The Monetary Policy Committee (Copom) of Brazil’s Central Bank has cut the benchmark Selic rate to 12.25% annually.
This decision marks the third reduction in 2023. Despite these cuts, companies still face borrowing rates of around 22%.
This level exceeds the base rate, as reported by the Central Bank’s credit data.
Banks lend to companies at rates higher than the Selic. Thus, even with a potential year-end drop to 11.75%, as analysts predict, corporate rates are likely to remain high.
The Selic rate sets the tone for loans among banks, which use government bonds as security. It acts as a market reference.
Corporate loan rates averaged 22.60% per year as of August 2023. Financial institutions offer different loan types, each with varying rates.
Specific rates included 350.2% for corporate overdrafts, 44.3% for average credit card rates, and 177.8% for credit card revolving rates.
Large companies can access rates below the Selic. However, they must have significant turnover and strong bank relationships.
Some credit lines, like those from Pronampe, offer subsidized rates for small businesses.
Individuals usually see higher rates than businesses, suggesting small businesses have a financing advantage.
Central Bank figures show personal loans average annual rates at 57.7%.
Background – Brazil Cuts Benchmark Rate
The reduction of Brazil’s Selic rate reflects a targeted monetary policy to stimulate economic growth.
Lower interest rates can encourage borrowing and investment but often lag in influencing lending rates.
Historically, Brazilian loan rates have remained high due to market factors, including risk perception and operational costs.
In Brazil, access to cheaper credit is crucial for small businesses, which are significant contributors to the economy.
Programs like Pronampe highlight a strategic push to empower small enterprises, acknowledging their role in driving innovation and job creation.