The debate focused on the causes of Brazil’s high interest rates and the need to reassess the theoretical models underpinning the country’s monetary and fiscal policies.

Throughout the discussion, participants examined the economic impact of public debt-servicing costs and conceptual anachronisms, alongside the sociopolitical challenges posed by the expansion of rent-seeking behavior in society, the risks of exchange rate volatility, and the feasibility of establishing predictable, gradual coordination between interest rate and fiscal targets.

André Lara Resende presented a critical analysis of the economic models traditionally used to explain the persistence of high interest rates in Brazil. Drawing on his recent paper, “I Accuse: A Proposal to Eliminate Absurdly High Interest Rates,” the economist discussed the relationship between monetary and fiscal policies, the cost of servicing public debt, and the limitations of conventional inflation models. As an alternative, he proposed greater coordination between the two policy areas through a unified Monetary and Fiscal Council, with a predictable and gradual path toward lower interest rates.

Luiz Orenstein, in turn, addressed the economic, social, and institutional challenges involved in potential changes to interest rate policy. He highlighted the expansion of rent-seeking behavior beyond major investors, the challenges associated with Brazil’s tax structure, and the potential effects of a sharp interest rate reduction on the exchange rate and economic agents’ confidence. In this context, he emphasized the importance of institutional credibility and fiscal management in creating favorable conditions for long-term economic stability.

This initiative is part of CEBRI Conversa, a series of discussions organized by the institute to encourage the exchange of perspectives and informed reflection on issues central to Brazil.