“Because of the inflation we are seeing, which is much higher than what is suggested by the target system, there should be an increase in interest rates…”
Fernando Siqueira is the research director at Guide Investimentos and professor at Fundação Getúlio Vargas – FGV, graduated in economics from USP, with a M.Sc. and Ph.D. in economics from FGV.
Fernando Siqueira, research director at Guide Investimentos
AgriBrasilis – Will the Central Bank cut interest rates again in the short term?
Fernando Siqueira – I don’t think that is likely. I think it is more probable that the Central Bank will raise interest rates in the short term and eventually manage to cut interest rates at the end of next year or in 2026. Given the inflation we are seeing, which is much higher than what the target system suggests, interest rates should rise in the short term.
AgriBrasilis – With the independence of the Central Bank, what should change in the conduct of national monetary policy in the coming years?
Fernando Siqueira – Regarding what could change in monetary policy, I don’t think anything should change in the coming years. I think this issue of the Central Bank’s independence will probably be maintained. This is something new, but it is very difficult to change once it is already been approved. So the conduct of monetary policy will be maintained the way it has been done in recent years, following the inflation target regime, but now with the Central Bank independent, which is something new.
“With the depreciation of the exchange rate, prices tend to rise a little in reais, which improves the profitability of farmers and reduces the risk of default”
AgriBrasilis – Regarding agribusiness, there was a new increase in the number of judicial reorganizations (Chapter 11) in the sector. What is your perception of this scenario?
Fernando Siqueira – Regarding judicial reorganizations (Chapter 11), I mentioned before that the moment was difficult due to the low prices of the main agricultural products. Obviously this is not positive, but what we see looking ahead is a possibility of improvement.
There should be an improvement mainly due to the depreciation of the Real (BRL): this ends up helping agribusiness a little, even with the dollar prices of agricultural products still at low levels. This exchange rate issue helps the sector, which is focused on exports.
AgriBrasilis – What were the effects of the drop of the Selic rate(Special System for Settlement and Custody) rate during the 1H 2024?
Fernando Siqueira – I think this effect was small. Especially because the drop in the Selic rate was very small since it began. So far this drop has had very little effect on the economy, both for agriculture and for the general outlook.
AgriBrasilis – Why are Fiagros (Investment Funds in Agro-Industrial Production Chains) recovering profitability and gaining ground on the stock market? Is this recovery here to stay?
Fernando Siqueira – There are a few factors: the first is that the prices of agricultural products were falling, but now, with the depreciation of the exchange rate, prices tend to rise a little in reais, which improves the profitability of farmers and reduces the risk of default. Fiagro is a credit operation in general. More profit means that the chance of the farmer not paying is getting smaller and smaller. People are seeing that the risk for Fiagros is decreasing.
Secondly, I can point to the issue of the Selic interest rates rising. This also helps because Fiagros are generally indexed to the CDI (Interbank Certificate of Deposit), which follows the Selic rate. So, when the Selic rate was falling, this was a sign that profitability would be lower for Fiagros. But now Fiagros should perform better, taking advantage of the fact that interest rates are expected to rise.
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