital requirements.

 The second pillar is supervisory review process.
 The third pillar is market discipline; it was designed to rein in bank risks in both
advanced and emerging economies.