NEWSLETTER

JUNE 2025

Murray Advogados

 

06/02/2025

SHARE BLOCK SALES HIT R$15BN, NEARING RECORD IN BRAZIL

Strategy emerges as main exit route for investors on B3 stock exchange

 

In Brazil’s sluggish stock market, the sale of shares through block trades has become the main exit route for investors in listed companies. So far in 2025, these deals have totaled about R$15 billion, already approaching the record R$17.7 billion set in 2020.

 

The largest deal this year took place in January, when Rubens Ometto’s Cosan sold part of its stake in mining giant Vale, moving R$9 billion—the biggest block trade ever on the Brazil’s B3 stock exchange. Investment firm Pátria sold a R$2.2 billion stake in gym chain Smartfit. Telecom operator Vivo held an auction of surplus shares worth R$1 billion. Canadian pension fund CPPIB offloaded R$700 million in GPS. Other transactions involved Carrefour, Clearsale, and Vitru Educação, the latter just last week.

 

Investment bankers say several shareholders are considering selling stakes through blocks, likely as more companies gain value on the exchange. Because these are fast-moving transactions, companies can launch an offer without prior notice, avoiding market volatility. A decision to sell can be made in one day, with banks quoting the deal—and execution happens at the opening of the next trading session, minimizing exposure to market swings.

 

Bruno Saraiva, co-head of investment banking at Bank of America (BofA) in Brazil, noted that a recent regulatory change now allows larger block sales without the previously required 48-hour notice, which had previously made many deals unfeasible. In a block trade, a bank offers a firm price for the shares, so the seller knows upfront how much they will receive. But when exposure to the market lasted longer, high risk often dampened banks’ appetite to structure such deals.

 

“It was a regulatory advance in Brazil. It created more flexibility,” Mr. Saraiva said. Under Brazilian law, block sales can only involve secondary tranches—that is, shares held by existing shareholders—because the law grants current shareholders preemptive rights, a structure only possible through a public offering.

 

Thus, companies that need to raise cash must turn to follow-on offerings.

 

Given this year’s tough and volatile market, the trend is for stake sales through exchange auctions. “We should see more block trades than other types of transactions,” Mr. Saraiva said.

 

With this momentum, volumes are expected to keep growing. Fábio Federici, head of equities at Goldman Sachs in Brazil, sees potential for a record year in 2025 as block trades increasingly become the preferred tool for monetizing investments. Beyond private equity firms’ portfolio sales, which can be auctioned on the exchange, he said controlling shareholders might also sell surplus stakes that do not jeopardize control. Other potential block sellers include funds that bought shares when the market was down, or even credit funds or banks that saw debts converted into shares.

 

“These are positions that easily surpass R$50 billion,” Mr. Federici said. “There’s a lot of pent-up deal flow,” he added, emphasizing that block sales are the most suited to the current market. “This type of operation is more adaptable,” he stressed.

 

More deals

 

Leonard Linnet, head of equities at Itaú BBA, said more deals are likely as stocks appreciate, a movement that has begun with the Ibovespa stock index’s current levels, reflecting the inflow of foreign capital. “It’s already starting to make sense for us to push some transactions,” he said.

 

Mr. Linnet pointed out that despite the benefits, block sales are not suitable for all companies, being more recommended for highly liquid stocks. In other cases, when a company needs to meet investors through management roadshows, a follow-on offering may be more appropriate.

 

Fabio Nazari, head of equities at BTG Pactual, added that follow-ons are also the path for companies seeking to raise funds and improve the quality of their shareholder base, as public offerings involve building an order book. He noted that the flow of foreign investors arriving in Brazil after “Liberation Day,” when U.S. President Donald Trump announced tariffs, has driven up many stock prices, creating room to unlock not only block trades but also follow-ons. “Deals are starting to move forward,” Mr. Nazari said.

 

Contacted for comment, Vitru said that “the sale of shares is a routine procedure, common in the capital markets. Vitru’s governance remains unchanged by this move.” The other companies did not comment.

 

Source: Valor International

https://valorinternational.globo.com

 

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06/02/2025

 

GNA OPENS BRAZIL’S LARGEST THERMAL POWER PLANT AT PORTO DO AÇU

With R$7bn in investments, GNA II boosts gas-fired capacity and strengthens energy security

 

 

Gás Natural Açu (GNA), a joint venture between Siemens Energy Sip Brasil and bp, has launched operations at its second power plant in Porto do Açu, in northern Rio de Janeiro state. The project, which received R$7 billion in investments, is now the largest thermal power plant in operation in Brazil.

 

The new facility, GNA II, has an installed capacity of 1,673 megawatts and was recently approved for operation by Brazil’s electricity regulator, ANEEL. Capable of supplying energy to roughly 8 million homes, the plant positions GNA as the operator of the largest natural gas-fired power complex in Latin America.

 

GNA II complements the company’s first plant, GNA I, which has been running since 2021 with a capacity of 1,338 MW. Together, the two units represent 17% of Brazil’s thermal generation capacity and play a crucial role during dry seasons when hydroelectric output declines.

 

The goal was to establish a gas hub at Porto do Açu, GNA CEO Emmanuel Delfosse told Valor. “These plants are like insurance for the power system as they come online when they’re most needed.”

 

The plants are connected to a private liquefied natural gas (LNG) regasification terminal with a daily capacity of 21 million cubic meters. This allows GNA to import LNG and convert it back to gas for power generation. Combined, the thermal units consume about 12 million cubic meters per day, roughly equivalent to the energy consumption of the entire state of São Paulo, according to Mr. Delfosse.

 

With GNA II operating under a 40% inflexibility clause, the system is contractually required to use the plant at least 40% of the time during Brazil’s dry season, from July to November.

 

The facility runs on natural gas and was contracted through Brazil’s energy auctions. It operates in a combined-cycle configuration, improving efficiency and lowering emissions. However, it lacks “fast ramp” capability, meaning it must be brought online several days in advance—a limitation in terms of operational flexibility.

 

GNA II is part of the federal government’s revamped Growth Acceleration Program (PAC), which targets key infrastructure investments. The total investment in the GNA power complex stands at R$12 billion. “It was a major technical and logistical challenge, especially during the pandemic,” Mr. Delfosse said. “Doing business in Brazil is complex. The scale of this industrial venture alone—R$12 billion—is remarkable.”

 

The project also has room for significant expansion, with 3.4 GW of additional capacity already authorized from an environmental standpoint. Any future development, however, will depend on demand in upcoming energy auctions.

 

GNA’s shareholders played critical roles beyond capital contributions. Siemens Energy supplied three gas turbines and one steam turbine, while bp handled the gas supply. Chinese state-owned company SPIC joined the venture during a period of heavy Chinese investment in Brazil’s power industry. Prumo Logística, which manages Porto do Açu’s infrastructure, is also a stakeholder in GNA I.

 

Source: Valor International

https://valorinternational.globo.com

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06/03/2025

 

BLOCKCHAIN COULD HAVE PREVENTED INSS FRAUD, EXPERTS SAY

Features like records immutability, traceability, and programmability could block unauthorized deductions from pension benefits

 

 

Blockchain technology could have prevented a multi-billion fraud that hit Brazil’s National Institute of Social Security (INSS), according to technology specialists consulted by Valor. Key features of blockchain—such as immutability of records, traceability, and programmability—would help stop unauthorized deductions from social security benefits.

 

Edilson Osório, founder of the blockchain authentication company OriginalMy, notes that blockchain alone wouldn’t resolve all problems. However, the fraud could have been entirely avoided by combining blockchain networks with digital identity systems.

 

The main advantage is that all information recorded on a blockchain is immutable. In other words, it cannot be edited or altered once entered. According to Mr. Osório, tying the authorization of payroll deductions to a signature that validates a retiree’s digital identity would ensure verified consent and offer irrefutable proof of when that consent was given.

 

The Brazilian government already uses blockchain to register the National Identity Card (CIN), which includes a digital version integrated with the gov.br platform. Since 2023, the “b-Cadastros” solution—a shared blockchain registry developed by the Federal Revenue Service in partnership with Serpro—has been used to issue the CIN. The document aims to centralize the CPF (individual taxpayer number) as the sole reference for accessing public services like SUS (public healthcare), INSS, Bolsa Família, and voter registration. Public Management Minister Esther Dweck has stated that the CIN seeks to eliminate fragmented civil records.

 

However, the INSS systems affected by the fraud do not yet use such technology. Caroline Nunes, founder of InspireIP—a blockchain-based intellectual property registry platform—says that Brazil’s social security systems suffer from fragmented data across different databases developed in various generations of IT infrastructure. “The INSS systems are connected via APIs or other types of interfaces. We’re dealing with information transfers between systems and agencies,” she explains.

 

All information registered on a blockchain is immutable: it cannot be edited or altered.

 

Murilo Cortina, head of new business at QR Asset, argues that the current system is vulnerable to unauthorized changes, deletions, or data entries by individuals with privileged access. “Blockchain technology, which underpins the entire crypto ecosystem, proposes a new architecture for storing and verifying data. Each record is validated by multiple independent parties—called nodes—that share an identical copy of the full history. This eliminates the risk of unilateral manipulation and ensures that everyone sees the same version of events,” he says.

 

According to Ms. Nunes, it would be possible to migrate all systems to an interoperable blockchain shared among government agencies, such as the Drex platform currently under development by Brazil’s Central Bank. Drex is a “tokenized” infrastructure for the financial system. “Drex could significantly advance blockchain identity. You could register the ID on the network just like a physical identity card, but on the blockchain,” she suggests.

 

A critical challenge would be adapting the system’s usability for retirees, many of whom are not comfortable using digital platforms. Mr. Osório proposes linking a digital identity app to a physical card, which could be used to sign authorizations. “A person would go to an INSS office, insert the card, and enter a PIN. Then, the office could proceed on their behalf,” he explains.

 

When asked for comment, the INSS said it monitors blockchain developments but has no active studies regarding its implementation. “While the INSS monitors the evolution of technologies such as blockchain and recognizes their potential for enhancing security and transparency, we inform that there are currently no ongoing studies for its specific adoption in payroll-deductible or association-linked discounts,” the institute said in a statement.

 

Source: Valor International

https://valorinternational.globo.com

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06/04/2025

 

EMBRAER INVESTS IN INDIA TO EXPAND IN ASIA

Brazilian manufacturer opens subsidiary and office in the country; considers setting up final assembly line

 

Embraer has stepped up its bet on the Asian market with the launch of a new subsidiary and office in India, where the Brazilian company currently has a modest presence. CEO Francisco Gomes Neto told Valor that the country offers significant business opportunities, particularly in the defense and commercial aviation sectors.

 

On Tuesday (3), an Embraer team visited the Brazilian Embassy in New Delhi to present its growth plans for the region. Earlier this year, the company established a subsidiary in India to support its business expansion and recently announced the opening of a new office.

 

India is not the only Asian country on Embraer’s radar. China, the world’s second-largest aviation market, has also been a key target. “We have 4,000 aircraft worldwide, and only 49 are here [in India]. We are heavily focused on the KC-390 [the defense aircraft being evaluated by the Indian government], and discussions are advancing. However, we also want to sell executive and commercial jets,” Mr. Gomes Neto said.

 

Of Embraer’s fleet in India, only 10 aircraft are in the commercial division, operated by Star Air. Mr. Gomes Neto noted that India’s regional aviation market relies heavily on turboprop aircraft, an area where Embraer sees a competitive edge. “There has been substantial investment in roads and railways, which reduces the competitiveness of smaller aircraft. We believe our planes can fill those gaps,” he said.

 

According to Embraer’s estimates, India will require approximately 500 aircraft over the next 20 years, with around 300 of those expected to be delivered within the next decade. A significant portion of orders is likely to focus on replacing turboprops, as there are currently about 100 operating in the country.

 

India’s vast geography contrasts with the limited range of turboprops, typically around 500 km. Embraer’s jets, besides being faster, can fly approximately 6,000 km, enabling direct connections between distant cities. Part of Embraer’s strategy to strengthen its position in India involved setting up a subsidiary, a process completed in March. This week, the company also announced a new office.

 

João Bosco da Costa Júnior, vice president of Embraer’s defense and security business, recalled that three years ago the company had no employees in India. All operations were managed from Singapore, about a five-hour flight from New Delhi. “Since we started our growth strategy here, we’ve hired people and now have 10 positions,” he said. The company’s goal is not only to build a sales team but also to hire engineers and technicians locally.

 

The subsidiary also supports Embraer’s effort to sell the KC-390 to the Indian Air Force. The Brazilian manufacturer is competing against industry giants such as the Lockheed C-130 Hercules and the A400M Atlas.

 

India plans to order between 40 and 80 aircraft, with a decision expected by 2026. One of the requirements is that 50% of the aircraft content must be produced locally, which helped drive Embraer’s decision to establish a presence in the country. Depending on the size of the order, the company is also considering setting up a final assembly line in India.

 

“The defense market in India is extremely significant. The Asia-Pacific region has seen considerable growth and now has an aging military fleet that will need to be replaced,” Mr. Costa Júnior pointed out. Embraer estimates the region will account for about 23% of global military aircraft demand in the coming years.

 

Embraer’s interest in the region extends beyond India. As previously reported by Valor, the company is eyeing opportunities in China, especially amid the current geopolitical turbulence. American manufacturer Boeing has been directly impacted by the trade tensions fueled by U.S. President Donald Trump, with the Chinese government even halting deliveries of Boeing planes.

 

China’s Comac offers aircraft with 80 to over 160 seats, while Embraer’s models range from 110 to 146 seats. The company already operates a fleet of around 90 aircraft in China, mainly ERJ-145s and E190s. To boost its prospects in the Chinese market, Embraer has hired Patrick Peng, formerly of Airbus and GE, to help drive business development.

 

The Brazilian manufacturer closed the first quarter with its highest revenue since 2016, totaling R$6.4 billion, a 44% year-over-year increase. Net income reached R$434 million, up 204.1%. Embraer’s order backlog now stands at $26.4 billion, the largest in its history.

 

However, the company also faces challenges. Chief among them is the Chapter 11 bankruptcy filing by Azul, currently its largest customer for the E2 model. “We have several aircraft scheduled for delivery, either directly to Azul or through lessors. We are monitoring the situation closely. What we hear is that Azul’s fleet strategy is to replace E1 jets with E2s, and that plan remains in place,” Mr. Gomes Neto said. According to him, the involvement of American Airlines and United in Azul’s restructuring process is a positive sign.

 

Another concern involves U.S. tariffs. Recently, Embraer delivered a commercial aircraft to an American customer under the new tariff structure. However, due to the U.S.-made content in the aircraft, the tax rate was significantly lower than the standard 10%. Despite the higher tariff, no orders have been canceled.

 

Source: Valor International

https://valorinternational.globo.com

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06/04/2025

 

DISAPPROVAL OF LULA 3 AT HIGHEST LEVEL, AT 57%, GENIAL/QUAEST POLL SHOWS

President’s popularity remains negative; perception of economy shows improvement

 

Disapproval of President Lula’s government reached 57% in May, the highest level since the start of his third term, according to a Genial/Quaest poll released on Wednesday (4). In the previous survey conducted in March, the disapproval rate was 56%. Approval now stands at 40%, down from 41% in the last poll, which had already marked the worst result since official records began.

 

The changes are within the margin of error of two percentage points. Since January, disapproval has risen by 8 points, while approval has dropped by 7 points. The latest edition of the bimonthly survey interviewed 2,004 respondents between Thursday (29) and Sunday (1).

 

Negative evaluations of President Lula’s government also increased slightly, reaching a historical peak of 43%, up from 41% in March. Positive evaluations fell from 27% to 26%. Those rating the administration as “regular” dropped from 29% to 28%. The percentage of Brazilians who believe the country is heading in the wrong direction rose to 61%, up from 56% in March and 50% in January. Meanwhile, 32% believe Brazil is on the right track, compared to 36% and 39% in the two previous rounds.

 

For the first time, disapproval of President Lula’s government surpassed approval among Catholics, at 53% to 49%. In March, approval and disapproval were tied at 49%. Catholics had previously shown more support than Evangelicals, a group historically more critical of the president. In the latest survey, disapproval among evangelicals stood at 66% (down from 67%), while approval was 30% (up from 29%).

 

The survey also indicates worsening figures in Mr. Lula’s traditional support voting bloc. His government is disapproved of by 54% of women, 47% of those with only basic education, and 49% of those earning up to two times the minimum wage—all segments showing an upward trend within the margin of error.

 

Regionally, President Lula’s approval outweighs disapproval only in the Northeast, where 54% support the government and 44% oppose it. In the more populous Southeast region, disapproval stands at a record 64%, while it reaches 62% in the South and 55% in the Central-West.

 

Improved economic perception

 

Despite confirming Mr. Lula’s popularity crisis, the survey shows an improvement in economic perceptions. The percentage of respondents who believe Brazil’s economy has worsened fell to 48%, down 8 points from 56% in March. Meanwhile, 18% say the economy has improved (up from 16%), and 30% believe it has stayed the same (up from 26%).

 

There was also some improvement in approval ratings among those familiar with recent government initiatives. For the proposal to exempt income tax for those earning up to R$5,000 per month, 56% had heard of it, and 45% approved. Regarding the new gas voucher program (Vale-Gás), 59% were aware of it, and 49% approved.

 

In a report released alongside the poll, political scientist and Quaest CEO Felipe Nunes described the scenario as a paradox, attributing the contradiction to the “widespread impact of negative news.” He noted that cases such as the social security fraud scandal at the National Institute of Social Security (INSS) have diluted positive impacts in other areas.

 

According to the survey, 56% believe the current Lula administration is worse than his first two terms. In comparison with former President Jair Bolsonaro’s administration, 44% believe Lula’s current term is worse, while 45% think the government is performing below expectations.

 

Social security scandal and IOF tax increase

 

Some 82% of respondents said they were aware of the INSS fraud scandal. Among them, 31% blamed Lula’s government, 14% cited the INSS itself, and 8% pointed to Bolsonaro’s administration—the same percentage as those blaming the organizations that forged retirees’ signatures. Another 26% said they did not know or did not respond.

 

Half of the respondents (50%) support opening an Investigative Parliamentary Committee (CPI) to investigate the INSS scandal, while 43% believe a Federal Police investigation is sufficient and that the opposition is only seeking to undermine the government.

 

Regarding the recovery of embezzled funds, 52% said the government should focus solely on reclaiming assets frozen from the implicated organizations, while 41% said the money should be returned even if public funds are needed.

 

Regarding changes to the Tax on Financial Transactions (IOF), fewer respondents were aware of the issue (39%) than those unaware (58%). Of those who knew, 41% approved of the government’s decision to reverse the IOF hike on investment funds, while 36% disapproved.

 

However, regarding the maintenance of the IOF increase on dollar purchases by individuals and remittances abroad, 50% said the government was wrong, and 28% said it was right.

 

Violence and corruption among top concerns

 

Violence remains the top concern for Brazilians, cited by 30% of respondents. It is followed by social issues (22%) and the economy (19%).

 

The fourth spot saw a shift compared to March: health, previously ranked fourth with 12%, was displaced by corruption, now cited by 13% (up from 10%). Health dropped to fifth place with 10%. Education ranked sixth at 6%.

 

Source: Valor International

https://valorinternational.globo.com

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06/09/2025

 

GOVERNMENT WARNS OF AI-DRIVEN DISINFORMATION AS NATIONAL SECURITY RISK

Deepfake videos and synthetic content targeting elections and public figures prompt calls for urgent regulation ahead of 2026 polls

 

The growing use of artificial intelligence to create highly realistic fake content has raised alarm bells within the Brazilian government, especially as the country approaches the 2026 general elections. Officials are particularly concerned with the manipulation of real data to produce convincing fake videos—spread widely on social media—that can mislead the public or facilitate digital scams. Authorities now frame the issue as not just an electoral or regulatory matter but one of public safety and national defense.

 

Three weeks ago, Valor reported on a case in Argentina where an AI-generated “deepfake” video may have influenced the results of Buenos Aires’ city council elections on May 18. The video, widely circulated the night before the vote, appeared to show former President Mauricio Macri endorsing Javier Milei’s party, even though Mr. Macri was in fact a political rival. The video used AI to reproduce Mr. Macri’s appearance and voice with striking accuracy.

 

The capital is a traditional stronghold of Argentina’s right wing. But when results came in, Mr. Milei’s party led with 30% of the vote, followed closely by the left-leaning Peronists with 27%. Mr. Macri’s party finished third, with just 16%—a surprising defeat in its own stronghold.

 

In Brazil, concerns have intensified after similar cases surfaced involving President Lula and Finance Minister Fernando Haddad. In one instance, a fake video circulated showing Mr. Lula supposedly announcing that the government would grant Bolsa Família cash-transfer benefits to women caring for reborn dolls—lifelike dolls that resemble newborns. The video used AI-driven lip-syncing to manipulate a real interview in which Mr. Lula was actually talking about soccer.

 

In another case, a fake video showed Mr. Haddad saying the government would tax pregnant women and pet dogs. The manipulated footage was based on a real speech where he had discussed taxing online betting platforms. These videos gain traction precisely because they combine authentic content with manipulated audio or visual elements, lending them false credibility.

 

Attorney General Jorge Messias, who leads the government’s effort to hold digital platforms accountable, told Valor that neither Brazil nor other countries are prepared for the chaos caused by AI, which he described as a “dystopian and unregulated technology.” He noted that while electoral technology has evolved, such as the now-regulated mass messaging systems used illegally in 2018, the role of AI in elections will be far more prominent in 2026.

 

In the meantime, AI is also being used in digital scams, many of which target vulnerable groups such as children, teenagers, and the elderly. A notable example was the so-called “Pix crisis,” when a false rumor spread that the government would tax the country’s instant payment system. Scammers took advantage by falsely charging fees for money transfers.

 

According to Mr. Messias, the lack of regulation has turned the debate over AI and digital platforms into an issue of public safety. “Street crime has moved onto the platforms,” he said. “These are the digital pickpockets.”

 

While the Supreme Court is currently reviewing platform liability, the issue is also being addressed in Congress. The Attorney General’s Office (AGU), in partnership with the President’s Chief of Staff and the Presidential Communication Secretariat (SECOM), is drafting new legislation to be submitted for President Lula’s approval before reaching Congress.

 

In the absence of stronger legislation, the AGU, through its National Office for the Defense of Democracy (PNDD), has been working to remove or flag false and criminal content on social media platforms. In December, the office secured the removal of 12 fake videos about Mr. Lula’s health from YouTube. At the time, the president was recovering from brain surgery following a fall, but some videos falsely claimed he had died. YouTube removed seven of the 12 flagged videos within 24 hours via an out-of-court process.

 

YouTube, which sees around 20 million videos uploaded daily, stated that it uses AI to identify potentially harmful or manipulated content, which is then reviewed by humans. Users can also report misleading videos, which may be removed or labeled as disinformation. The company emphasized that the use of AI alone does not necessarily constitute a policy violation and that each case is reviewed individually under its guidelines and user rights.

 

Between January 2023 and May 2025, the PNDD submitted 39 out-of-court takedown requests. Of those, 23 were fully granted, two partially accepted, six rejected, and eight remain pending. In court, five requests were granted, two were rejected, and five await a ruling.

 

Over time, the PNDD has found that applying a “disinformation” label is often more effective than removing content entirely. Labeling allows users to access the content while being explicitly warned about its misleading nature—a solution the platforms may find less invasive.

 

Meta, which owns Facebook and Instagram, did not comment when contacted.

 

Source: Valor International

https://valorinternational.globo.com

 

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06/09/2025

 

TAX REFORM ALREADY RESHAPES LOGISTICS STRATEGIES

Companies prepare for end of tax incentives in 2033; impact on new projects already visible

 

Brazil’s tax reform is beginning to influence corporate logistics strategies for new investments. The prospect of ending tax incentives and changing the point of tax collection starting in 2033 is already dampening interest in new projects in states that currently attract companies through generous fiscal benefits, according to business executives and consultants involved in the transition to the new model.

 

Among the states potentially affected, from the private sector’s perspective, are Santa Catarina, known for its import-related incentives; Goiás, which supports the pharmaceutical industry; Espírito Santo, which also favors imports and has attracted sectors like automotive and retail; and Minas Gerais, home to one of the most emblematic cases of tax incentives: the city of Extrema.

 

In Extrema, logistics operators say demand for existing warehouses remains strong, but appetite for new developments is waning.

 

According to Sérgio Fischer, CEO of Log CP, a developer and manager of logistics and industrial warehouses, clients have said that rental prices in Extrema were a “non-issue” and could be up to three times higher due to the significant cost reduction from tax incentives. Log CP previously owned a warehouse in Extrema but sold it and has no plans to return. “It’s a city with fewer than 60,000 residents and nearly the same amount of warehouse space as Cajamar (São Paulo), which serves Brazil’s largest city,” Mr. Fischer said.

 

On the other hand, demand is rising for warehouses closer to major consumer hubs such as São Paulo and Recife—a key logistics center for the Northeast—executives report.

 

Logistics operator Multilog, which has a R$900 million investment plan over the next three years, has decided to allocate more than half of that amount to São Paulo, largely due to the tax overhaul. “We’ve been getting many inquiries from clients who are already looking ahead to 2033. From that point forward, inventory will need to be closer to consumers. A natural realignment will take place,” said CEO Djalma Vilela.

 

Pedro Moreira, president of ABRALOG (Brazilian Logistics Association), said the reform is already affecting the price per square meter of fulfillment centers, which is rising around São Paulo and Recife. The Manaus Free Trade Zone, which will retain its incentives, is also drawing increased interest from companies, he said.

 

Indeed, prices are climbing in São Paulo, according to data from Colliers International. In Guarulhos, the average price per square meter for logistics projects reached R$37.80 in the first quarter of this year, a 16.6% increase compared to the same period in 2024. In Cajamar, prices rose 8.5%, to R$31.38. Even in Extrema, prices increased to R$28.65—a 5.3% rise year over year.

 

According to analysts and executives, the lack of a sharp correction reflects market resilience. Mr. Fischer pointed out that cities that grew thanks to tax incentives won’t become “ghost towns” overnight, as the market will adjust based on demand-driven pricing.

 

Moreover, a lengthy transition period lies ahead before incentives are phased out, noted Maurício Lima, partner at logistics consultancy Ilos. “No company will relocate while it can still enjoy the benefit.” He emphasized that current impacts are limited to new projects still in the planning stages.

 

Under the new rules, the transition away from the Tax on Circulation of Goods and Services (ICMS), the main instrument used by states, won’t begin until 2029 and will run through the end of 2032, noted Douglas Mota, a tax partner at Demarest. During this period, a compensation fund will reimburse companies for lost incentives.

 

Mr. Mota added that the reform’s impact comes not only from the loss of tax breaks, but also from the shift in the tax collection model—from the point of production or storage to the point of consumption. “They’ve tightened the screws on both ends.”

 

Long-term lease contracts may help smooth the transition. Mariana Hanania, director of market research at consultancy Newmark, noted that Extrema’s growth was driven largely by BTS (build-to-suit) contracts tailored to specific tenants. “These are long-term contracts with tenant guarantees,” she said, adding that new developments in those areas may now be limited.

 

Simone Santos, partner at consultancy Binswanger SDS, said the long timeline before the reform takes full effect still makes these regions attractive. “We’re still seeing major leases,” she noted, citing the announcement in late May of a fully pre-leased 40,000 square meters warehouse by Fulwood in Extrema.

 

These locations also offer other advantages, such as strong logistics infrastructure, skilled labor, established industrial ecosystems, and the local economy. Santa Catarina, for example, is expected to see limited impact, according to two executives with operations in the state.

 

Gustavo Serrão, CEO of Espírito Santo’s port authority Vports, acknowledged that the reform presents challenges for the state but said the government is investing in greater efficiency, and existing infrastructure supports business retention. “There’s an exit barrier. Incentives helped the state build a robust infrastructure, and the integrated supply chain is resilient,” he said. “The challenge now is to use the transition to boost productivity.” He also cited potential financial incentives from state banks to help attract investment.

 

The impact of the changes will vary across sectors. The most affected will likely be those in which tax considerations weighed heavily in project decisions; typically high-value, lightweight products like pharmaceuticals and electronics, Mr. Lima said. “Heavier products, like large appliances, already leaned more on logistics convenience than tax advantages.”

 

Some e-commerce firms and import-heavy sectors that traditionally benefited from incentives will also need to rethink their strategies, said Vilson Silva, CFO at ID Logistics.

 

“In 2033, the impact will be significant. From a logistics standpoint, this will be an improvement. Today, there are some irrational practices, like a client who produces in São Paulo, serves customers in São Paulo, but ships inventory to Goiás for storage, only to bring it back,” Mr. Silva said.

 

Source: Valor International

https://valorinternational.globo.com

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06/10/2025

 

BROADBAND PUSHES TELECOMS REVENUE GROWTH IN BRAZIL

Of every R$10 that companies in the sector earned in 2024, a little over R$3 came from fixed broadband services

Fixed broadband is increasingly solidifying its position as the second-largest revenue source for the telecommunications sector in Brazil. Out of every R$10 earned by telcos in 2024, a little over R$3 was generated from fixed broadband services.

 

Overall, fixed internet access ranks just behind mobile telephony, which accounted for 41.2% of the sector’s gross revenue last year, or R$4.12 of every R$10 earned. This information is part of a report prepared by the telecommunications operators’ union, Conexis Brasil Digital.

 

According to the union, the sector’s gross revenue—adjusted by Brazil’s official inflation index, IPCA—grew by 2.7% last year compared to 2023, reaching R$318.8 billion. This growth was driven primarily by fixed broadband, but also by the strong performance of mobile telephony (with a +4% real growth) and the industry (equipment manufacturers, with +4.8%).

 

“What drove [this result] the most was fixed broadband, in terms of revenue. It had a real growth of 6.1%,” said Marcos Ferrari, the president of Conexis.

 

The mobile telephony segment, in turn, benefited from the continued expansion of 5G, Mr. Ferrari said. “We saw significant growth in the number of 5G terminals, in smartphones. We had about 20 million customers at the end of 2023 and reached 40 million by the end of 2024.”

 

In the same annual comparison, the number of cities with 5G coverage jumped to 812 from 352. Additionally, the total number of antennas compatible with the technology more than doubled during this period, rising to 37,000 from 18,400.

 

“The higher offering pushes up the demand. The more cities with 5G technology, the faster people adopt it,” Mr. Ferrari said.

 

Despite this, the mobile segment’s revenue has struggled to grow when examining the figures over the past five years, after adjusting for inflation. Brazil ended last year with 263.4 million active mobile phone lines, an increase of 29.3 million accesses since the end of 2020. However, the gross revenue generated by the segment in 2024 (R$131.5 billion) was lower than that recorded in 2020 (R$133.7 billion, adjusted for the IPCA).

 

Conversely, fixed broadband has been growing both in real gross revenue and the number of users. The total number of fixed connections increased by 43.2%, reaching 52 million, between the end of 2020 and the same period in 2024. In the same timeframe, the gross revenue rose by 29.3% in real terms, reaching R$96.7 billion.

 

This positive performance led to fixed broadband accounting for slightly more than 30% of the sector’s revenue last year, an increase of nearly seven percentage points compared to 2020. In contrast, the share of mobile telephony in the telecommunications revenue pie shrank, falling from 42.1% to 41.2% over the past five years.

 

Last year alone, the number of broadband connections via fiber optics grew by 13.5%, driven primarily by the expansion of this technology in the Northeast region (+15.7%).

 

The service is expected to advance further in 2025, driven by fiber optic expansion. “Fiber is not only used for fixed broadband. It’s expanding across the country to handle and transmit all the data from 5G,” Mr. Ferrari said. Fiber is also the gateway for operators to offer entertainment, security (self-monitoring), and home automation services to subscribers, among other offerings.

 

By April, there were 52.7 million fixed broadband accesses in the country, according to the National Telecommunications Agency (ANATEL), up 6% year over year.

 

Considering only fiber connections, this percentage rises to 9.3%. The current cycle of fixed broadband expansion seems likely to continue in 2025, supported by the country’s economic growth, and extend into the coming years.

 

Source: Valor International

https://valorinternational.globo.com

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06/10/2025

 

SKILLED WORKERS STAND TO GAIN MOST FROM REDUCED WORKING HOURS

Employees with less schooling already average close to 36 hours per week, say researchers at FGV Ibre

 

Adopting a shorter 36-hour workweek would primarily benefit more highly educated workers, further widening the real wage gap between them and those with lower levels of formal education. That’s the conclusion of a study by economists Fernando de Holanda Barbosa Filho and Paulo Peruchetti, researchers at the Fundação Getulio Vargas’s Brazilian Institute of Economics (Ibre-FGV).

 

They point out that less-educated workers already work closer to a 36-hour week— the central Constitutional Amendment Proposal (PEC) introduced by federal deputy Erika Hilton, which seeks to end the 6 x 1 work schedule.

 

According to the researchers, average weekly working hours in Brazil remain below the legal cap of 44 hours, standing at 38.4 hours in 2024. But among those with no formal education or incomplete elementary schooling, the average is already 36.2 hours. The average for those with complete elementary and incomplete high school education is 37.8 hours.

 

The longest working hours are concentrated among those with a high school diploma and incomplete college education, averaging 39.3 hours per week. Workers with a completed higher education clock in at 38.9 hours per week.

 

The data challenge the assumption that those with the lowest income and educational attainment—typically the focus of advocacy for reduced work hours—are the ones working the longest. According to Mr. Barbosa Filho, this is not borne out by the evidence.

 

Cutting working hours without reducing pay effectively raises the hourly wage of each worker. But in this scenario, too, the researchers argue that the most qualified employees stand to gain the most.

 

Mr. Barbosa Filho and Mr. Peruchetti estimate that workers with a high school diploma and incomplete college education, as well as those with a college degree, would see real wage increases of 9% and 8%, respectively.

 

By contrast, uneducated workers and those with incomplete elementary education would see their income rise by just 0.7%. Workers with a high school diploma and incomplete higher education would gain about 5%.

 

In a separate analysis, Mr. Barbosa Filho had previously estimated that, considering labor as the sole factor of production, a reduction in the workweek to 36 hours would result in a 6.2% decrease in total hours worked—and, by extension, in the value added to the economy. However, the impact would vary significantly across sectors, with estimated losses ranging from 1.4% to 14.2%, according to the researchers.

 

Sectors with longer average work hours, they argue, would face greater adaptation costs under the proposed change.

 

Transportation, extractive industries, and commerce currently lead in weekly work hours, averaging 42, 41.2, and 41 hours, respectively. The researchers project that cutting working hours would reduce value added by 14.2% in transportation, 12.6% in extractive industries, and 12.2% in commerce. Public Utility Industrial Services (SIUP—which includes the production of electricity, gas, and water) would see a 10.6% reduction, while information and communication services would experience a 10.5% drop.

 

Conversely, the sectors expected to suffer the smallest losses are “other services”—which comprise most services provided to families—and Public Administration (APU, which covers areas like defense, social security, education, health, and social services), with declines of just 1.4% and 1.7%, respectively.

 

The researchers note that these sectors already operate close to a 36-hour workweek. Still, Mr. Barbosa Filho questions whether businesses in “other services”—typically small entrepreneurs—could realistically reorganize their working hours. In the case of commerce, he adds, much of the workforce relies heavily on commission-based pay, complicating the shift.

 

Supporters of a shorter workweek often argue that productivity gains could compensate for increased labor costs. Mr. Barbosa Filho and Mr. Peruchetti estimate that in agriculture, for instance, historical productivity growth—5.2% per hour worked between 2012 and 2024—could offset potential losses. However, they point out that agricultural productivity is well above the national average, which has remained stagnant.

 

According to the researchers, even a 2% increase in hourly productivity would fall short of offsetting the losses in most sectors.

 

For the analysis by formal qualification, the researchers note they were unable to isolate the value added by different educational groups. Instead, they used the evolution of adequate hourly wages as a proxy for productivity growth across those groups, arguing that in competitive markets, wages should reflect productivity gains.

 

Between 2012 and 2024, the educational group that saw the highest wage growth was composed of workers with no education and incomplete primary education, whose hourly earnings rose by an average of 0.9% per year. Those with complete elementary education and incomplete secondary education experienced a 0.5% increase. In contrast, workers with complete secondary education and incomplete higher education saw their wages fall by 0.3%, while those with a college degree saw a decline of 1.1%.

 

“If we consider wage gains as a proxy for productivity gains, only lower-skilled workers recorded productivity growth during the period. Therefore, it is unlikely that productivity gains will offset the rise in hourly wages resulting from a reduction in working hours,” the study states.

 

The researchers also stress that their findings do not account for how employers might respond to a shorter workweek. Since this would raise unit labor costs (ULC), companies could be expected to reduce hiring, potentially resulting in job losses.

 

ULC represents the labor cost per unit of output—that is, the share of value generated that is allocated to employee compensation, explains Guilherme Zimmermann, an economist at Bradesco. “In recent years, productivity has shown modest or virtually no growth. In contrast, ULC has been rising steadily,” Mr. Zimmermann noted in a recent report.

 

According to him, virtually all real wage growth in the recent period has stemmed from increases in ULC, not from productivity improvements. “This imbalance suggests that wages have been growing faster than workers’ average productive capacity, which could exert further pressure on costs and prices if it continues,” he warns.

 

Source: Valor International

https://valorinternational.globo.com

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06/16/2025

 

BRAZIL RISKS NEW MULTIBILLION TAX LOSS AS COMPANIES GAIN IN COURT

Firms win right to exclude service tax from social contribution base in 75% of appellate rulings; Supreme Court decision still pending

 

Eight years after losing what became known as the “case of the century” in Brazil’s tax litigation history, the federal government now faces another potentially costly defeat. This time, companies are seeking to exclude the municipal services tax (ISS) from the calculation base of two federal social contributions—PIS (Social Integration Program) and Cofins (Contribution for the Financing of Social Security)—in a legal argument that stems from the earlier ICMS (state-level value-added tax) exclusion case. Taxpayers have the advantage in federal appellate courts and are well-positioned to win in the Supreme Court (STF).

 

The current tally in Brazil’s highest court signals a likely loss for the government. Both the STF’s Virtual Plenary and lower court rulings mirror the dominance of favorable rulings for companies. Between January 2024 and January 2025, 75% of 602 decisions from regional federal courts ordered the removal of ISS from the tax base, according to a survey by law firm Velloza Advogados.

 

The case, listed as Theme 118, resembles the ICMS case and remains pending in the Supreme Court. A defeat could deal a R$35.4 billion blow to public finances, based on figures from the 2025 Budget Guidelines Law, at a time when the federal government is pushing to increase revenue and eliminate the primary deficit.

 

The STF began reviewing the case in 2020, but the trial was suspended in August 2023. The outcome is critical for defining the constitutional concept of gross revenue. In some earlier rulings on related cases, the Supreme Court classified taxes as part of corporate revenue. However, with Brazil’s new tax reform introducing a dual VAT system, taxes will be levied separately—clarifying that they do not constitute revenue for companies.

Appeal rulings

Velloza Advogados analyzed appeal rulings from Brazil’s six federal appellate courts. All decisions from TRF-1, TRF-2, and TRF-3—which handle most of the lawsuits—favored the taxpayers, applying the same rationale used in the ICMS exclusion case (Theme 69).

 

TRF-4, based in Southern Brazil, diverged. Of its 119 decisions, all went against the companies. TRF-5 issued mixed rulings but mostly sided with businesses, agreeing that the ISS does not constitute revenue and should therefore not be included in the PIS/Cofins tax base. TRF-6, based in Minas Gerais, opted to suspend proceedings until the Supreme Court rules—even though a formal stay has not been ordered.

 

So far, the STF’s physical plenary shows a score of four votes against the federal government and two in its favor. Five justices have yet to cast their votes, but tax lawyers expect a victory for taxpayers. Optimism stems from Justice André Mendonça, who had been a wildcard but voted in favor of the companies in 2024. Considering votes from both the Virtual Plenary—previously split 4–4—and those cast in the ICMS case, there would already be a majority in favor of businesses.

 

Three justices have voted in this case so far: Dias Toffoli and Gilmar Mendes against the companies, and Justice Mendonça in favor. Votes from retired justices Celso de Mello (the rapporteur), Rosa Weber, and Ricardo Lewandowski—also in favor of taxpayers—remain valid. As a result, current justices Nunes Marques, Flávio Dino, and Cristiano Zanin, who succeeded them, will not vote.

 

Taking all these votes into account, there is currently a 5–5 tie. Only Justice Luiz Fux has yet to vote. Given his prior stance in the ICMS case, the expectation is that he will vote for the companies, securing their win.

 

Lead case

 

The lead case involves Viação Alvorada, a bus operator in Porto Alegre, Rio Grande do Sul. Both the trial court and TRF-4 ruled against the company. Heron Charneski, lead attorney at Charneski Advogados, is representing Viação Alvorada at the Supreme Court. He said TRF-4’s stance mirrors its position in the ICMS case.

“After the ICMS ruling, the court began following the STF’s guidance. But since the ISS hasn’t been ruled on, it reverted to its earlier jurisprudence,” Mr. Charneski said. A ruling by the Supreme Court would help standardize decisions across appellate courts, especially important during the transition to Brazil’s tax reform, under which the ISS will no longer be included in the base of the new Contribution on Goods and Services (CBS), which will replace PIS and Cofins.

 

Mr. Charneski argued that the ISS exclusion case is not a derivative, but rather a “sister” case to the ICMS one—similar to another major issue, Theme 1037, which discusses excluding PIS and Cofins from their own tax bases. “All these cases depend on the definition of revenue, which determines whether PIS and Cofins are due. We’re looking for a consistent interpretation—a single concept of revenue for both taxes,” he said.

 

Gross revenue definition

 

At the core of these cases is how to define gross revenue. “It’s a concept that has haunted Brazil for a long time,” said economist and tax lawyer Eduardo Fleury, founding partner of FCR Law. Many major rulings by the Supreme Court, he added, have included taxes to be remitted to the government within the definition of gross revenue. “You won’t find this concept in the rest of the world,” he said.

 

Mr. Fleury warned that this is a “harmful path,” especially now that Brazil has approved its tax reform and is adopting a split payment system. “The new system makes it clear that taxes are external to revenue and should be charged separately,” he said. He noted that the ISS is similar to the U.S. sales tax, which is itemized separately. “The tax is charged on top of the product and clearly shown because it doesn’t belong to the seller—it’s owed to the municipal government.”

 

Tax lawyer Fernanda Secco, a partner at Velloza Advogados, argued that since court rulings overwhelmingly favor taxpayers, there is no reason to restrict the impact of the ruling to future cases—a proposal made by Justice Mendonça. “There’s no surprise here that would justify such limitation,” she said.

 

Mr. Mendonça suggested that companies which didn’t include ISS in their PIS/Cofins tax base or whose amounts remain in escrow would not owe the tax. But for those who already paid over the years and whose tax credits have expired, there would be no retroactive recovery—citing a “social interest” in protecting the integrity of the budget cycle.

 

Ms. Secco expressed concern over the proposal, saying it undermines legal certainty and equal treatment among businesses. “Companies that acted conservatively and chose not to benefit from favorable rulings and paid the tax would be barred from recovering what they paid,” she said. “The proposal rewards those who didn’t pay, which could even distort competition.”

 

The Attorney General of the National Treasury declined to comment.

 

Source: Valor International

https://valorinternational.globo.com

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06/16/2025

 

RENEWED PUSH FOR BAMIN MINING PROJECT AS PLAYERS SEEK PORT PARTNER

Vale, Cedro, and BNDES focus on mine and railway

 

After a period of stalled negotiations, discussions around the Bahia Mineração (Bamin) project have regained momentum. According to Valor’s business website Pipeline, Vale, Cedro Participações, and BNDES have resumed talks centered on the mine and railway operation, while actively looking for a third party to take over the port terminal. The companies have approached investors from the Arab world and China, offering the incentive of a “take-or-pay” contract for iron ore transportation.

 

The Bamin project includes an iron ore mine in Caetité (Bahia) with an annual production capacity of 26 million tonnes, the completion of a section of the West-East Integration Railway (FIOL), and the construction of a port terminal in Ilhéus, also in Bahia. Total investment in the venture could surpass R$30 billion, according to estimates. Bamin is owned by Kazakhstan’s Eurasian Resources Group, which has been seeking a buyer for the entire project.

 

Talks around the project have seen several starts and stops. Brazil Iron, another interested party, submitted a proposal but failed to secure exclusivity for the deal.

 

Behind the scenes, sources say the federal government is pushing for the project to move forward and would prefer to see Vale take the lead. Vale CEO Gustavo Pimenta has publicly acknowledged that Bamin is among the projects under review. However, the company has not committed to any timeline for making a decision.

 

While the matter is under discussion at the technical and executive levels within Vale, it has not yet reached the board of directors, according to Valor’s sources. The due diligence process includes geotechnical assessments to determine the size of the reserves and iron content.

 

In response to inquiries, Vale referred to its latest public filing on the Bamin matter, which states that “investment opportunities are evaluated as part of the company’s regular business activities.”

 

A joint effort by Vale, Cedro, and BNDES is seen as a viable path forward. Cedro lacks the capacity to execute the project on its own, while neither Vale nor BNDES appear willing to shoulder the full risk independently. According to sources, BNDES could potentially contribute equity and also help fund the project.

 

Market participants have expressed concern that political pressure could push Vale into an investment that ultimately erodes shareholder value. A source close to the company emphasized that any potential investment in Bamin would only proceed if it met internal return thresholds. During the commodity boom of the 2000s, Vale made international acquisitions that later led to losses and divestitures—some sold at symbolic values.

 

Analysts argue that it would make more strategic sense for Vale to focus on expanding and developing new mines in Carajás, in southeastern Pará, where it already has high-grade reserves and supporting infrastructure. The challenge, however, is that both Vale and the broader mining sector are still waiting on a federal decree on cave regulation. The long-anticipated legislation would define mining permissions in areas with protected caves, which are home to sensitive flora and fauna. To date, the decree has not been issued.

 

Source: Valor International

https://valorinternational.globo.com

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06/17/2025

 

LOWER HOUSE PASSES URGENCY MOTION TO REVOKE IOF TAX HIKE BY 346–97

Vote paves the way for debate on financial tax increase, but final decision hinges on spending cuts

 

The Brazilian Lower House approved Monday (16) by 346 votes to 97 an urgency motion to advance the vote on a legislative decree (PDL) that would revoke the recent increase in the Financial Transactions Tax (IOF). Despite the wide margin, there is still no set date for discussing the substance of the proposal, which depends on the federal government presenting spending cut measures and on the progress of a provisional presidential decree already sent to Congress. A vote on the merits is expected in two weeks, after the June holidays, allowing time for further negotiations.

 

Lower House Speaker Hugo Motta of the Republicans Party scheduled the plenary session for 6 p.m., local time, but proceedings did not begin until after 8 p.m. In the same session, lawmakers also approved another urgency motion, this time to fast-track a bill that updates the income tax bracket and exempts individuals earning up to two minimum wages. The proposal mirrors a provisional measure issued in April.

 

Mr. Motta spent the afternoon in meetings with party leaders and ministers Rui Costa (Chief of Staff Office) and Gleisi Hoffmann (Institutional Relations), who were met with numerous complaints from lawmakers.

 

At the end of the meeting, Mr. Motta said he reiterated to the two ministers what he had told President Lula the previous Saturday: Congress will no longer accept tax hikes as a way to balance public finances. He said the government had pledged to send a package of spending cuts. “We’re waiting,” he said.

 

In addition to opposition parties, several groups that control eight ministries—Brazil Union, Social Democratic Party (PSD), Progressive Party (PP), Republicans, and the Democratic Labour Party (PDT)—urged their members to vote in favor of the urgency motion. The PDT distanced itself from the government after the dismissal of former Social Security Minister Carlos Lupi, amid the National Social Security Institute (INSS) scandal. Other left-wing parties and the Brazilian Democratic Movement (MDB) voted against the motion.

 

Facing likely defeat, the government’s leader in the Lower House, José Guimarães of the Workers’ Party (PT), allowed his caucus to vote freely in an effort to mask the extent of resistance the administration faces. He added, however, that the government would not submit cost-cutting proposals affecting social programs.

 

Finance Ministry officials had already anticipated that the urgency motion would pass with more than 300 votes but believe congressional leaders remain open to negotiating alternatives that would prevent the decree from being overturned. Lawmakers aligned with the government told Valor they still see room for dialogue.

 

Many party leaders pushed for an immediate vote on the PDL itself, but a compromise prevailed, giving the government more time to present alternatives. Some of these options are included in the provisional measure sent to Congress last week, though the expectation is that the text will undergo major revisions.

 

Lindbergh Farias, the Workers’ Party leader in the Lower House, praised Mr. Motta’s handling of the process and said the urgency vote reflected some lawmakers’ desire to negotiate the content of the provisional presidential decree. He nonetheless defended the IOF increase, arguing it would help balance the budget without significantly impacting lower-income Brazilians.

 

“Where is the working class really affected by this IOF hike?” he asked. “This measure targets those at the top. In this country, we see sectors clamoring for fiscal adjustment, but always on the backs of the poor.”

 

Mr. Motta countered that lawmakers do not support balancing the budget at the expense of the poorest, but stressed the importance of avoiding harm to “those who produce, create jobs, and generate income,” referring to the business sector.

 

During the meeting with party leaders before the vote, Ms. Hoffmann was met with complaints that went beyond delayed payment of congressional earmarks or the content of the provisional decree. One lawmaker described the situation to Valor: “There are so many complaints on so many issues that paying the amendments won’t even come close to solving the government’s problems in the House.”

 

Source: Valor International

https://valorinternational.globo.com

 

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06/17/2025

 

FAMILY FARMING LOAN RATES EXPECTED TO KEEP STABLE AMID BUDGET STRAIN

Agrarian Development Ministry aims to maintain subsidized credit for small-scale food production and agroecology

 

Facing a tightening federal budget and challenging macroeconomic outlook, Brazil’s Ministry of Agrarian Development (MDA) is working to preserve low interest rates in the upcoming 2025/26 Family Farming Plan. The ministry aims to keep annual rates at 3% for staple food production and 2% for agroecological farming within credit lines to be made available to smallholder farmers in July.

 

The ministry’s main challenge in negotiations with the Ministry of Finance is to secure the budget required to equalize interest rates over the long term. The Treasury’s spending on credit subsidies has risen significantly with the surge in the Selic benchmark rate, which jumped from 10.5% in July 2024 to 14.75%. That rate could change again following the Central Bank’s Monetary Policy Committee (COPOM) meeting scheduled for tomorrow, potentially increasing rural credit subsidy costs further.

 

“Our main goal is to maintain all the interest rates we’ve managed to achieve, especially for food production,” MDA Executive Secretary Fernanda Machiaveli told Valor. Current interest rates under the Family Farming Plan range from 0.5% to 6% per year, with lower rates for small machinery purchases (2.5%), agroecological activities (2%), and staple food production, including rice, beans, cassava, and milk (3%).

 

Increased mandatory allocation of funds raised from cash deposits by banks—from 30% to 31.5%—and a higher share of those funds directed to family farming—from 30% to 35%—will help secure more low-interest resources without increasing government spending on subsidies, said José Henrique da Silva, director of Financing, Protection and Support for Family Productive Inclusion at the ministry.

 

“We save public funds when requirements are higher. This was our initiative to ensure more money for family farming at a lower cost,” Mr. Silva said.

 

“The challenge is to ensure that food production continues to grow with support from federal financing. We already have enough resources to provide interest rate equalization, and the government has chosen to ensure that food is financed at special rates,” Ms. Machiaveli added.

 

While the ministry has not disclosed funding figures for the new plan, it expects to surpass the R$76 billion made available under the current 2024/25 cycle, which ends June 30. As of May, R$60.2 billion had been disbursed to family farmers—an increase of 5.5% over the same period in the 2023/24 cycle and nearly 21% more than the equivalent 11-month stretch in 2022/23. The executive secretary called the outcome a “success.”

 

In some financial institutions, subsidized Pronaf credit for production costs has already run out, indicating strong demand, Mr. Silva said. Despite this, the full amount initially offered is unlikely to be disbursed due to reallocation and adjustments during the cycle. “We expect the final total to reach R$65 billion by the end of June,” he added.

 

For the new Family Farming Plan, expected to be launched in the final week of June, the ministry plans to spotlight the sector’s role in addressing climate emergencies, especially as Brazil prepares to host COP30 this year. The initiative will include new credit lines, improved access to climate-related programs through revised rules on limits, interest rates, and eligibility, and incentives for transitioning to agroecological models.

 

The ministry wants to demonstrate that, although family farming is among the sectors most vulnerable to extreme weather events, it can be part of the solution due to its diversified production, natural resource preservation, and move away from chemical inputs. While farmers in Brazil’s semi-arid northeast have long adapted to drought conditions, other regions are also in need of climate-related support, Ms. Machiaveli noted.

 

The goal is to create “a Safra Plan that views family farming not only as a solution to hunger and a producer of healthy food, but also as a key to tackling the climate emergency through a more sustainable production model that can now be financed,” Ms. Machiaveli said.

 

On launch day, the ministry expects to sign several decrees signaling its climate commitments. One will establish the long-discussed National Program for the Reduction of Pesticides (Pronara), which still faces internal resistance within the federal government.

 

Another decree will introduce updates to the Minimum Price Guarantee Program for Sociobiodiversity Products (PGPMBio), managed jointly with the National Supply Company (Conab). The goal, Ms. Machiaveli said, is to improve program rules to better reach traditional and Indigenous communities. The revamped version, to be called SocioBio+, will be tested on products such as pirarucu fish, nuts, and rubber, which already have minimum prices but will now also guarantee fixed incomes for extractive workers.

 

Source: Valor International

https://valorinternational.globo.com

 

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06/23/2025

 

BRAZIL’S GROWTH STILL A STRENGTH, BUT REFORMS NEEDED, GOLDMAN SAYS

Foreign investors are returning, but high interest rates are a concern

 

Brazil’s economic growth, despite a long monetary tightening cycle, remains one of the country’s key advantages. However, this expansion could be far greater if Brazil pushed forward with structural reforms, said Goldman Sachs executives during a visit to the country last week.

 

In an interview with Valor, Richard Gnodde, vice chairman of Goldman Sachs, and Kunal Shah, co-CEO of Goldman Sachs International and co-head of the firm’s Fixed Income, Currency and Commodities (FICC) division, said Brazil has returned to the radar of foreign investors. This can be seen in the inflow of international funds into the local stock market. Still, the high level of interest rates remains a concern, as it continues to burden Brazilian companies.

 

“I think Brazil’s remaining advantage is growth. The economy could double or triple over time. The right structural reforms would help unlock that growth. For me, that’s the most important thing—growth would allow the country to overcome its fiscal challenges. Not every economy has this opportunity,” Mr. Gnodde said.

 

“Growing 2.3% in a still very challenging macro environment shows the strength of the private sector,” added Mr. Shah, who visited Brazil for the seventh time and gave his first interview to a Brazilian media outlet.

 

Geopolitical distance

 

The war in the Middle East adds more uncertainty to markets, but Brazil’s distance from the conflict could prove beneficial. “You’re far from the specific areas of conflict, so people here can really focus on the country’s economic issues and opportunities, and maybe spend less time worrying about geopolitics. In a way, that’s an opportunity,” Mr. Gnodde said.

 

The global environment has also highlighted the importance of portfolio diversification, he said. “People have remembered that the United States isn’t the only economy in the world, nor the only place with opportunities.”

 

Brazilian economic challenges, its companies and sectors, and the ups and downs of the local economy are well known to international investors, Mr. Shah said. “Right now, they are beginning to allocate funds back to Brazil. Part of that is due to macro fundamentals. Interest rates are very high while inflation is falling. The latest inflation reading came in below market expectations. So, when you look at real interest rates, Brazil has one of the highest among major global economies. And with a relatively stable currency, that’s usually a good signal for the exchange rate and fixed income flows. It also boosts confidence,” he said. He added that equity investors and others willing to take on currency risk are likely to follow—something already being observed.

 

Fiscal limits

 

Mr. Shah said Brazil’s fiscal situation may have reached a limit, requiring a shift to avoid recessionary or unstable fiscal scenarios. “That’s where checks and balances kick in, and you start to see the cycle reverse. I think that’s why optimism is growing — because certain limits are being reached,” he said.

 

Still, he warned there are many questions about when there will be room for interest rate cuts. “While high rates are good for capital inflows, they place a huge burden on companies and the economy. It’s impressive how resilient the economy has been, and how growth remains strong even with such high rates. Our forecast for Brazil is 2.3% growth—above consensus. This cycle is lasting longer than many expected. Part of it is due to still-high fiscal spending, which worries investors,” Mr. Shah noted.

 

The 2026 presidential election is also on investors’ radar, he said, as they begin to evaluate “what changes might come or whether there will be continuity.”

 

IOF decree

 

Mr. Gnodde said that in recent weeks, the number of questions from foreign investors has increased, particularly after the government issued a decree raising the Financial Transactions Tax (IOF) in several cases. The measure is expected to be overturned by Congress. “It was constructive to see how that was revised. I think the feedback was clearly taken into account, and that helped ease investors’ concerns,” he said.

 

He added that what’s missing is a catalyst to bring in more consistent capital flows. “The premium you’re getting now to invest in Brazil is at a level where people feel comfortable. So that’s positive. The question is: what’s the catalyst that gets someone to make the decision today? Otherwise, they may just wait until tomorrow.”

 

Mr. Gnodde also highlighted the self-confidence of Brazil’s business leaders, who remain optimistic about the country’s future. “When you’re running a business and taking out a loan that’s going to cost you 15% to 20%, and you’re still able to run a successful company, you’re a good entrepreneur,” he said.

 

“If I were designing policy, I’d just try to make their lives a little easier and create a more favorable environment. With a tailwind instead of a headwind, this business community can achieve great things. We travel the world, and people say, ‘my God, interest rates are 3%, or 4%, or 5%—it’s so hard, it’s impossible.’”

 

Global-minded clients

 

The Goldman executives spent the week meeting with high-net-worth clients, institutional investors, and companies. “The client base here is unique. Brazilian investors are deeply rooted in a large domestic market, but also very connected to the global landscape. You can have in-depth conversations about what’s happening in the U.S., Europe, and other emerging markets, and that’s reflected in their portfolios. They are very sophisticated and well informed both globally and regionally. That makes conversations very productive,” Mr. Shah said.

 

“We’ve been in Brazil for 30 years. We’ve seen many cycles. Highs and lows across different sectors, with different strengths at different times. That’s why having a diversified business portfolio is extremely important. It’s great when the IPO market is booming, but even when it’s not, there are many other things we can do,” Mr. Gnodde said.

 

Source: Valor International

https://valorinternational.globo.com

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06/23/2025

 

INTEREST GROUPS WANT TO SLICE UP REFORM OF CIVIL CODE

Bill 4/2025 aims to revise over 1,200 provisions on family, inheritance, damages and contracts

 

Filed early this year in Brazil’s National Congress, the proposal to overhaul the Civil Code hasn’t even begun its formal review yet and is already provoking backlash. Dozens of organizations, spanning legal associations to industrial groups, are contesting the rapid “urgent” approval of Bill 4/2025, which seeks to modernize the code. Its proponents say there’s ample opportunity for debate.

 

Many groups prefer delaying the proposal so each theme—family law, inheritance, damages, contracts—can be addressed separately, effectively “slicing” the reform.

 

Drafted by a panel of 38 jurists convened in August 2023 at the request of former Senate President Rodrigo Pacheco, the commission proposes changes to more than 1,200 of the Code’s 2,046 articles, last overhauled in 2002. The draft also introduces a new chapter on digital assets, covering cryptocurrencies and image collections on social media.

 

Several proposed family law updates will affect inheritance divisions. The definition of marriage would shift from “between a man and a woman” to “between two people,” to explicitly recognize same-sex unions. Corporate liability changes—like the introduction of “pedagogical damages”—could significantly impact business finances.

 

Under Article 944-A, paragraph 3, judges could impose fines alongside moral damages in cases of serious wrongdoing or repeated misconduct, “in order to prevent recurrence,” effectively turning compensation into a punitive deterrent.

 

The Industrial Federation of Minas Gerais (FIEMG), along with other civil society organizations, is spearheading a national effort to involve the productive sector in discussions around the bill. Paulo Ribeiro, FIEMG’s integrity and governance advisor, warns that the proposed changes could push companies into unforeseen indemnity obligations, since liability would hinge simply on whether damage occurred—not on fault. “Any lawsuit could put a small enterprise under,” he says.

 

Mr. Ribeiro also criticizes the expanded role of the judiciary under proposals tying contracts to social function, arguing courts could reinterpret virtually any agreement, and the judiciary could become overburdened.

 

In response, FIEMG plans to launch an Observatory of the Reform by month’s end—cross‑sector thematic groups to monitor the bill’s progress and propose alternatives.

 

Twenty legal organizations signed a letter urging the bill to pass through all congressional committees with amendment hearings, per Senate rules. They argue the bill implicitly demanded approval before year‑end when filed.

 

Diogo Leonardo Machado de Melo, a law professor and president of the São Paulo Lawyers Institute (IASP), part of the movement pushing for the reform, notes the bill includes structural changes never before debated—like extrajudicial DNA-based paternity recognition. “That needs judicial oversight, because being added as a parent affects insurance, school registration, and more,” he says. Mr. Melo also criticized the proposal to allow judges to impose pedagogical damages. “Granting magistrates the authority to set punitive damages deviates entirely from the current objective standard established in Article 402 [losses and damages],” the professor said. Regarding the chapter on digital assets, Mr. Melo raised concerns about possible legal overlap. “Won’t the ongoing discussions at the Federal Supreme Court over the Civil Rights Framework for the Internet affect this?”

 

He further noted that the French Civil Code, known as the Napoleonic Code, was enacted in 1804 and underwent a reform in 2015 that modified fewer than 300 provisions—primarily focused on the law of obligations and contractual practices.

 

Rodrigo da Cunha Pereira, president of the Brazilian Institute of Family Law (IBDFAM), which supports the proposal and took part in drafting the text, recalled that the current Civil Code spent 20 years in Congress before being enacted, and by then, was already outdated. “Of course, that doesn’t mean approval should happen overnight. Debate will certainly take years as the bill progresses through the many committees every PL must go through,” he said.

 

According to Mr. Pereira, an IBDFAM committee will monitor the bill’s progress and submit proposals to improve the draft. “In a democratic society, this is standard: a committee of legal experts makes a proposal knowing it will be modified,” he said.

 

Mr. Pereira noted that many of IBDFAM’s proposals were considered too bold and didn’t make it into the preliminary draft. “In the section on marriage, for example, we had suggested the phrase ‘union between people’ instead of ‘between two people’ to include polyamorous relationships,” he said.

 

Flavio Tartuce, the bill’s rapporteur, emphasizes there is no urgency in its advancement. “It must pass through thematic committees and will take at least two years. There’s no rush,” he says. He adds that all entities had been notified to participate in earlier public hearings but didn’t contribute.

 

Mr. Tartuce also rejects claims that the social‑function clause would harm commerce, noting the current Code already includes this in Article 2035’s sole paragraph. He argues new indemnity rules are grounded in Superior Court of Justice precedent (REsp 1.152.541), and argues that “today in Brazil, it’s cheaper to breach a contract because moral‑damages are low.”

 

“We’d welcome anyone proposing to shelve or sabotage the bill to join the debate and refine it,” says Mr. Tartuce. “That’s what a democratic society expects.”

 

Source: Valor International

https://valorinternational.globo.com/

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06/29/2025

 

POLITICAL RIFT IN BRASÍLIA STALLS INCOME REFORM PLAN

Bill’s rapporteur Arthur Lira delays report on income tax exemption for low earners as lawmakers push back on government’s compensation plan

 

 

The growing rift between Brazil’s executive and legislative branches following the repeal of a presidential decree to raise the Financial Transactions Tax (IOF) is now threatening other government priorities in Congress. One casualty is the income tax reform bill that would raise the exemption threshold to R$5,000 per month. The bill’s rapporteur, Congressman Arthur Lira (Progressive Party, PP), is expected to postpone the release of his report, which had been scheduled for this Friday (June 27).

 

At the same time, lawmakers anticipate pushback against the provisional presidential decree (MP) introduced to offset lost revenue from the scrapped IOF hike.

 

Regarding the income tax proposal, legislators now believe the timing is not right and that tensions need to subside. However, the goal is still to present the report before the legislative recess, which begins on July 18.

 

Relations between the government and Congress have soured, with lawmakers increasingly voicing frustration over revenue-raising measures and new taxes. There is a growing narrative within the legislature of “fatigue” with policies perceived as tax-heavy.

 

Mr. Lira has been searching for ways to offset the fiscal loss from expanding the tax exemption. The Finance Ministry’s original proposal includes taxing dividends and high-income earners to compensate for the new exemption ceiling. Mr. Lira’s focus in the upcoming report will be on evaluating and negotiating this compensation.

 

Searching for support

 

The executive branch is also pushing for an alternative MP to replace the IOF hike. Despite the friction, the government believes it is still possible to reach a consensus in Congress. As Valor reported on Wednesday, the economic team has already been warned that there are not enough votes to pass the proposal in its current form.

 

The MP includes, among other provisions, an increase in withholding tax on Interest on Net Equity payments distributed by companies to shareholders and changes to tax-incentivized private securities.

 

Talks are unfolding during a low point in the relationship between the government and Congress. Following the IOF repeal, officials in the presidential palace believe that Lower House Speaker Hugo Motta (Republicans Party) broke a promise to ensure predictability in the legislative agenda. They say that commitment was a key reason behind the government’s support for Mr. Motta’s appointment to the leadership of the Lower House. Sources admit that the relationship with Mr. Motta has deteriorated, but caution that the government must act “calmly.”

 

According to President Lula da Silva’s aides, Mr. Motta’s move was politically calculated—an attempt to secure a base of support in Congress similar to what Mr. Lira had built. They believe Mr. Motta is also laying the groundwork for a broader political strategy in the run-up to the 2026 elections, amid Mr. Lula’s declining approval ratings. Mr. Motta did not respond to requests for comment.

 

Speaker Motta’s allies argue there was no “surprise” in putting the IOF repeal to a vote, as it reflected the majority sentiment in the chamber. They said this position was made clear in a meeting with Institutional Relations Minister Gleisi Hoffmann.

 

Following the defeat, Mr. Lula addressed the public on social media, saying, “A lot of people have been talking about taxes in Brazil in recent days,” and that it’s “important to understand what’s actually being proposed.” He added, “The government wants to make changes that target privileges and injustices. To make the system fairer.”

 

Source: Valor International

https://valorinternational.globo.com

 

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06/27/2025

 

BRAZIL WANTS TO INCLUDE CARS AND SUGAR IN MERCOSUR

The Lula administration aims to give strategic sectors preferential treatment during its presidency of the bloc

 

Brazil plans to use its upcoming six-month presidency of Mercosur to push for the inclusion of the automotive and sugar industries in the bloc’s common trade regime, according to the country’s Foreign Ministry, known as Itamaraty. The initiative is expected to be one of President Lula’s top priorities for the regional group in 2025.

 

The effort is tied to the economic significance of these sectors within intra-bloc trade. Roughly half of all trade between Brazil and Argentina, for example, is concentrated in the auto industry. Yet despite its central role, the sector has remained outside Mercosur’s common trade framework since the bloc was created 34 years ago.

 

“Our goal is to include the automotive sector in Mercosur, and we will continue working toward a regional agreement in this area,” said Ambassador Gisela Maria Figueiredo Padovan, secretary for Latin America and the Caribbean at Brazil’s Ministry of Foreign Affairs, who is leading the negotiations.

 

Ms. Padovan said the Brazilian government has already drafted a proposal outlining a new common industrial policy for the regional auto sector. “We’ve submitted a draft agreement aimed at establishing a shared industrial policy. Just between Brazil and Argentina, autos account for 50% of bilateral trade—that’s highly significant. We’re pursuing a deal that will be mutually beneficial,” she said.

 

Negotiations on the sugar industry are still at an earlier stage, with no formal text under discussion. Even so, talks are moving forward, according to Ambassador Francisco Pessanha Cannabrava, director of the Mercosur Department at Brazil’s foreign ministry.

 

“In the case of sugar, we’re aware of the sensitivities among our Mercosur partners, but our goal is not to harm local agriculture. Our focus is on aligning production chains. Countries like Uruguay and Paraguay have domestic industries that rely on sugar, so we need to find ways to integrate it into the bloc,” Mr. Cannabrava said.

 

As part of this process, Brazil is considering working with the Inter-American Development Bank (IDB) to help develop technical benchmarks for sugar sector integration. “We’re working on terms of reference to figure out how sugar can be included in Mercosur in a way that’s a win-win for everyone. These terms could be developed by respected institutions like the IDB,” he added.

 

Brazil’s Foreign Ministry also expressed optimism about reaching an agreement with Argentina on a new version of the Common External Tariff Exception List. The current discussion stems from a proposal made during Argentina’s previous Mercosur presidency, which secured exemptions for 50 new products.

 

According to Brazilian officials, a final agreement could be reached during the next Mercosur summit, scheduled for July 2–3 in Buenos Aires. The exception list allows member countries to apply different external tariffs to specific goods, giving them more flexibility within the bloc’s broader trade structure.

 

Source: Valor International

https://valorinternational.globo.com

 

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