Industry discomfort with high interest rates is a record, says CNI – 04/20/2023 – Market

Industry’s annoyance with high interest rates in the country broke a record in the first quarter of this year. This is what a survey released this Thursday (20) by the CNI (National Confederation of Industry) indicates.

According to the survey, 28.8% of the consulted entrepreneurs cited high interest rates as one of the main problems in the first three months of 2023.

This is the highest percentage registered by this factor in the survey’s historical series, with data available from 2015 onwards. The CNI states that the mention of high interest rates draws attention because “it is gaining more and more relevance”.

“Since 2022, in all quarters, this problem has been frequently presented by industries and marks a percentage above 20% consecutively”, says the entity in a note.

The concern is in line with recent statements by President Luiz Inácio Lula da Silva (PT), who repeatedly criticized the BC (Central Bank) and the level of the basic interest rate, the Selic.

In early February, Lula said that the Selic rate (13.75% per year) was a “shame”. The president also stated at the time that “the business class needs to learn to demand, to complain about high interest rates”.

“When the Central Bank depended on me, everyone complained. The only day Fiesp [federação da indústria paulista] talked about was when interest rates increased. It was the only day […]. Now, they don’t speak,” Lula said.

The survey released by CNI this Thursday consulted more than 1,600 small, medium and large companies in Brazil.

In the list of the main problems of the industry in the first quarter, interest rates were only behind the high tax burden (34.6%) and insufficient domestic demand (33.3%), according to the survey. These issues, says the CNI, are usually at the top of businessmen’s concerns.

The survey also points out that industries indicated worsening financial conditions in the first quarter.

The index that measures the ease of access to credit dropped by 4.7 points, from 42.7 points to 38 points. The indicator was below both the dividing line (50 points) and the average of the historical series (39.8 points).

“This difficulty in accessing credit is related to the increase in restrictions on granting criteria, given the high default rate, including due to adverse events at large retail companies,” stated CNI’s economic analysis manager, Marcelo Azevedo.

Maintaining the Selic at a high level is the Central Bank’s weapon in trying to contain inflation. The measure seeks to curb prices by cooling demand for goods and services.

The expected side effect is the loss of momentum in economic activity, because the cost of credit is higher for companies and consumers.

On Wednesday (19), BC president Roberto Campos Neto assessed that the “battle” against inflation has not yet been won and that it is necessary to “persist”.

The IPCA (Ample National Consumer Price Index) slowed down to 4.65% in the 12 months through March. It is the lowest level in more than two years.

For Campos Neto, full inflation data remain “polluted” by recent changes in product taxation, and the cores, which disregard more volatile prices, remain high.