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Inflation, interest rates and indexation in Brazil: how contracts keep their value

Last verified: 2026-10-27 · Status: Changing

Brazil still lives with indexation, but under strict rules: obligations payable in Brazil must be stated in reais, and price index adjustment clauses are valid only in contracts of one year or more and no more often than once a year. Since Lei nº 14.905 of 2024 the Civil Code fills gaps with IPCA for monetary correction and a legal interest rate equal to the Selic minus IPCA, floored at zero, which the Central Bank publishes monthly. With the Selic target at 13.75 percent and 12 month IPCA at 4.58 percent in September 2026 against a 3 percent target, the real cost of money is high, so the choice of index and interest clause moves real value in every long contract.

USD figures use the Banco Central do Brasil PTAX selling rate of R$5.3346 per US dollar for 27 October 2026. The rate moved from R$5.0377 on 23 October to R$5.5007 on 26 October 2026, so conversions are for orientation only.

Key facts

Selic target rate	13.75 %Copom decision, BCB SGS 432, as of 2026-10-27 · in force
Effective Selic, daily rate	0.050788 % per business dayBCB SGS 11, as of 2026-10-26 · in force
IPCA inflation, 12 months	4.58 %IBGE IPCA via BCB SGS 13522, as of 2026-09-30 · in force
IPCA inflation, month	0.82 %IBGE IPCA via BCB SGS 433, as of 2026-09-30 · in force
Legal interest rate when none agreed	Selic minus IPCA, floored at zero, published monthly by the Central Bank textCivil Code art. 406 (Lei nº 14.905); Resolução CMN nº 5.171, as of 2024-08-29 · in force
Default monetary correction index	IPCA textCivil Code art. 389 sole paragraph (Lei nº 14.905), as of 2024-06-28 · in force
Shortest allowed price index adjustment period	12 monthsLei nº 10.192, art. 2, § 1, as of 2001-02-14 · in force

The rule

1. Payment obligations enforceable in Brazil must be stipulated in reais at their nominal value. Clauses are void if they require payment in or linked to gold or foreign currency (except where law or Central Bank regulation allows), adjust by any unit of account, or adjust by general or sector price indexes or production cost indexes, except as allowed by art. 2.Lei nº 10.192 (Plano Real complementary measures; art. 1, I as worded by Lei nº 14.286), Art. 1, caput and sole paragraph, I to III, 2001-02-14 official text · verified 2026-10-27

2. Monetary correction or adjustment by general, sector or cost price indexes is allowed in contracts with a term of one year or more. Any adjustment clause with a frequency shorter than one year is void, as is any mechanism that produces the financial effect of a shorter period. After a contract review, the next adjustment period starts from the review date. Contracts with public entities follow the same rules, with the year counted from the deadline for submitting the bid or the budget it refers to.Lei nº 10.192, Art. 2, caput and §§ 1 to 3; art. 3, caput and § 1, 2001-02-14 official text · verified 2026-10-27

3. Foreign currency payment clauses are allowed, among other cases, in foreign trade contracts and their financing and guarantees, and in obligations where the creditor or debtor is a non resident, including credit and leasing operations, but not in real estate leases.Lei nº 14.286, Art. 13, I and II, 2021-12-29 official text · verified 2026-10-27

4. If a debtor defaults, it owes damages plus interest, monetary correction and attorney fees. When no correction index was agreed and no specific law applies, IPCA calculated by IBGE applies. When interest is not agreed, agreed without a rate, or set by law, it follows the legal rate, which equals the Selic rate minus the IPCA correction; if negative it counts as zero. The same legal rate applies to loans for economic purposes when no rate is agreed.Lei nº 14.905, amending the Civil Code (Lei nº 10.406), Civil Code art. 389 sole paragraph, art. 406, §§ 1 to 3, and art. 591 sole paragraph (as worded by Lei nº 14.905 art. 2), 2024-06-28 official text · verified 2026-10-27 · changed: Lei nº 14.905 replaced the previous legal interest rule with Selic minus IPCA and set IPCA as the default correction index. The rules took effect 60 days after publication, except the CMN mandate in art. 406 § 2, which took effect on publication (art. 5).

5. The Usury Law (Decreto nº 22.626 of 1933), which caps interest, does not apply to obligations between legal entities, to obligations represented by credit instruments or securities, to obligations with financial institutions and other Central Bank authorised entities, investment funds, leasing companies and simple credit companies, or to transactions in the financial and capital markets.Lei nº 14.905, Art. 3, 2024-06-28 official text · verified 2026-10-27

6. The legal rate (TL) is calculated for each reference month from the accumulated Selic factor of the previous month and the IPCA-15 variation of the previous month, expressed monthly with six decimal places. Simple interest applies when accumulating monthly rates and calculating interest for part of a month. The Central Bank calculates and publishes it.Resolução CMN nº 5.171, Art. 2, art. 3, art. 5, art. 6 and art. 8, 2024-08-29 official text · verified 2026-10-27

7. The inflation target is continuous: 3.00 percent for 12 month IPCA with a tolerance of 1.50 points either way, missed only if inflation stays outside the band for six consecutive months, in which case the Central Bank publishes an open letter to the Finance Minister.Decreto nº 12.079; Resolução CMN nº 5.141, Decreto art. 2 and art. 6; Resolução art. 1 and art. 2, 2024-06-26 official text · verified 2026-10-27

Indicator	Value	Reference
Selic target	13.75%	In force on 27 October 2026 (SGS 432)
Effective Selic	0.050788% per business day, about 13.65% a year over 252 business days	26 October 2026 (SGS 11)
IPCA, month	0.82%	September 2026 (August minus 0.32%, July 0.07%)
IPCA, 12 months	4.58%	September 2026 (August 4.22%)
Inflation target	3.00%, band 1.50% to 4.50%	Continuous since 1 January 2025
Selic target over 12 month IPCA	About 8.8% real	13.75% and 4.58%

Rates and inflation, latest official values (Banco Central do Brasil SGS; IBGE IPCA)

Situation	Result	Rule
Contract under one year with a price index clause	Clause void	Lei nº 10.192 art. 2
Contract of one year or more, annual IPCA or IGP adjustment	Valid	Lei nº 10.192 art. 2
Adjustment every six months	Void	Lei nº 10.192 art. 2, § 1
Default with no index agreed	IPCA	Civil Code art. 389 sole paragraph
Default interest with no rate agreed	Legal rate: Selic minus IPCA, not below zero	Civil Code art. 406
Loan between two companies at a high agreed rate	Usury cap does not apply	Lei nº 14.905 art. 3, I
Payment in US dollars to a non resident creditor	Allowed	Lei nº 14.286 art. 13, II
Payment in US dollars in a lease of real estate	Not allowed under art. 13, II	Lei nº 14.286 art. 13, II

Which rule decides the index and the interest rate in a contract

Worked example

Cost of local money in real terms. With the Selic target at 13.75 percent and 12 month IPCA at 4.58 percent, the real policy rate is about 8.8 percent (1.1375 divided by 1.0458, minus 1). Carrying R$1,000,000 (about US$187,455) of debt at the Selic alone costs R$137,500 a year (about US$25,775) before any bank spread.
Annual adjustment. A three year supply contract of R$500,000 a year signed in October 2025 may be adjusted by 12 month IPCA in October 2026: at 4.58 percent the annual price becomes R$522,900 (about US$98,020). A clause adjusting every six months would be void (Lei nº 10.192 art. 2, § 1).
Late payment with no clause. A buyer pays a R$100,000 invoice six months late and the contract has no correction or interest clause. The seller can claim IPCA correction (Civil Code art. 389) plus interest at the monthly legal rate published by the Central Bank, which is the Selic minus IPCA-15, accumulated in simple interest (Civil Code art. 406; Resolução CMN nº 5.171 art. 6).

Step by step

1. State all prices payable in Brazil in reais unless a Lei nº 14.286 art. 13 exception applies.
2. For contracts of one year or more, choose the index (IPCA is the common choice and the default) and fix an annual adjustment date (Lei nº 10.192 art. 2).
3. Write explicit late payment interest and correction clauses; otherwise the Civil Code default of IPCA plus the legal rate applies.
4. For intercompany loans and B2B credit, note that the Usury Law cap does not apply (Lei nº 14.905 art. 3), but transfer pricing and tax rules still do.
5. Track IPCA monthly and the Copom decisions; check the monthly legal rate published by the Central Bank when calculating claims.

Common traps

Monthly or quarterly price adjustments in ordinary commercial contracts. They are void (Lei nº 10.192 art. 2, § 1).
Indexing a short contract. Contracts under one year cannot carry price index adjustment clauses (Lei nº 10.192 art. 2).
Copying a foreign currency clause into a domestic contract. Foreign currency stipulations are void unless law or Central Bank rules allow them (Lei nº 10.192 art. 1, I; Lei nº 14.286 art. 13).
Assuming the legal rate is the Selic. Since Lei nº 14.905 it is the Selic minus IPCA, and zero if negative (Civil Code art. 406).
Pricing on the 3 percent target. IPCA was 4.58 percent over the 12 months to September 2026, above the 4.50 percent ceiling.

Sources

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