Productive investment falls 3.4% in the first quarter

Gross fixed capital formation (GFCF), the name given by economists to productive investment, fell 3.4% in the first quarter, compared to the last three months of the previous quarter, according to the Brazilian Institute of Geography and Statistics (IBGE). It is the worst start to the year since 2009, when it shrank by 10.4%.

According to the Economic Policy Secretariat (SPE) of the Ministry of Finance, the weak performance of the can be attributed to the high level of the basic interest rate. The Selic is currently at 13.75% per annum.

High interest rates and economic uncertainties, which increase the cost of capital and reduce the return on investment, are discouraging businessmen from investing resources in the modernization and expansion of their businesses. Expectations are that productive investment will lose strength in 2023, after two years of growth. The investment rate reached 17.7% of GDP in the first quarter, below that registered in the same period of the previous year (18.4%).