The president of Brazil’s Federation of Industries of the State of São Paulo (Fiesp), Paulo Skaf, declared today that the increase in the benchmark interest rate is “harmful to the country.”
This affirmation represented a response to President Luiz Inácio Lula da Silva’s comment that the country continues to grow despite the rise in interest rates. The two participated today in the presentation of the special edition of the Best Coffees of Brazil.
“The only meaning of these increases in the Selic rate is to ratchet up public spending, since one of the government’s biggest outlays is for interest payments,” Skaf contended.
According to Skaf, last week’s 0.25% hike in the Selic rate will cost the government an additional US$ 789 million (R$ 2 billion) per year in debt interest payments.
“All of this is very bad for the country. All of this discourages investment and consumption,” he said.
Regarding consigned credit, launched by the government and mentioned by Lula as one of the reasons for the growth in consumption, Skaf agreed that it constitutes a positive initiative, since it provides personal loans at lower costs.
He said, however, that this form of credit represents only about 0.6% of the country’s Gross Domestic Product (GDP).
“A new line of credit will neither resolve our problem nor does it justify charging 7% or 8% a month for overdrawn checks. The monthly charge for overdrawn checks is more than the annual rate of inflation,” he argued.