Brazil's benchmark rate, the Selic, stands at 14% a year, and Finance Minister Dario Durigan said on Monday (Aug 31) that bringing it down is the country's main economic challenge. Speaking to investors at Macro Day 26, an event held by the bank BTG Pactual, he promised a seven-front fiscal agenda to take rates to what he called a "civilized" level. The rate is the starting point for the credit families use to buy a fridge in installments and companies use to finance production.
According to Folha de S.Paulo, the seven fronts include meeting the primary result targets, strengthening the fiscal framework, controlling mandatory spending and reviewing tax benefits. Durigan promised "growing and recurring primary surpluses" from 2027. The surplus of 0.1% of GDP forecast for next year should be the minimum floor for the years after, the minister told Exame, referring to a possible new term for President Luiz Inácio Lula da Silva.
Why public accounts hold up interest rates
Understand: the Selic is the basic rate Brazil's central bank sets to contain inflation, and it anchors every loan in the country, from credit card revolving debt to farm financing. A primary surplus means the government collects more than it spends, excluding interest payments on its debt. When markets trust that accounts are under control, inflation pressure eases and the central bank gains room to cut the rate.
The urgency comes from the size of the debt: it reached 82.5% of GDP in July, the highest level in more than five years, according to news outlet G1. Put plainly, the government owes more than four fifths of everything the country produces in a year. Durigan argued for keeping the fiscal framework, which caps spending growth at 2.5% above inflation, and improving it rather than replacing it; the 2027 budget bill sent to Congress on Monday projects mandatory spending growing less than the overall limit.
"É o custo do dinheiro no país. Nós temos que fazer avançar uma agenda olhando para essa milha final, que é como que a gente traz os juros... com patamar civilizado." ("It is the cost of money in the country. We have to push forward an agenda looking at this final mile, which is how we bring rates... to a civilized level.")
The remarks came at the panel "Cenário Econômico" (Economic Outlook), in conversation with BTG Pactual's chief economist, Mansueto Almeida. The audience was Faria Lima, the São Paulo avenue whose name doubles as shorthand for Brazil's financial market. In Durigan's view, expensive money hurts the Treasury, families, companies and farmers.
Where the adjustment will bite
The main target is spending the budget pays by obligation, with no annual vote in Congress. This year the government cut 10% of non-constitutional tax benefits, which should bring in about R$ 20 billion, Exame reported. "If we are doing a 10% revision this year, we will do another 10%, or 5% at least, next year," the minister said, defending fresh linear cuts in each following year.
According to Folha, Durigan said the government wants to reach the goal while keeping social programs and gaining efficiency in how benefits are granted and monitored. At the same event, André Esteves of BTG Pactual said Brazil has a "golden opportunity" to reach civilized rates and that the Selic could be at 7%, according to Valor Econômico, less than half the current 14%. NeoFeed described the seven fronts as the priorities of a possible next administration, one month before October's election.