Interest Rates challenged by President

Brazil’s president has taken another step forwards in her attempts to encourage interest rate reductions. This is clearly an important issue, not just for all who invest in Brazil but anyone who just lives there too!

Brazilian news recently reported a set of meetings with her economic team by the country’s president, Dilma Rousseff. She has again emphasised that in her view there’s no need for the cost of loans in the Country to remain so high. This is particularly puzzling, she feels, as the Selic rate (basic interest level) set by Brazil’s Central Bank (although still in double figures, 10.5%) is slowly but surely dropping.

That ‘benchmark rate has gradually been edging downwards in recent times, by cautious half-a–percent steps every time and the President wants to see much more progress. After all, the vast majority of Brazil’s main competitors throughout the world have much lower basic rates.

Also of great concern to Dilma and her team is the difference between the two main kinds of interest. There is one for banks to lend out money and one paid by the banks themselves to raise their cash in the first place. The technical term for the gap between the two is ‘the spread’.

There are a great many possible measures that could be taken to reduce this further. Indeed, the eventual package will be of great interest (no pun intended!) to anyone who borrows money. This includes literally millions of newly middle-class people who for the first time ever are able to obtain (and afford) mortgages. These enable them to buy their dream homes via the ground-breaking (in more ways than one!) new affordable housing scheme Minha Casa Minha Vida