The Constitution, interest and the economy

Clovis de Faro ()

Brazilian Journal of Political Economy, 1994, vol. 14, issue 1, 45-56

Abstract: The promulgation of the Brazilian Constitution of l988, reinstated the so-calledUsury Law. According to this old regulament, which was never revoked but that was madeineffective due to the extremely high rates of inflation that we have been experiencing sincea long time ago, the rate of interest, in nominal terms, cannot exceed 12% yearly. Aiming toinnovate, while at the same time ignoring the ever-present law of supply and demand, the1988 Constitution established that ceiling in real terms. The paper focuses not only on thedifficulties of measuring the effective rate of interest that is charged on bank loans, but alsoon the almost impossible task of measuring it in real terms. The unavoidable conclusion isthat this new version of the Usury Law will be also rendered ineffective in practice. JEL Classification: E43; E52; G28.

Keywords: Interest; usury laws; inflation (search for similar items in EconPapers)
Date: 1994
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