Chief economist sees chance for AI to make Brazil more efficient, but high interest rates are a risk

The artificial intelligence can help Brazil attack one of its main historical bottlenecks — low productivity —, but the high interest rate environment still represents a relevant brake on this transformation, in the assessment of Bradesco’s chief economist, Fernando Honorato.

According to him, technology opens up space for large-scale efficiency gains and can even reduce structural inequalities. However, there is a risk that the country will lose another wave of development due to structural issues.

“Technology makes it possible to bring quality services to regions where this was not previously available. This can have an important impact on the efficiency of the Brazilian economy as a whole”, he stated during VTex Day, held this Thursday (16).

In the view of Bradesco’s chief economist, the sectors that benefit most tend to be those with greater scale potential or historical productivity bottlenecks, such as health, education and services, where digitalization and the use of data can speed up processes and reduce costs.

Despite the potential, Honorato considers that the high cost of capital in Brazil still limits the speed of this transformation. “With high interest rates, technology adoption slows down — and this ends up delaying productivity gains,” he said.

Interest decreases investments

He highlights that this effect is not trivial: by making investments more expensive, the high interest rate environment reduces companies’ appetite for innovation and postpones projects that could boost efficiency and growth in the medium term.

This situation is connected to a structural problem in the country. Over the last few decades, Brazil has grown below the global average, largely due to more limited productivity gains.

Still, the economist highlights that the country has the capacity to grow more when it avoids macroeconomic crises. “When Brazil manages to maintain stability, it grows closer to the world. The problem is the recurrence of shocks”, he stated.

In this context, high interest rates appear both as a symptom and a cause of difficulties. They reflect fiscal risks, but they also end up holding back investments and limiting growth potential.

For Honorato, the solution necessarily involves a more consistent fiscal adjustment — even if the path is politically challenging.

“The adjustment on the spending side is more difficult politically, but there is no alternative. It is the inevitable path to reducing interest rates in a sustainable way”, he stated.

In practice, according to him, without a credible sign of fiscal consolidation, the country will continue to live with high rates, which tends to “put an end to the party” precisely at a time when technology could accelerate productivity gains and unlock growth.