Brazilian banks warn tax changes on LCI could raise credit costs

Banking executives from Bradesco and Santander have warned that ending tax exemptions for Real Estate Credit Letters (LCI) and Agribusiness Credit Letters (LCA) could significantly increase the cost of credit. During the 27th Annual Santander Conference, leaders noted that taxation would force investors to demand higher returns, inevitably leading to higher interest rates for borrowers in the real estate and agribusiness sectors.

As the availability of funds from savings accounts (poupança) continues to decline, LCIs have become a vital funding source, with stocks exceeding R$ 500 billion and accounting for approximately 20% of the real estate sector's funding. Executives emphasized that maintaining these exemptions is crucial to prevent a slowdown in financing operations.