By Brazil Stock Guide — The chief executives of Itaú Unibanco and Bradesco, two of Brazil’s largest private sector banks, warned on Monday that economic growth could slow to near zero in 2027 as inflation pressures persist and interest rates remain elevated. Both called for fiscal measures to restore investor confidence and create room for lower borrowing costs.
Speaking late Monday morning at NeoConference 2026, an event hosted by business news outlet NeoFeed in São Paulo, Itaú CEO Milton Maluhy Filho and Bradesco CEO Marcelo Noronha discussed the economic challenges facing President Luiz Inácio Lula da Silva’s fourth term. The panel, moderated by journalist Carlos Sambrana, covered public debt, corporate financial strains and the conditions needed to revive investment.
Maluhy said Itaú forecasts gross domestic product growth of just 0.5% in 2027, with risks tilted to the downside. Inflation, previously projected at around 4.2%, could reach 6%, he said, citing currency depreciation, geopolitical developments and recent economic measures.
“Our best assessment today is that interest rates will remain unchanged for longer,” Maluhy said, raising the possibility that Brazil’s benchmark policy rate could stay at 13.75% throughout 2027.
Noronha offered a similar assessment, saying Bradesco’s economic forecasts point to growth of approximately 0.4% next year. High interest rates are already weakening companies’ ability to service their debt, particularly among businesses with heavier borrowing and thinner operating margins, he said.
He also highlighted household debt service, which absorbs close to 29% of income, constraining consumption and limiting the scope for an economic recovery.
Public Debt Could Reach 89% of GDP
The trajectory of public debt was a central concern for both executives. Noronha said gross public debt, currently close to 83% of GDP, could reach 89% in 2027 without a significant shift in fiscal policy.
Maluhy warned that debt could exceed 100% of GDP within four years if the current trajectory continues. High interest rates, weak growth and rising public spending could further undermine confidence, with consequences for the exchange rate, inflation and employment, he said.
“To sustain social policies and invest in development and social programs, you need to have your fiscal house in order,” the Itaú CEO said.
Noronha argued that a lasting reduction in interest rates requires economic growth, renewed confidence and consistent fiscal results. Assuming real interest rates of 4% and GDP growth of 2.5%, he estimated that a primary budget surplus—excluding interest payments—of between 1% and 1.5% of GDP could stabilize the debt ratio.
“Fiscal adjustment is not the destination. It is the starting point,” he said.
Maluhy Pushes Back Against Criticism of “Faria Lima”
Asked about the perception that the debate over high interest rates reflects pressure from “Faria Lima” on the government, Maluhy rejected the idea that banks necessarily benefit from tight monetary policy.
Faria Lima, a major financial district in São Paulo, is commonly used in Brazil as shorthand for the financial establishment, much as Wall Street is in the United States.
Maluhy said lending is banks’ core business and excessively high rates hurt both borrowers and financial institutions by increasing default risk.
“No one today supports interest rates at this level. They are not good for banks. Rates this high are very damaging,” he said.
He also joked about the tendency to associate Brazil’s largest banks with the district.
“I have even said this in Brasília: Bradesco is headquartered in Cidade de Deus, and Itaú in Jabaquara. So neither is on Faria Lima,” he said, referring to the banks’ headquarters in the São Paulo metropolitan area.
Maluhy added that financial markets represent more than the interests of large investors. “At the end of the day, Faria Lima is a retiree’s savings,” he said, referring to individuals’ money managed by financial institutions.
He also disputed the suggestion that markets necessarily follow partisan preferences. Investors focus primarily on the credibility of economic policy, the public debt trajectory and the government’s ability to meet its commitments, he said.
“The market, by definition, is nonpartisan,” Maluhy said, adding that a coherent economic plan led by a credible team with sufficient autonomy could substantially improve expectations.
Lara Resende’s Proposal and a Return to Investment Grade
Both executives were also asked about economist André Lara Resende’s proposal, which has fueled public debate over changes to monetary policy and ways to lower interest rates.
Maluhy declined to assess the possibility of administratively imposed limits on rates, saying there was no official government proposal to examine. He nevertheless defended the preservation of the economic policy institutions developed since the Real Plan, Brazil’s landmark inflation stabilization program, including a floating exchange rate and the central bank’s role in controlling inflation.
Noronha took a similar position, arguing that the current environment calls for orthodox economic management, with lower interest rates resulting from stronger public finances and restored credibility.
Maluhy also called for Brazil to regain an investment grade sovereign credit rating from international rating agencies.
Losing that status raises financing costs not only for the government but also for Brazilian banks and companies borrowing abroad, he said. Brazil should focus on stabilizing debt and restoring its ability to attract long-term foreign capital, he added.
Noronha Says Food Tax Breaks Should Target Lower-Income Families
Discussing options for fiscal adjustment, Noronha said Brazil has room to review tax incentives and exemptions, citing an estimated R$580 billion in tax expenditures that could be examined.
As an example, he pointed to the roughly R$50 billion annual cost of tax exemptions on a basket of essential food products. Better targeting of support to lower-income households could preserve social protection while reducing the fiscal cost, he argued.
Noronha noted that affluent consumers, including the executives on the panel, also benefit from tax breaks on basic foods.
“Frankly, we do not need a blanket subsidy for basic food staples. It should be targeted at the people who actually need it,” he said, after mentioning products such as beans, cheese, rice and pasta.
Restricting the benefit to lower-income families could potentially save R$25 billion to R$30 billion a year, the Bradesco CEO estimated.
Noronha also highlighted the impact of above-inflation increases in the minimum wage on mandatory spending, including pensions and welfare benefits. Linking various public expenditures to the minimum wage amplifies the fiscal effect of those increases, he said.
He stressed that he was not advocating the removal of social benefits, but a discussion about spending sustainability and the government’s ability to finance support for lower-income Brazilians.
Corporate Restructurings Reflect Pressure From High Rates
Rising corporate financial distress also featured in the discussion. Asked about the frequency of court-supervised and out-of-court debt restructurings, Noronha attributed some of the strain to persistently high borrowing costs.
Companies that previously operated with manageable leverage have found it increasingly difficult to service their debt as interest rates remain elevated, he said.
Noronha added that out-of-court restructuring can be a less disruptive alternative to court-supervised proceedings, allowing companies and creditors to negotiate directly.
For banks, the environment places greater emphasis on loan portfolio quality and borrowers’ repayment capacity as economic growth slows.
Bankers Urge Caution Without Losing Optimism
Toward the end of the discussion, both CEOs balanced their economic warnings with confidence in Brazil’s long-term opportunities.
Noronha said business leaders need to recognize the difficulties while continuing to invest and run their companies. Fiscal adjustment should be a shared responsibility across the executive branch, Congress, the judiciary and society, he argued.
“Let’s do our homework, but look ahead with optimism,” he said, invoking the work ethic of Bradesco founder Amador Aguiar.
Maluhy said periods of instability can create opportunities for well-prepared companies, noting that the history of Brazil’s major banks has been shaped by mergers, acquisitions and decisions made across different economic cycles.
Even so, the Itaú CEO urged companies to be selective about investment, particularly given what he described as an excessively high cost of capital.
“You cannot try to be a hero in a challenging environment,” he said.
Companies should maintain a long-term perspective, allocate capital carefully and avoid rushed decisions, Maluhy added. Business leaders have become more cautious about investment, a response he considers appropriate given the uncertainty.
Both executives concluded that restoring confidence and growth will require structural policy decisions alongside a constructive approach from the private sector.
Their message was one of near-term caution without losing sight of investment opportunities in an economy that, despite fiscal and financial constraints, continues to offer growth potential in areas such as energy, infrastructure and technology.
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