Brazil’s finance chief is considering a series of measures to boost credit in Latin America’s largest economy, saying capital markets have “stalled” under the weight of high interest rates.
(Bloomberg) — Brazil’s finance chief is considering a series of measures to boost credit in Latin America’s largest economy, saying capital markets have “stalled” under the weight of high interest rates.
Fernando Haddad, who’s joined President Luiz Inacio Lula da Silva in criticizing the central bank’s restrictive monetary policy, said discussing a credit agenda with the nation’s development bank will be his next priority after approving a fiscal plan designed to shore up public finances.
“Those seeking capital markets in Brazil today are those who are really in need of working capital, even money for payroll,” Haddad said Tuesday during an interview in his Brasilia cabinet office. “They’re taking loans and looking to the past rather than making investments and looking to the future.”
Among the measures under consideration, he said, is a proposal from the Sao Paulo Industry Federation, or Fiesp, for a program of subsidized credit akin to the so-called “plano safra” offered to the agriculture sector. The plan would cater to companies seeking long-term investment and environmental transition projects.
Haddad said he’s analyzing the request but believes that a good tax reform would be the best contribution the government can give to Brazil’s industry. A spokesperson for Fiesp confirmed its president Josue Gomes had a meeting with Haddad, when the idea was discussed, but didn’t have details about the plan.
Brazilian capital markets are reeling from the central bank’s aggressive monetary tightening campaign, which took the benchmark interest rate to 13.75% from an all-time low of 2% during the pandemic. The collapse of retailer Americanas SA has added to the uncertainty as investors worry about the risk of additional corporate bankruptcies. Haddad has previously said central bankers don’t seem to fully grasp Brazil’s credit situation and has expressed hopes that his fiscal framework proposal will make room for lower interest rates.
Working on Convergence
Yet the finance minister said he has an open line with central bank chief Roberto Campos Neto, with whom he’s been “seeking convergence on economic facts.” There has also been mutual acknowledgment of efforts by fiscal and monetary authorities, he added.
Read More: Brazil Central Bank Sees Haddad Committed to Fiscal Package
Haddad has submitted to Lula five candidates to replace two central bank directors whose terms have ended. While he wouldn’t reveal the names, he said the ideal picks must have technical expertise and knowledge of monetary policy, and not necessarily be someone who would simply back the government.
Naming a group of pro-government board members for the central bank, just for the sake of it, “would be a mistake,” Haddad said. He added that even current board members have different views about the economic situation, and that the usually consensual interest-rate decisions are a political construct.
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