Analysis: Brazilian debt cost is higher than other countries

The Minister of Finance, Dario Durigan, stated, in an interview with Hora H this Thursday (21), that the interest rates charged in Brazil are not "civilized". CNN Economics analyst Lucinda Pinto commented on the matter and highlighted that the cost of Brazilian debt is higher than other countries.

In the interview, Durigan said that he agrees that, in Brazil, "interest is not civilized interest". It's something that bothers me a lot to see our debt being rolled over in interest at this level," he said.

For Durigan, the high interest rate in the country has multiple explanations and cannot be attributed solely to the level of government spending. "I have said that there is a very easy answer given by some economists who are openly opposed to the government, which is that the government spends a lot, which is why the interest rate is high, which is not true", he declared.

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According to him, the fiscal factor is part of the explanation, but it is not the only reason.

Analyst Lucinda Pinto, however, considered that Durigan avoids answering about the impact of additional government spending on inflation and, consequently, on the interest rate.

The analyst highlighted that the economic stimulus measures adopted throughout the year amount to between R$150 billion and R$200 billion.

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"According to XP's calculations, this additional spending has an impact on GDP of 1.4 percentage points", he explained. "The point is that economic growth, additional consumption, this generates inflation. So, yes, there is an effect on interest rates," added Lucinda.

Lucinda also highlighted that the effect becomes a kind of snowball: higher interest rates increase the cost of the debt that the government carries and rolls over periodically.

"The cost of our debt, because of the interest rate, is higher than that of other countries," said the analyst, refuting Durigan's argument that other nations, including emerging and developed ones, also carry high debt.

War as a backdrop and Central Bank autonomy
Durigan also mentioned international conflict as a factor behind current inflation. Lucinda partially agreed, but highlighted that other elements contribute to the scenario.

The analyst recalled that government spending to try to contain the impact of rising fuel prices on people's lives also ends up resulting in inflation, creating a paradox that, according to her, the minister is unable to explain clearly.

In another part of the interview, Durigan defended the autonomy of the Central Bank, but expressed reservations regarding the text of a PEC presented to the Constitution and Justice Commission. "I see a way out, yes, for us to give more financial and operational autonomy to the Central Bank, but I see some problems in the last text that was presented at the CCJ," he said.

Lucinda highlighted the urgency of the issue, pointing out that the Central Bank is facing a shortage of manpower and investments in technological tools, such as artificial intelligence, necessary to supervise an increasingly complex and agile financial system. "Indeed, the Central Bank needs to be strengthened", concluded the analyst.

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Source: CNN