Abstract

The promulgation of the Brazilian Constitution of l988, reinstated the so-called
Usury Law. According to this old regulament, which was never revoked but that was made
ineffective due to the extremely high rates of inflation that we have been experiencing since
a long time ago, the rate of interest, in nominal terms, cannot exceed 12% yearly. Aiming to
innovate, while at the same time ignoring the ever-present law of supply and demand, the
1988 Constitution established that ceiling in real terms. The paper focuses not only on the
difficulties of measuring the effective rate of interest that is charged on bank loans, but also
on the almost impossible task of measuring it in real terms. The unavoidable conclusion is
that this new version of the Usury Law will be also rendered ineffective in practice.

JEL Classification: E43; E52; G28.