Private lenders of last resort: the debates around central banking in Brazil in the 1920s

The objective of this study is to analyze the debate surrounding the transformation of the Bank of Brazil into a central bank in 1923. The article seeks to answer the question: What was the role of a central bank for Brazilian policymakers at that time? Unlike other Latin American countries that established their central banks during this period, Brazil’s institution was not the result of any foreign mission. While central banks in other countries were primarily concerned with maintaining the gold standard, in Brazil, the main impetus for establishing a central bank was the need to address cash shortages and expand credit, rather than focusing on monetary discipline. Advocates for the creation of a central bank in Brazil were inspired by the model of Germany’s Reichsbank, and part of their theoretical influence came from the German Historical School. Other references cited in the debates included the works of Keynes and Cassel, and the participants of the debate made parallels with other sciences, such as comparing the central bank to elements of mechanical physics. Beyond controlling the money supply, the central bank was seen as an element for the economic development of the country, and there was an emphasis on the bank’s private management.