April 16 (UPI) -- In earlier columns, I argued that Latin America's high cost of capital is driven mainly by political risk and weak institutions. Brazil, the region's largest economy, is one of the clearest examples.
The country has extraordinary scale, a domestic market of more than 200 million people, abundant natural resources and deep reserves of technical talent. Yet investors still demand a steep premium to operate there. That premium does not reflect a lack of potential. It reflects persistent doubts about the fiscal outlook, the complexity of the tax system and the state's uneven capacity to implement policy efficiently.
Brazil's benchmark Selic rate stands at 14.75% following the central bank's March 2026 decision, one of the highest nominal policy rates among major economies. Public debt, which the IMF estimates at roughly 88% of gross domestic product, also remains elevated by emerging-market standards. The result is a financing environment that constrains investment, raises borrowing costs and narrows the country's room to grow.
That is Brazil's paradox. It is not short on assets. It is short on confidence.
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