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Cost of Capital Remains a Challenge to Expanding Access to the Market

In 2025, Brazil’s capital markets reached an all-time high in fundraising, with R$839 billion in issuances. During the same period, the outstanding balance of private credit surpassed the banking loan portfolio for the first time, becoming the country’s leading source of corporate financing. This confirms a structural transformation in how companies finance themselves in Brazil, but it also raises a central question: who has been able to participate in this growth?

The question became even more relevant following the Central Bank’s Monetary Policy Committee (Copom) meeting in August 2026, when the Selic rate was cut from 14.25% to 14% per year. The reduction signals a marginal shift in the interest rate cycle but leaves the cost of capital at an elevated level. For capital markets, this matters because the benchmark interest rate directly affects the economic feasibility of issuances, particularly beyond the universe of large issuers.

Over more than three decades of managing transactions in this sector, I have witnessed different interest rate regimes and their effects on companies, investors and credit structures. This experience has led me to a simple conclusion: fundraising volumes and market development can progress at very different paces.

Large companies, issuers with established credit ratings and infrastructure projects benefiting from tax incentives can raise capital even when the Selic rate is high. For this group, interest rates above 14% can be accommodated within a transaction’s financial structure. However, the reality is different for a significant portion of the middle market.

Despite the high volume of funds raised, only 72 companies accessed the debt market for the first time in 2025. This suggests that growth remains concentrated among a relatively small group, given the size of Brazil’s economy. Thousands of mid-sized companies could benefit from direct access to capital to finance expansion, productive investments and operational modernization.

For a company with annual revenue between R$100 million and R$500 million, issuing debt when the CDI benchmark rate is high can make a substantial portion of its projects unviable. Even with a reasonable spread, the final cost limits the decision before it reaches the structurer’s desk. In these circumstances, the market favors companies that already have the scale, track record, governance and financial capacity to absorb the cost.

Based on this assessment, I believe there is an interest rate range in which Brazil’s capital markets are better positioned to develop more evenly. In my experience, this range tends to fall between 6% and 12% per year. This view considers the relationship between fundraising volumes, broader market access, issuer diversity, credit structure quality and investor appetite.

When rates fall significantly below this range, as they did in 2020, when the Selic rate stood at 2% per year, a different type of distortion emerges. Investors shift toward other investments, such as equities or multi-strategy funds combining fixed-income and equity investments, rather than private credit—not necessarily because of the quality of credit structures, but because of the need to seek more attractive returns elsewhere. Another factor is that abundant liquidity can finance transactions that would otherwise require greater rigor in risk assessment under normal conditions. The 2022–2023 cycle, marked by a significant increase in credit events in the market, revealed where some of these weaknesses had accumulated.

When interest rates exceed 12%, the market can continue to expand, as 2025 demonstrated. The problem lies in the composition of that growth. The shift away from bank lending is more pronounced among companies that already have established market access, while many businesses in the real economy remain far removed from this source of financing—or simply raise funds to roll over existing debt.

Between 6% and 12% per year, we observe a more balanced dynamic. Private credit spreads provide investors with a meaningful return premium without relying on an environment of compressed real interest rates. At the same time, the cost of capital becomes more competitive for a broader range of companies and sectors. Capital allocation decisions can then be based more rationally on risk, return, structure and issuer quality.

The record set in 2025 helps put this discussion into perspective. Brazil’s market demonstrated resilience because structural drivers continue to advance regardless of the interest rate cycle. The shift away from bank intermediation, regulatory improvements introduced by the Brazilian Securities and Exchange Commission (CVM), and the expansion of the investor base continue to support a significant transformation in the country’s financing framework.

The challenge now is to turn growth into broader development. A market capable of including the middle market, creating opportunities for new sectors and financing productive projects across different regions depends on a cost of capital that is consistent with this ambition. Brazil has already demonstrated that it can break fundraising records. The next stage requires answering a more difficult question: how many companies will have a genuine opportunity to access this market?

*José Alexandre Freitas is CEO of Oliveira Trust, a fiduciary services infrastructure platform with more than R$2 trillion in active transactions in Brazil’s capital markets.