Production sector reacts to the Selic reduction and points to a still restrictive level

Entities representing Brazilian industry reacted cautiously to the decision, indicated by the Copom (Monetary Policy Committee) this Wednesday (17), to reduce the Selic rate to 14.25% per year.

Institutions point out that, although the decrease is a positive aspect, the level of interest still remains at a restrictive level, which harms investments, competitiveness and even the financial health of companies and families.

In a statement, the CNI (National Confederation of Industry) says that the announced reduction is insufficient and incapable of reversing the scenario of stagnation and financial suffocation.

The entity highlights that the new level of 14.25% is still 3.1 percentage points above the equilibrium rate (estimated at 11.1%), which would be the ideal level to reconcile inflationary control with full employment.

"As long as real interest rates remain so high, directly benefiting speculative capital, the cost of credit will continue to make industrial production and expansion plans unfeasible", stated the president of the CNI, Ricardo Alban.

"Similarly, the measure proves to be ineffective in relieving the budgets of families, companies and the government itself, which will continue to be strangled by debt service, postponing the resumption of consumption and investment and overcoming the specter of default."

The CNI analysis also provides data on the impact on the production base and consumption: "High interest rates continue to severely impact companies and families. In April, Brazil reached the record mark of 9 million negative CNPJs, according to Serasa Experian - an increase of 1.5 million in one year - with debts totaling R$221 billion. Of this total, 8.5 million are micro and small companies, the most vulnerable to monetary tightening."

In the context of families, the institution highlights that debt compromises around 50% of accumulated income, while 30% of the monthly budget is allocated to paying interest and amortizations.

According to the National Confederation of Industry, this situation acts as a direct obstacle to consumption and the construction of family wealth.

Fiemg highlights challenges for sectors
Fiemg (Federation of Industries of the State of Minas Gerais) classifies the Copom decision as a favorable sign for the business environment.

The entity assesses that the movement contributes to improving credit and investment conditions, but highlights that the challenges remain high for sectors dependent on financing.

"While recognizing the importance of price stability for sustaining economic growth, FIEMG highlights that disinflation must occur in a manner compatible with the preservation of productive capacity and job creation. In this sense, the entity understands that a less restrictive monetary policy needs to be accompanied by greater coordination with fiscal policy", said the Minas Gerais federation.

The entity defends an economic strategy capable of reconciling inflation control, balancing public accounts and stimulating production.

"This environment is essential for expanding investments, increasing productivity and strengthening the competitiveness of Brazilian industry, creating conditions for more robust and lasting economic growth."

Investment capacity
Firjan (Federation of Industries of the State of Rio de Janeiro) also reiterated the importance of continuing the process of monetary easing is positive, but the current level of interest penalizes the industry's investment capacity.

"The context that the national industry is going through is challenging. In addition to the rise in input and freight costs, resulting from global geopolitical instability, the high - and persistent - cost of capital is a fundamental factor that reduces the competitiveness of Brazilian products in the domestic and foreign markets", points out Firjan's chief economist, Jonathas Goulart.

The Rio de Janeiro federation highlights that the manufacturing industry operates 16% below its historical maximum, according to IBGE data. For Firjan, strengthening fiscal credibility is essential to guarantee the continuity of the monetary easing process in a structured and credible manner.

BC cuts interest rates by 0.25 points and reduces Selic to 14.25% | H TIME

Source: CNN