On November 17, the Central Bank of Brazil released the IBC-Br (Economic Activity Index), which calculates the evolution of national economic activity, for the 3rd quarter of this year.

The report shows that although the Gross Domestic Product (GDP) has grown by 2.2%, in recent months there has been a reversal, with economic activity falling by 0.2% in September alone and by 0.9% in the 3rd quarter, with a general decline in all sectors: agriculture (-4.5%), industry (-1.0%) and services (-0.3%).

First drop in two years

Since the start of the current Lula administration almost three years ago, the national economy has grown – with the only exception being the third quarter of 2023, when there was a drop of 0.5%. In all the following quarters of the last two years, there has been continued economic growth.

The situation is therefore worrying, as this is the first drop in economic activity in the last two years and the -0.9% rate is the highest in the last five years, which could indicate a more prolonged downturn, with serious consequences for the country and especially for workers and the poor, with the risk of company closures, unemployment and further wage cuts.

Consequences of high interest rates

This setback is not happening by chance, but is the result of the Central Bank’s policy of high interest rates, with the Selic rate at 15%, the highest real interest rates in the world.

This policy consists of the government’s largest income transfer program, which ends up giving bankers and big capitalists around half of the entire national budget every year.

With high interest rates, capital that should be invested in new companies, in the creation of direct and indirect jobs, is diverted to financial speculation, which becomes much more attractive to the capitalists.

For workers and the poor, high interest rates also make it impossible to buy property, finance vehicles and other goods.

This is a policy designed to prevent national development and thus keep the country backwards, with the population in misery, as is already the case.

Without a change in the high interest rate policy, the country could be heading for an economic recession and further deepen the serious social problems that already exist today, such as hunger, misery, informal workers and low wages.