Central Bank is hospital, and interest is medicine, says entrepreneur – 03/25/2023 – Panel SA

José Isaac Peres, founder and main shareholder of the shopping center company Multiplan, which brings together undertakings such as BarraShopping and Morumbi Shopping, was another of the voices in the business community that came out in defense of maintaining the Selic at 13.75% by the Central Bank.

He uses the same analogy repeated by other businessmen during the week to justify such a high level: interest rates are the bitter medicine, but necessary, to fight the disease, which in this case is inflation, he says.

“The Central Bank is like a hospital. It is applying the medicine”, he says.

One of the businessmen identified with Bolsonarism —he was one of the targets of the search warrants against members of a WhatsApp group in which messages about a coup d’état were exchanged last year—, Isaac Peres also sees problems with high interest rates, as well as the President Luiz Inacio Lula da Silva.

“But my question is that I am aware that the big problem is not interest, it is inflation”, he says.

How do you see the high level of interest? We are living a difficult post-Covid moment. It is difficult for the whole world and also for Brazil. The problem with interest rates is inflation. Interest is the remedy. Inflation is the problem.

And the problem with inflation is that, when you talk about 5% or 6%, you are talking about the average. And the average is very unrealistic, because if you have your feet in the fridge and your head on the stove, your body temperature is perfect. But you’re already dead.

So, the evil of inflation is that the poorest people, the least favored, are the ones who suffer the most. The inflation of the poor is not 6%. It’s somewhere around 25% or more, mostly because of the diet. And, sometimes, around 50% is spent on food, excluding medicine and others. So, you have to understand.

Roberto Campos, the grandfather of the current president of the Central Bank, used an expression. As a carioca, I can use it, because we are kind of irreverent, but he used to say: statistics are like a bikini, they show everything except the essentials. Then that’s it. When you see the statistical number, you work with averages. And the average means nothing. It is necessary to determine inflation in the different social classes to see exactly how it is.

Those who have money to invest benefit from the high interest rate. I, for one, am a businessman. I pay a lot of interest. I would not like. If we pay R$300 million or R$400 million in interest per year, it’s not good. This reduces profit, but I understand that the problem is not the interest rate. The problem is inflation. The Central Bank is like a hospital. He is applying the medicine. It’s bitter.

And he gives the signal that this can go further. It’s worrying?It’s because we still need to know exactly what the current government’s metric is. The government seems to be going to present its project, it is said that it will be presented in 60 days.

It is possible that, depending on what the government presents, the Central Bank will change its perspective. But I don’t think Brazil will stay with this interest rate for a long time. I think inflation will drop, but you have to think about the less favored classes, because inflation of 6% to 7% is real for the average, but not for the less favored classes.

Those who have a lot of money and invest even earn money now by investing at interest rates, but the economy slows down. And if that doesn’t happen, though, inflation keeps rising.

The government already said it was going to bring forward the presentation of the framework, but later it postponed it. Would it be a relief?It depends on what the government comes up with. The Central Bank is the thermometer. He is the currency manager, he is concerned with the issue of economic stability. I’m from cruise time. I think that, over these 60 years of business life, he must have cut about 21 zeros. Imagine what that is and how much inflation we’ve had over the years. Inflation is bad. You have to look at those at the bottom, at the base of the pyramid, and worry about inflation.

President Lula and the government have been complaining about interest rates. In your speech you also have a complaint about the fees?Of course, but my question is that I am aware that the big problem is not interest, it is inflation. Sometimes the medicine seems a little bitter. But we have already been, in the Sarney government, with 80% inflation in one month. I took this. It’s terrible.

We had another president who froze his deposits. All of a sudden he wanted to run out of money to end inflation. Nor is killing the patient the end of inflation. So, I think interest rate metrics are things adopted from the last 30 to 40 years, it’s a more modern thing, in which the world relies a lot on inflation to maintain a lower interest rate.

Brazil didn’t look bad in this whole post-Covid picture compared to other countries. Now, this is a political issue, that is, depending on the proposal, I think that the Central Bank can make it more flexible.

And the concern from the point of view of retail?Yes, for all of us. High interest rates hinder development.

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Founding partner of the shopping center company Multiplan, the entrepreneur created his first business, the developer Veplan, when he was studying at the National Faculty of Economics, in Rio de Janeiro, in the 1960s. In 2007, Peres went public in the company, which has malls such as Anália Franco, Vila Olímpia and VillageMall.