BRAZIL · ECONOMY
Published Saturday, 7 November, 12:50 p.m. ET, updated 4:35 p.m. ET · Source: Banco Central do Brasil (Brazil’s central bank), Brazil’s Finance Ministry, Lara Resende’s published article
A proposal to cut Brazil’s benchmark interest rate roughly in half has drawn warnings that it could push the real into a currency crisis. The idea comes from André Lara Resende, a former central bank director and one of the designers of the 1994 Real Plan, which ended Brazil’s hyperinflation.
He published it as a newsletter essay in September, and it has drawn support from some allies of President Lula in his left-wing Workers’ Party. Finance Minister Dario Durigan said in early November that capping rates or burning foreign-currency reserves is not under evaluation, and on 3 November that the idea has “deficiencies”.
Key Facts
- The rate The central bank’s rate committee, Copom, held the Selic, Brazil’s benchmark rate, at 13.75% on 4 November.
- The plan Lara Resende proposes a gradual cut to about 7.5% within 12 months.
- The warning Critics say forcing rates down could trigger capital flight and a weaker real.
- The bill By Lara Resende’s calculation of gross cost, yearly interest on public debt is R$1.4 trillion (about US$255 billion), 10.5% of GDP.
- Power Index Brazil ranks 1st of 14 in The Rio Times Latin America Power Index, with 74.2 points (November 2026 edition).
- Prediction markets Polymarket, a prediction platform, gives 88.5% to no Selic change in December (7 November, 4:30 p.m. ET).
The Plan on the Table
Lara Resende, a former central bank director, proposes a new council that would set targets, with the central bank keeping the Selic between the inflation target of 3% a year and about 5.5%, his estimate of the economy’s potential growth in nominal terms (2.5% real growth plus 3% inflation). The central bank would then cut the Selic gradually to about 7.5% a year within 12 months.
He argues that the cost of public debt, not government spending, drives Brazil’s fiscal problem. He puts gross debt at 82.5% of GDP and says interest on it costs R$1.4 trillion a year (about US$255 billion), or 10.5% of GDP.
Central bank data on nominal interest, as reported in the Brazilian press, are lower: R$1.205 trillion (about US$219 billion), or 8.99% of GDP, over the 12 months to September.
Why Critics Warn of a Currency Crisis
The weakest point, Brazilian analysts say, is capital flight. If investors fear that rates are being forced down, they may sell the real and buy dollars, and Lara Resende suggests using part of Brazil’s foreign-currency reserves to absorb the outflow. Central bank data show reserves of US$367.9 billion on 5 November.
Critics point to Turkey, where the government forced rates down in 2021 and the lira hit record lows. Inflation soared, and a new team later raised rates to 50% in 2024.
A weaker real would also raise the cost of imported fuel, food and other inputs. Lara Resende adds that bonds linked to the Selic make up more than half of the debt, so interest costs would fall quickly after each cut.
Where the Rate Stands
Brazil’s central bank held its benchmark rate, the Selic, at 13.75% on Wednesday 4 November. The decision by its rate-setting committee, known as Copom, was unanimous and ended a run of five cuts that began in March.
The Selic has stood at 13.75% since the September cut, as the central bank’s data series shows. Our earlier articles covered the idea and reactions among President Lula’s allies.
What Prediction Markets Say
Bettors see no immediate change. Polymarket, a prediction platform, gives 88.5% to no change in Brazil’s rate at the December meeting, with US$64,208 traded, and a 6.1% chance of a quarter-point cut (7 November, 4:30 p.m. ET).
For the January meeting the same platform gives 58.0% to no change and 15.9% to a quarter-point cut, with US$13,017 traded. The March market gives 57.5% to no change, with US$10,457 traded.
Why we show this: prediction markets turn real-money bets into a live probability that moves within minutes of the news, which is why investors, campaigns and newsrooms in the United States now follow them closely. We show them next to polls and official results, never instead of them.
What It Means for You
Nothing in the central bank’s 4 November decision adopts the plan, so holders of Brazilian bonds and the real face no new rule today. Durigan, the finance minister, said in early November that capping interest rates or burning foreign-currency reserves is not under evaluation, and on 3 November that the idea has “deficiencies”. Brazilian reports said in early November that Lula had no meeting scheduled with Lara Resende.
The next official signal is the Copom minutes, the committee’s written record, which will show how the committee weighed the pause. The central bank’s official dollar rate (PTAX) was R$5.50 per US$ on Friday 6 November.
What Is Not Known
We have not seen the government or the central bank adopt Lara Resende’s plan, and the Finance Ministry says it is not on the table. We could not open the central bank’s own statement of the 4 November decision, so the unanimous vote rests on reports in Brazil’s business press.
More: Brazil news in English; Brazil Rate Cap Idea Wins Some Lula Allies; Brazil Denies Plan to Cap Interest Rates.
Context: our brazil role in latin america explained guide.
Background: our bringing your pet to brazil the complete.
Frequently Asked Questions
What is the Selic?
The Selic is Brazil’s benchmark interest rate, set by the central bank’s committee, Copom. It stands at 13.75% after the 4 November meeting.
What does André Lara Resende propose?
He proposes lowering the Selic gradually to about 7.5% within 12 months and using foreign-currency reserves to absorb any capital flight.
Why do critics warn of a currency crisis?
They say forcing rates down could make investors sell the real and buy dollars. Turkey’s 2021 experience, when forced rate cuts were followed by record lows for the lira, is the example they cite.
Sources: Banco Central do Brasil, Selic target series; Banco Central do Brasil, reserves series; Selic target as of 4 November 2026; international reserves of 5 November 2026; Finance Ministry statements of early November 2026; Lara Resende’s published article; Polymarket market data, read on 7 November 2026.
This article was produced by The Rio Times’ automated AI newsroom. Editorial responsibility: Matthias Camenzind, Publisher and Editor-in-Chief. The Rio Times also runs Ask Rio Times, which answers from 100,000+ of our own articles, the daily Latin America Power Map, and prediction-market odds on elections and markets.. How we use AI · Report an error
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