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[BUSINESS] · Brazil · 61 sources

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André Lara Resende blames high interest rates for Brazil's fiscal imbalance

Economist André Lara Resende, a key architect of the Plano Real, has sparked intense debate by accusing the Central Bank of Brazil of causing the country's fiscal imbalance through high interest rates. In a recent article, Resende argues that maintaining the Selic rate at its current level is a strategic error based on anachronistic economic theories, asserting that high interest rates, rather than primary spending, are the primary driver of the public deficit.

Resende proposes reducing the Selic rate to approximately 7.5% per year over a 12-month period to lower government debt servicing costs. He also suggests the creation of a National Fiscal and Monetary Council to establish medium-term economic goals and recommends using international reserves to stabilize the exchange rate if a rate reduction triggers currency volatility.

Finance Minister Dario Durigan has denied that the government is considering these proposals or any plan to freeze or table interest rates. Durigan also clarified that there is no scheduled meeting between President Luiz Inácio Lula da Silva and Resende to discuss these specific ideas. While some members of the Workers' Party (PT) have expressed support for Resende's views, the proposal has caused apprehension in financial markets due to potential destabilizing effects.

Entities

André Lara Resende · Banco Central do Brasil · Brazil · Central Bank of Brazil · Copom · Darío Durigan · Gleisi Hoffmann · Luiz Inácio Lula da Silva

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