High Interest Rates Stall Brazil’s Factory Growth for Second Month

Brazil’s official statistics agency, IBGE, says factory production dropped by 0.5% in May 2025 compared to April. This is the second month in a row that factories made less, showing that the sector is struggling.

Even though production was 3.3% higher than in May 2024, it is still 15% below the best level reached in 2011. The main reason for this slowdown is the high cost of borrowing money. Brazil’s central bank kept interest rates at 15% to fight inflation.

This makes loans more expensive for businesses, so many factories are holding back on new investments and production. The IBGE points out that this policy, along with rising prices, has made it harder for companies to grow.

Most factory sectors shrank in May. Car makers, oil and fuel producers, and furniture factories all made less. Only companies that make materials used by other factories, like mining, saw a small increase.

Out of 25 types of industry, 13 made less than the month before. This is not a new problem. Since 2011, Brazil’s factories have had trouble growing.

The country’s economy is still expanding, but most of that comes from farming and services, not industry. Experts predict that factory production will grow by just about 2% in 2025, which is slower than last year.

Despite these problems, Brazil’s job market is holding up. More people are working, and incomes are rising, which helps keep the economy going for now. But if factories keep shrinking, it could mean fewer good jobs and less money for the country in the future.

Factories are important for Brazil because they create skilled jobs and help the country sell goods abroad. If this slowdown continues, it could make Brazil’s economy weaker and more dependent on farming and services.

LatAm Markets: Live Signals → — real-time movers, turnover leaders and FX across Latin America.