Brazil’s Selic cut to 13.25%: Corporate interest rates remain at 20% despite central bank move

The Central Bank has cut the Selic, Brazil’s key interest rate, to 13.25% annually after almost a year without changes.

Despite this reduction, corporate loans are likely to continue to have interest rates around 20%.

According to the monetary and credit statistics released by the authority for June 2023, the average interest rate for legal entities was 23.1% per annum.

For individuals, it was even higher at 59.1%.

Special checks (133.6% p.a.) and credit cards (104.2% p.a.) have rates significantly higher than the average for businesses.

Banks lend money to businesses at rates higher than the Selic, meaning that the company rates will remain relatively high even if the benchmark rate drops to 12% by the end of 2023.

The Selic serves as a benchmark in lending operations between financial institutions using federal public bonds as collateral.

As of June 2023, the average interest rate for legal entities was 23.1% per annum.

Consumer rates are even higher, with special checks and credit cards showing significantly elevated rates.

Some companies can secure interest rates lower than the Selic, provided they have a high turnover and good relations with financial institutions.

There are also subsidized credit lines with favorable rates, but not all businesses can easily access them.

Before the decision of the Monetary Policy Committee (Copom), the base rate was 13.75% per annum.

The reduction of 0.5 percentage points will lower interest rates, but it will not align them with the Selic for most borrowers.

With information from Poder360

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