World talks energy addition rather than transition, ex-minister says

Izabella Teixeira, Brazil’s environment chief from 2010–2016, says decarbonization brings opportunity—but globally, energy is being added, not replaced

04/11/2025

Amid global geopolitical turmoil, Brazil is the best place to host the next United Nations climate summit, said Izabella Teixeira, Brazil’s environment minister from 2010 to 2016. “Brazilian democracy’s ability to welcome the world with its diverse social expressions is remarkable,” said Ms. Teixeira, now a consultant and advisor to institutions such as the Brazilian Center for International Relations (CEBRI).

The biologist, who played a key role in the negotiations that led to the Paris Agreement in 2015, stressed that it’s crucial to observe how financial and corporate actors—from São Paulo’s Faria Lima financial district and beyond—will engage with the climate issue. “Decarbonization is indeed an opportunity for Brazil, but we need to approach the issue in a mature way, not through a polarized or biased lens,” she said.

In an interview with Valor, the former minister discussed what will really be at stake at COP30, to be held in Belém, and why the world is not truly progressing in the so-called energy transition. Below are key excerpts from the conversation:

Valor: Based on your experience with the Paris Agreement, how do you view COP30? What areas might reach consensus in Belém?

Izabella Teixeira: I’m not even sure the world is capable of reaching consensus at a COP today. The event in Belém is more about understanding the current global moment to work toward practical solutions to tackle climate change. We’re witnessing a profound transformation in the international order, which directly affects the COP and the multilateral system.

All the geopolitical conditions that enabled the Paris Agreement ten years ago have changed. Paris was a political agreement that mobilized global engagement around climate. Today, global governance is undergoing a deep shift, marked by intense debate. The United States, for instance, has prioritized energy security based on fossil fuels. Meanwhile, countries like China and India are taking their own paths. We’re not talking about energy transition anymore—we’re talking about energy addition.

Valor: So the world isn’t replacing its energy sources?

Ms. Teixeira: No, there’s no substitution of one energy matrix for another, but rather the addition of new sources to the existing mix. The data shows record investments in renewables, but fossil fuel investments remain high. Europe, for example, might return to coal because of the energy crisis triggered by the war in Ukraine. Geopolitics directly influences the climate agenda, and this must be acknowledged in global discussions.

Electrification is key to decarbonization and is closely tied to the digital and technological age, which depends on strategic minerals and new materials—all of which require more energy. Moreover, population growth and extreme weather events are increasing energy demand. Cooling energy consumption has skyrocketed globally. The world’s energy matrix is still largely fossil-based, and changes aren’t happening fast enough.

Valor: Is Brazil out of sync with this global trend?

Ms. Teixeira: Brazil has a relatively comfortable position in terms of its electric matrix, which is heavily based on renewables. But challenges remain—such as our reliance on diesel, since we are the seventh-largest diesel consumer in the world. Decarbonization presents opportunities, but it also requires strategic decisions across short, medium, and long terms. These decisions cannot be based on assumptions but must follow a strategic vision that brings together government, the private sector, the financial industry, and civil society.

Valor: To what extent can COP address this ongoing energy debate?

Ms. Teixeira: The climate summit isn’t just the event—it’s part of a broader process already underway, stretching to 2026 while Brazil holds the COP presidency. The country must define how it will lead this global and domestic debate, bringing together different sectors to craft realistic solutions. Our electric matrix offers strengths, but we face complex challenges, including organized crime linked to deforestation in the Amazon. The forest is crucial for global climate security.

We’re facing a real, global problem that requires maturity and strategic choices. What we decide now will shape the next decades. The current climate crisis is the result of past actions. What we do today will determine how vulnerable we are tomorrow. Brazil must approach this conversation as an adult—among other adults—without polarization. That’s the real challenge.

Valor: Can “all these adults” actually decide the world’s future in Belém?

Ms. Teixeira: Brazil’s role as COP president is to offer a platform for dialogue—for example, on climate financing. There won’t be a specific decision on this at COP30, but there will be efforts to set up a political process to define future pathways. The decision to invest $1.3 trillion was already made at the COP in Baku [last year]. Brazil and the COP29 presidency will provide a vision on how to raise these resources. But the conversation isn’t limited to the COP—it’s also happening in the G20, BRICS+, and G7. Similarly, there won’t be major decisions on NDCs [Nationally Determined Contributions]. What we will see is a report assessing how ambitious these national plans are. The gap to stay within the 1.5°C limit clearly still needs to be narrowed.

Valor: If Belém is more about setting future processes than major negotiations, could this COP still change the cultural mindset around climate?

Ms. Teixeira: For Brazilians, it’s important to understand that they are part of global solutions. This isn’t some distant issue. Decarbonization can bring economic and social benefits to Brazil. We need pragmatism and realism to address all the moving parts. Our country must lead and offer solutions. Brazil has the diplomatic and economic capacity to influence the global conversation. COP30 is an opportunity to show that. Tackling climate change is in our direct interest. It’s not just an environmental issue—it’s about sustainable development, social inclusion, and technological progress. If Brazil plays it right, it can emerge stronger from this process.

Valor: So this will be a hands-on COP?

Ms. Teixeira: Climate change is happening—there’s no turning back. What’s needed now is action. This will be a COP of hard work, focused on restoring credibility and trust in the climate process, even as we deal with huge geopolitical uncertainties. These are issues that affect daily life, especially for younger generations, who are deeply concerned. We can’t be hostage to short-term tensions. Giving up or pretending the problem doesn’t exist is not an option.

We are creating life. That’s the key message: decarbonization brings the future into Brazil’s present and keeps us generating life. This is a country that looks to its future with innovation and a contemporary mindset, aware of the challenges of changing deeply rooted cultures.

*By Eduardo Geraque — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Brazil, U.S. resume trade talks as Trump tariffs bite

Economist Paul Krugman warns of inflation and false victories in new protectionist wave

04/11/2025

Brazil and the United States held their first negotiations since U.S. President Donald Trump’s sweeping tariff hike, which added a 10% duty on all Brazilian exports. According to sources, the two sides met on Thursday to discuss two main issues: clarifying the scope of the so-called “reciprocal tariffs” and securing continued access for Brazilian steel in the American market.

The Brazilian government is still pushing for the reinstatement of quotas imposed during Mr. Trump’s first term, including the 3.5 million-tonne cap for semi-finished steel, which serves as raw material for U.S. steelmakers.

Negotiators from both countries exchanged ideas on how to move forward, and a new round of talks is expected to be scheduled.

As previously reported, the Trump administration is still concerned about Brazil’s 18% import tariff on ethanol, which contrasts with the 2.5% duty applied by the U.S. It is widely expected that ethanol and steel may ultimately be bundled into a single deal, creating a trade-off that would appeal to both Brasília and Washington.

Mr. Trump is rushing to secure bilateral agreements under increasing pressure from segments of the U.S. private sector, even as the economic fallout from his trade policies continues to mount.

Last week, Mr. Trump presented tariff changes dramatically, displaying them on a large cardboard sign in the White House Garden. Although some duties have been slightly reduced—for example, the European Union will face a 10% tariff instead of 20% over the next three months—others have soared. Tariffs on Chinese imports, the third-largest source of U.S. trade after Canada and Mexico, have jumped to over 130% from 34%. High tariffs also remain on steel and aluminum.

Nobel Prize-winning economist Paul Krugman warned that claims of a tariff reduction miss the bigger picture. He pointed to an analysis by Yale’s Budget Lab, which suggests that the April 9 tariff regime could increase consumer prices even more than the April 2 package.

According to the report, Mr. Trump’s decision to apply a uniform 10% tariff to all countries, while sharply escalating duties on Chinese goods, is expected to raise U.S. consumer prices by 2.9%. That’s nearly ten times the estimated impact of the infamous 1930 Smoot-Hawley tariff, which helped turn a recession into the Great Depression and contributed to a rise in nationalism and global conflict.

Mr. Krugman questioned what the U.S. is even trying to negotiate. In many cases, he argued, other countries have no trade barriers to remove. He recalled that Mr. Trump’s trade advisor, Peter Navarro—mocked by Elon Musk as an “idiot”—has insisted that value-added taxes (VAT) are effectively tariffs. “They’re not,” Mr. Krugman said, adding that EU countries cannot afford to eliminate them.

In Mr. Krugman’s view, foreign governments may offer symbolic concessions that Mr. Trump will brandish as real victories. He cited Mr. Trump’s earlier trade deal with China during his first term, which he claimed involved major concessions from Beijing—claims that later proved false.

“In fact, American soybean producers never fully regained their lost market share,” Mr. Krugman noted. “And remember how Trump made minor tweaks to NAFTA and then claimed to have secured an entirely new trade agreement with Mexico and Canada.”

The two sides met on Thursday to discuss two main issues: the scope of the “reciprocal tariffs” and access for Brazilian steel in the American market — Foto: Pexels
The two sides met on Thursday to discuss two main issues: the scope of the “reciprocal tariffs” and access for Brazilian steel in the American market — Photo: Pexels

By Assis Moreira, Valor — Bordeaux

Source: Valor International

https://valorinternational.globo.com/
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Carbon market creates new job opportunities in Brazil

Companies seek professionals for emission reduction projects, clean energy adoption, and credit negotiations

04/10/2025

A new “green” industry is gaining momentum in Brazil and beginning to recruit professionals for strategic roles. The regulated carbon market—which allows companies and countries to offset greenhouse gas (GHG) emissions by purchasing credits tied to environmental initiatives—was established by a government bill at the end of 2024 and is expected to be fully operational by 2030.

According to the International Chamber of Commerce (ICC Brazil), the sector could attract up to $120 billion in investment over the next five years, potentially generating 3.4 million jobs by 2040.

Professionals in this segment, which has been active in other countries for more than two decades, are recruited to lead projects aimed at reducing GHG emissions, such as the adoption of clean energy and reforestation efforts. They may also calculate an organization’s carbon footprint, advise leadership on sustainable practices, and facilitate carbon credit negotiations between companies.

“In the last two years, we’ve seen an 18% increase in the number of projects recruiting for this area,” says Kleber Bonancio, senior associate manager at Talenses, an executive search firm that has specialized in carbon market hires for six years. “The number reflects growing interest in the topic in Brazil, especially after progress on regulated market discussions and projections of sector contributions.”

Mr. Bonancio notes that the positive outlook is heating up the job market and prompting more companies to form dedicated teams. “Hiring is happening mainly in the energy sector—both renewables and oil and gas—along with agribusiness, chemicals, and manufacturing,” he explains. However, as the market is still emerging, companies will likely face difficulties filling roles due to a shortage of qualified candidates. “That’s making the talent search extremely competitive and demanding CVs with strong technical skills,” he says.

This is the case of Maria Belen Losada, head of carbon products at Itaú Unibanco, who joined the bank in 2022. With more than two decades of experience in the treasury departments of global institutions such as BNP Paribas and Morgan Stanley, the São Paulo-based Argentine executive has spent the last three years immersed in the carbon market. She was recruited by Itaú’s HR team to take on the role. “My responsibilities include advising on carbon project generation, credit commercialization, and market advocacy,” says Ms. Losada, who holds a degree in economics and a specialization in sustainable finance from the University of Cambridge.

Among her notable achievements is the creation of a carbon credit trading and custody platform developed in partnership with eight international banks, including BNP, UBS, and BBVA. “The goal is to connect credit supply and demand across the banks’ client bases,” she explains.

Leading a team of four, Ms. Losada believes the sector in Brazil urgently needs more professionals. “The new accounting and reporting obligations for publicly traded companies, along with the growing need to plan for climate-related risks, will require specialized talent,” she says. “We’ll need professionals skilled in greenhouse gas emissions measurement, climate transition consulting, environmental and international law, and data science.”

At Bichara Advogados, partner Patrícia Mendanha Dias—who holds a master’s degree in environmental engineering—has worked with carbon-related cases for about a decade. “My legal practice has always focused on environmental matters, and I transitioned to the climate agenda because of its growing relevance and increasing client demand,” she explains.

Ms. Dias provides legal counsel on environmental issues and assists companies in structuring credit transactions, reviewing contracts, and monitoring sector-specific legislation.

With a team of five employees dedicated exclusively to carbon projects, she’s currently involved in initiatives in northern Brazil that bring together investors and riverside communities. “To do this work well, you need to be ready for constant change,” she says. “The sector’s regulations and project viability criteria are continually evolving. In this field, the ability to offer well-directed, proactive guidance is essential.”

Soraya Dias Pires, head of decarbonization at the Brazilian environmental solutions multinational Ambipar, emphasizes the need for both technical expertise and a strategic mindset. “In addition to being able to connect sustainability, economic viability, and business development,” says the agronomist, who was recruited by a headhunter in 2022.

Her background in innovation and deep understanding of the low-carbon economy helped open the door to the sector, says the executive, who previously served as business development manager at BP Bunge Bioenergia, in the sugar and ethanol industry. “I worked on structuring projects with both environmental and financial impact, linking environmental regeneration with a sustainable economy,” she explains.

Reporting directly to CEO Tércio Borlenghi Jr., Pires leads a 70-person team and oversees the certification and sale of carbon credits, the development of corporate decarbonization plans, and the application of geotechnologies for project monitoring. “Our mission is to make decarbonization accessible to companies by securing funding sources that make implementation feasible,” says Ms. Pires, who works on environmental conservation and restoration projects in states such as Amapá, Pará, and Rondônia. “What drives me is knowing that my work contributes to the global climate agenda and creates a legacy for future generations.”

*By Jacilio Saraiva — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Santos-Guarujá tunnel auction draws interest from four groups

Construction cost and port disruption top list of investor worries

04/10/2025

The auction for the Santos-Guarujá tunnel concession is scheduled for August, but private-sector players are already gearing up for what is considered an exceptionally complex project. According to sources familiar with the matter, at least four business groups are actively studying the bid: China’s CCCC, partnered with Portugal’s Mota-Engil; Spain’s Acciona; Italy’s WeBuild, teaming up with Brazilian companies Andrade Gutierrez; and OEC (Odebrecht Engenharia e Construção), which is finalizing a joint venture with Queiroz Galvão’s EGTC and a third, as-yet-undisclosed firm expected to provide the financial backing for the consortium.

Odebrecht has reportedly held talks with several asset managers and international companies—including WeBuild and Chinese groups—in a bid to secure a financially viable partnership. One source indicated that with the addition of the third investor, now in advanced negotiations, the consortium’s financial structure would be in place. The company is also said to have hired an international firm specialized in tunnel design, given that the construction method being proposed has never before been used in Brazil.

Acciona has already partnered with Ballast Nedam, a Dutch firm specializing in submerged tunnel construction. Sources say the Spanish group has been studying the project for over a year and has held biweekly meetings with government officials. Talks were reportedly held with Vinci to potentially form a consortium, but the French firm ultimately walked away. Observers note, however, that Vinci remains interested in the auction, though its immediate focus is on other large-scale mobility projects in São Paulo that require substantial capital investment.

Acciona told Valor that it is “constantly assessing opportunities” and sees “significant value in Brazilian infrastructure assets.” CCCC, Odebrecht, EGTC, and Andrade Gutierrez declined to comment. Mota-Engil, WeBuild, and Ballast Nedam had not responded by press time.

The auction is widely seen in the market as highly challenging. The construction will require significant investment, involve an engineering method unprecedented in Brazil, and may interfere with operations at the country’s largest port. On the other hand, the fact that both the São Paulo state government and the federal government are contributing funds and sharing key risks is viewed as a strong point for the project’s feasibility, according to industry sources.

One major red flag cited by analysts is the project’s estimated rate of return, which some say is based on outdated interest rate assumptions. Given the complexity and risk of the initiative, they argue that a revised rate reflecting current financial conditions is needed.

There are also doubts surrounding the capital expenditure estimates. The project’s preliminary studies put CapEx at R$5.8 billion, but sources say the figure may be significantly underestimated due to incomplete technical details in certain areas of the project, which introduce uncertainty. The final construction cost, they warn, could be considerably higher.

Analysts are also concerned about potential impacts on shipping traffic. “The challenge is to execute a project of this scale without disrupting ongoing port operations,” said Casemiro Tércio Carvalho, a partner at infrastructure consultancy 4 Infra. “It’s a logistical challenge both for the port authority and for the contractor.”

Civil engineer and infrastructure consultant Jennyfer Tsai flagged further complications related to the staging areas where tunnel segments—which are to be built off-site and then submerged—will be constructed.

The auction notice identifies four possible locations within the Port of Santos for this activity, but Ms. Tsai noted that all of them overlap with areas designated for future terminal projects by the port authority, raising doubts over land availability. “If none of these sites can be used, that will drive up costs,” she warned.

In a statement, the Santos Port Authority (APS) said it is working to ensure “that any proposed location aligns with current port planning and is compatible with strategic projects underway,” while adding that the final site selection will be the concessionaire’s responsibility.

Regarding concerns about shipping operations, APS said that the tunnel is “urgently needed and will be built with the highest level of responsibility, with any necessary navigation suspensions planned well in advance in coordination with terminal operators.”

São Paulo’s Department of Investment Partnerships emphasized that the tunnel project was designed to minimize disruption to port activity. “Navigation through the main channel is expected to be suspended for only two days per module—six modules are currently planned, though that number could be reduced,” the agency stated. It also defended the current return and CapEx parameters, saying they were “based on robust studies.”

Despite lingering concerns, analysts and insiders acknowledged that several major risks—such as demand uncertainty, expropriation challenges, and geotechnical issues—have been adequately addressed. “From a regulatory standpoint, I don’t see any deal-breakers. The risk matrix already accounts for key issues,” Mr. Carvalho said.

The auction is set for August 1. The contract will be awarded to the bidder offering the highest discount on annual payments, which are capped at R$304 million. If the maximum discount (100%) is reached, bidders may then offer a discount on the public subsidy, which can go up to R$4.96 billion.

*By Taís Hirata — São Paulo

Source: VAlor International

https://valorinternational.globo.com/business
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Analysts fear Brazil could lose ground in U.S. trade talks

Projections point to closer ties with China, potential delays in investment

04/10/2025

The Trump administration’s surprise decision to impose new tariffs on Chinese imports has split Brazilian analysts over the potential fallout for Brazil’s economy. Experts interviewed by Valor expect continued headwinds for sectors like steel and aluminum—particularly if the 25% tariffs remain in place, well above the general 10% rate—while also anticipating a further deepening of Brazil’s commercial ties with China. At the same time, there are concerns that Brazilian products could lose ground to competitors in the U.S. market and that investment decisions may be postponed.

These measures add to global uncertainty and insecurity, said Welber Barral, partner at consultancy BMJ and former secretary of foreign trade. They’re likely to trigger a wave of negotiations with countries and blocs most affected by the U.S. trade policy. Mr. Barral warned that the move could open new markets for U.S. agricultural goods, posing risks to Brazil’s export sector. He believes blocs hit hardest by the new tariffs—such as the European Union, Japan, and South Korea—will likely receive priority in trade talks with Washington. Brazil, he says, could end up “at the back of the line” in negotiations for the 10% base tariff.

“In exchange for lower tariffs, the EU will offer the U.S. access to its agricultural market, which would be bad news for Brazil. Japan is expected to do the same, and South Korea may seek to negotiate around meat exports,” Mr. Barral added. According to Mr. Barral, the U.S. must secure new buyers for its agricultural output.

If the 25% sector-specific tariffs—which in Brazil’s case target steel and aluminum—remain, the executive believes the Trump administration will effectively be blending trade policy with commercial defense issues, heightening uncertainty. The 125% tariff on Chinese electric vehicles is also likely to raise concerns among U.S. Midwest farmers, who rely heavily on Chinese demand.

Sergio Vale, chief economist at MB Associados, sees a natural shift ahead: stronger Brazil-China relations. “If there was still any doubt that Trump would take a hard line against China, there’s none now,” he said. “This tariff will likely be reduced in time, but the broader consequence will be a faster decoupling between the U.S. and Chinese markets—and a growing alignment between Brazil and China.”

Trade between Brazil and China has surged in recent years and now amounts to twice the total volume of trade between Brazil and the U.S., Mr. Vale noted. Currently, trade between Brazil and China totals $160 billion, compared to $80 billion with the United States. “Within five years, Brazil-China trade could reach $200 billion—nearly three times the volume with the U.S., which may fall to $70 billion,” he said.

Still, Mr. Vale cautions that the short-term outlook remains volatile. “Even if Trump backtracks and returns to the negotiating table, this episode sends a clear message: the U.S. is no longer seen as the reliable trade partner it once was. And it’s making poor decisions on trade,” he said.

Luis Otávio Leal, chief economist at G5 Partners, sees a potential short-term window of opportunity during the 90-day suspension of reciprocal tariffs. “If all tariffs are in fact reduced to 10%—including those already levied on aluminum and steel—it could give U.S. companies a chance to rebuild inventories in preparation for a potential tariff hike once the suspension ends,” he said.

However, forecasting Brazil’s gains or losses is far from straightforward, said Carla Beni, economist and professor at the Getulio Vargas Foundation. “Companies need stability to make investment decisions and sign long-term contracts,” she said, adding that the prevailing uncertainty is likely to delay capital allocation—a negative outcome for all involved.

*By Marta Watanabe, Marsílea Gombata, Michael Esquer and Alex Jorge Braga — Brasília

Source: Valor International

https://valorinternational.globo.com/
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Orange juice industry faces $100m blow from new U.S. tariff

CitrusBr says cost to Brazilian exporters could rise 80%

04/08/2025

The tariff hike announced by U.S. President Donald Trump is expected to cost Brazilian orange juice exporters more than half a billion reais. According to CitrusBR, which represents exporters Cutrale, Citrosuco, and Louis Dreyfus, the new 10% tariff on the commodity could add $100 million per year in taxes for Brazilian companies.

The additional tariff, unveiled last week, targets a range of Brazilian products.

CitrusBR’s estimate assumes Brazil will export around 235,500 tonnes of orange juice to the U.S. during the 2024/25 harvest season. The U.S. currently accounts for 37% of Brazil’s total orange juice exports.

Data from the Foreign Trade Secretariat (SECEX), compiled by CitrusBR, show that between July 2024 and February 2025, Brazil shipped 207,200 tonnes of frozen concentrated orange juice (FCOJ 66 Brix) to the U.S., generating $879.8 million in revenue.

The new tariff would be in addition to existing charges, including a $415-per-tonne duty on FCOJ at 66 Brix concentration. That charge alone amounted to $85.9 million in 2024, according to CitrusBR.

Taken together, the existing and new tariffs could push the total annual tax burden on Brazil’s orange juice exports to about $200 million, or roughly R$1.1 billion.

“This 10% tariff leads to an over 80% increase in costs. We’re jumping from $415 per tonne to nearly $800, while Mexico—our main competitor in the U.S. market—pays zero thanks to its free trade agreement with the U.S.,” said Ibiapaba Netto, CitrusBR’s executive director, in an interview with Valor.

Despite the headwinds, CitrusBR said that “Brazilian companies continue, individually and in line with their commercial strategies, to supply the U.S. market with high-quality orange juice.”

“The industry regrets, however, that the decision was made without taking into account the long-standing complementary relationship between Brazilian production and Florida’s processing industry, as well as long-term partnerships with U.S. bottling companies,” Mr. Netto added.

Last year, the U.S. was the destination for 32.12% of Brazil’s orange juice exports.

*By Fernanda Pressinott, Globo Rural — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Trump’s threat to China weighs on Brazilian assets

Ibovespa falls sharply, real weakens to R$5.91 per dollar amid global sell-off

04/08/2025

A surge in global market volatility led to broad losses in Brazilian assets on Monday (7), following renewed trade tensions between the United States and China. A threat by U.S. President Donald Trump to impose an additional 50% tariff on Chinese products hit emerging markets hard, dragging down Brazilian stocks, pushing the U.S. dollar to its highest level against the real since February 28, and driving long-term interest rates higher.

Mr. Trump’s increasingly aggressive trade stance has stoked recession fears in global markets in recent sessions. Following several banks’ warnings about a possible recession this year, Goldman Sachs lowered its U.S. GDP growth forecast from 1% to 0.5% and raised its 12-month recession probability from 35% to 45%.

Against this backdrop, emerging market assets underperformed developed markets on Monday. In Brazil, the foreign exchange rate jumped 1.29% to R$5.91 per dollar. The U.S. currency posted even larger gains against other emerging market currencies, including the Colombian peso, Chilean peso, and South African rand.

In equities, benchmark Ibovespa dropped 1.31%, mirroring the decline in the iShares MSCI Brazil ETF (EWZ) in New York, which fell 2.24%. This contrasted with the near-flat performance of the S&P 500, which dipped 0.23% amid a volatile session. Emerging market stocks (EEM) slumped 3.72%, largely dragged down by Asia. The iShares MSCI China ETF (MCHI) ended the day with a steep 8% loss.

Emerging market impact

The slowdown in the U.S. economy could also weigh on emerging markets, said Gilberto Nagai, head of equities at SulAmérica Investimentos. “What we’re seeing unfold doesn’t look like a good deal for anyone—it’s full of uncertainty and depends entirely on Trump. If the U.S. economy slows significantly, there will be a broad risk-off movement across markets,” he said.

Fears of a Chinese slowdown triggered another sharp drop in oil prices, which fell for a third straight session. The decline pressured oil-related stocks on the Ibovespa after China announced reciprocal tariffs on Wednesday.

Markets are now discussing whether the sharp drop in oil could force Brazil’s oil giant Petrobras to adjust gasoline prices. Ativa Investimentos said the move would be negative for Petrobras shares, particularly after the company cut diesel prices just 60 days after a price hike announced on January 31.

“If another price cut is confirmed, it would be the third move in less than 120 days, exposing the company’s pricing policy—designed to shield domestic prices from barrel volatility—as ineffective,” analysts said.

Rising interest rates

Brazilian interest rates also provided no support for stocks. Long-term yields rose steadily throughout the session as investors corrected recent excesses and tracked the uptick in U.S. Treasury yields.

At the close, the DI (Interbank Deposit) rate for January 2029 climbed from 14.03% to 14.16%, and the January 2031 DI advanced from 14.35% to 14.48%.

Citi said it closed its positions betting on falling interest rates futures and on rising fixed-rate NTN-F bonds maturing in January 2029. “While we still believe the economic outlook supports medium-term disinflation and lower long-term rates in Brazil, we’re concerned about the spillover effects from equity market selloffs via the dollar/real, along with potential idiosyncratic risk surprises,” the bank’s strategists said.

On the other hand, Morgan Stanley strategist, Ioana Zamfir, doubled down on her position, betting on a decline of Brazilian interest rate futures (January 2029 DI), and added a new bet on falling prices of inflation-linked NTN-B bonds maturing in August 2028.

Ms. Zamfir said the rates position reflects expectations of a potential slowdown in Brazil’s economy amid relatively muted fiscal policy risks and a more favorable global interest rate environment. She described the short position on medium-term real interest rates as “extremely attractive” and argued “it does not match global growth risks or Brazil’s medium-term economic outlook.”

Challenging environment

Vagner Alves, fixed-income portfolio manager at Kinea Investimentos, said that while the market reaction has been sharp, emerging markets will likely continue to suffer as recession fears grow. “In this environment, it’s natural for emerging market assets to lose more value—especially those tied to commodity prices, like Brazil’s,” he said.

“The recent moves happened very quickly, so we may see a partial correction, but that’s more likely in U.S. markets. For emerging markets, the environment remains challenging,” said Mr. Alves.

A reversal in this scenario would require a drastic shift in the U.S. government’s stance, “but there’s no sign of that—quite the opposite. There was even a rumor today [Monday] of a [tariff] delay, but the White House quickly denied it,” he noted.

Despite investor fears about a severe global slowdown, Mr. Alves said the downturn may not be so deep. “Countries still have fiscal tools they can use. That could help reverse the current market gloom,” he said.

Marcello Siniscalchi, a partner at Asset 1, said the slightly more resilient performance of Brazilian assets in recent sessions was partly due to Brazil facing a lower tariff rate of 10%. He also noted that foreign investors had already reduced their exposure to local markets, leaving them with fewer positions to liquidate. “Investors held a certain position based on a specific volatility pattern. When that pattern changed, they had to cut back,” he said.

Currently, Asset 1 has a clearer outlook on equities and interest rates than on currencies. The firm’s chief economist, Luis Cezario, said they expect a slowdown in the U.S. and Europe, and foresee back-and-forth developments in trade negotiations between the two sides. As a result, he said it will be hard to predict currency moves.

“It’s difficult to know how the dollar will behave against the euro, or whether it will strengthen. Will Europe remain a more independent player? Tariffs lead to lower growth and higher inflation. It’s easier to believe that equities will fall in a recession than to predict which currency will come out on top,” he said.

*By Maria Fernanda Salinet, Arthur Cagliari, Bruna Furlani and Gabriel Caldeira — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Santander moves to defensive stance on global assets amid U.S. tariffs

Economist sees unprecedented shock increasing global uncertainties with repercussions in Brazil

04/07/2025

Santander Asset Management has adopted a defensive stance on global assets and is taking a tactical approach to domestic markets amid heightened uncertainty prompted by the “unprecedented shock” from the sweeping tariff hike announced by the United States, said Chief Economist and Strategist Eduardo Jarra. In an interview with Valor, Mr. Jarra expressed concerns about the potential impact of the tariffs on global economic activity and noted that repercussions could be felt in Brazil—possibly leading the Central Bank to end its interest rate tightening cycle earlier than expected.

The following are key excerpts from the interview:

Valor: What’s your assessment of the global outlook now that the Trump administration has announced new tariffs?

Eduardo Jarra: We’re dealing with a situation that has no recent historical precedent. Typically, in our analysis, we rely on past events as a reference to understand how markets and economies might react. This time, there’s no roadmap; we’re operating on assumptions. We had marked April 2 as a key date to get more clarity, but the announcement surprised markets with its scale and timing.

Valor: What kind of tariff levels had you anticipated?

Mr. Jarra: Like most of the market, we were expecting something in the 10% to 15% range. Therefore, the announcement was surprising not just in terms of size but also in terms of the rationale behind it. By April 2, the picture was very different from what we had imagined. At least we now have clarity on what the tariffs look like. The uncertainties now revolve around how other countries will respond and whether there’s any room left for negotiation. That has left us in a highly uncertain environment, and we’ve adopted a more defensive management stance. We’ve shifted to a defensive management mode.

Valor: Has Santander Asset shifted to more defensive assets?

Mr. Jarra: I’d say we’ve moved toward more defensive positioning rather than specific defensive assets. Given that we saw this as a significant event, we had already begun reducing risk across portfolios. After the announcement, we still believe that de-risking was the right move. We’re now navigating more uncharted territory. China responded with a 34% tariff on U.S. goods—a strong reaction that immediately impacted markets. We’ll have to wait and see how the U.S. responds. Is this the end of the escalation or just the beginning? Given the magnitude of the U.S. tariffs, is there still room to negotiate? In an environment with this much uncertainty, we believe the prudent approach is to wait, digest the information, and observe how key players act. It’s too early to take positions based on hypotheticals.

Valor: Can we already assess any concrete economic impact from the tariffs?

Mr. Jarra: We knew that a tariff shock would likely lead to slower growth and higher inflation. Now, we’ll try to gauge the magnitude of those effects. The problem is that we still don’t have a full picture—retaliatory measures from other countries are still unfolding. U.S. inflation will rise as import prices climb. However, the spike in uncertainty is also likely to make companies pause investment decisions, possibly leading to reduced capital expenditures. Consumer purchasing power will also be hit. On top of that, we need to consider the impact on financial markets since a significant portion of Americans’ savings are in equities. And don’t forget supply chains. What does this disruption mean for corporate production structures? That concerns me more than inflation.

Valor: Could the U.S. be heading for a recession?

Mr. Jarra: The probability has increased. We need more data to know how much more likely it is now, but yes, the risk has risen. The real question now is how severe the U.S. slowdown will be. If conditions remain roughly as they are, I believe the focus will shift more toward growth concerns, which will eventually lead to rate-cut discussions.

Valor: Have you changed your outlook for Federal Reserve rate cuts?

Mr. Jarra: We were projecting two 25-basis-point cuts this year and two more in 2026. I’m still comfortable with that forecast for this year. From here, the question is whether there’s room for additional cuts in 2025—perhaps bringing forward some of the easing we expected next year.

Valor: How is your global portfolio positioned now?

Mr. Jarra: We started the year optimistic about the U.S., driven by strong economic data and the tech sector. Even with elevated valuations, there was a compelling case for U.S. “exceptionalism.” However, with rising uncertainty around the U.S., and with fiscal stimulus in Europe and promising developments in Chinese tech, we began diversifying our global equity exposure geographically. Even before the tariff announcement, we were already becoming more defensive. Today, our global exposure is significantly lower—neutral or close to it, depending on the portfolio. As we continue to assess the post-announcement landscape, we’re maintaining that defensive posture and plan to revisit our strategy once things settle.

Valor: Given the weaker U.S. growth outlook, are you allocating to U.S. fixed income?

Mr. Jarra: Not through a directional bet. That said, we’ve been combining U.S. fixed income with our global equity risk bucket. We like U.S. fixed income as a complementary asset within our risk allocation framework, though not as a standalone opportunity. Our current stance is neutral.

Valor: Does this defensive stance also apply to Brazilian markets?

Mr. Jarra: We’re also holding neutral positions across all asset classes in Brazil. However, we’re actively managing the portfolios with a more tactical eye, looking for short-term opportunities. It’s a tactical allocation strategy that remains close to neutral overall.

Valor: The market had been concerned about a sharper slowdown in Brazil. Has that changed?

Mr. Jarra: We still project 2% GDP growth for this year and 1.5% for next. The economy is generally unfolding as expected. The first quarter was strong, largely due to agribusiness, and the labor market remains tight, providing a tailwind. That momentum should moderate in Q2 as the agribusiness’s impact fades. For the second half of the year, the restrictive monetary policy should lead to a more noticeable deceleration.

Valor: Are any of the government’s stimulus policies likely to offset this slowdown?

Mr. Jarra: We’ve already factored in measures like expanded payroll-deductible credit and the proposed income tax exemption. Based on current information, we believe the Central Bank is nearing the end of its tightening cycle. The economy appears to be entering a gradual slowdown. If new data changes the picture, we’ll reassess.

Valor: Is there any bias in your GDP outlook?

Mr. Jarra: Given the current strength in the labor market and agribusiness—and some uncertainty around fiscal stimulus—the bias is to the upside. Two downside risks remain: first, the lagged impact of restrictive monetary policy; second, the global backdrop, which has become more concerning and could influence the Central Bank’s decisions moving forward.

Valor: Could that lead to an earlier start to a rate-cutting cycle?

Mr. Jarra: Right now, we’re more focused on the current cycle coming to an end. Given the global developments, the probability of ending the cycle with the Selic policy interest rate at 14.75% has increased—this is our base case. If the global economy slows but avoids a more serious disruption, the external environment could help ease Brazil’s economic deceleration. That would provide room for the monetary authority to hold rates steady at 14.75% or 15.25% and monitor the effects. In that scenario, the global factor could tilt the odds in favor of rate cuts starting in 2026. But as things stand today, Brazil still seems far from any discussion of an early start to easing this year.

*By Arthur Cagliari and Victor Rezende — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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OPEC+ output boost erodes competitiveness of Brazilian oil

If prices remain low, country will earn less from top export while Petrobras gets room to lower fuel prices

04/07/2025

The decision by the Organization of the Petroleum Exporting Countries and its allies (OPEC+) to increase oil production starting in May by a larger-than-expected volume has surprised the market, worrying oil companies and adding further uncertainty to an already challenging global short- and medium-term outlook.

The cartel’s announcement came on April 3, a day after President Donald Trump’s announcement of broad tariffs on the rest of the world. Analysts and industry executives believe the combination of these two factors has heightened uncertainties. The American trade tariffs are expected to slow down the global economy, which could reduce growth in countries and decrease demand for oil. Yet, despite this already complex scenario, OPEC+ opted to triple the volume of additional supply compared to the previous plan for 2024, causing oil prices to plummet.

On Friday (4), global benchmark Brent crude closed at $64.95 per barrel, a drop of 6.44% from the previous day and 10.73% for the week.

A scenario with lower Brent prices could help Petrobras in reducing diesel and gasoline prices in the domestic market. On April 1st, the company cut diesel prices by R$0.17 per liter, a decrease of 4.6%. It was the first time the oil company reduced fuel prices since December 2023. Gasoline, which saw an increase in July 2024, remains unchanged.

However, if the Brent price reduction persists in the long run, Brazil is likely to earn less from oil exports. In 2024, oil was Brazil’s main export item, surpassing soybeans, with sales of $44.9 billion, a 5.23% increase over 2023.

Daniel Osorio, head of energy for Hedgepoint in the U.S. and Latin America, states that Brazil is in a difficult position: “The increase in production by OPEC members could make it more challenging for Petrobras and other Brazilian players to compete in Europe and Asia.”

On Thursday, OPEC+, which accounts for about 40% of global oil production, decided to raise the commodity’s supply by 411,000 barrels per day starting next month. This volume equates to three months of the supply ramp-up plan announced in December. At that time, the idea was to add 140,000 barrels per day to the cartel’s production from April 2025, including May and June. Until then, it could be said that this week’s supply announcement was anticipated since the end of last year. But what surprised many was the addition of a significantly larger number of barrels all at once.

Given the circumstances, Goldman Sachs revised its oil price estimate to $66 per barrel by the end of 2025, a reduction of $5 per barrel from the previous forecast. According to the bank, in addition to the cartel’s decision, the tariffs announced by Donald Trump also increase the risk, which is expected to bring more volatility through the end of the year.

Mr. Osorio from Hedgepoint says that the OPEC+ announcement is related to the group’s internal policies. “Although the timing might seem strange, it’s important to consider that Russia has been expressing concerns about Kazakhstan’s production growth for some time, especially after the expansion of the massive Tengiz oil field operated by Chevron. The decision reflects ongoing regional tensions rather than a direct response to Trump’s tariffs,” he states.

The Hedgepoint analyst evaluates that while it was expected for OPEC+ to resume production levels in 2025, this decision combined with Mr. Trump’s tariffs could have uncertain effects: “What is certain is that many countries will be forced to negotiate with the United States. Companies are already seeking ways to mitigate the effects of these new tariffs.” The drop in oil prices, he adds, could lead oil producers to reduce supply levels in more expensive fields, prompting oil companies to reevaluate investment plans.

Citi describes the combination of American tariffs and OPEC’s decision as a “double whammy” for the oil and gas sector, increasing risks to global economic growth and demand for the commodity. In a report, the bank states that OPEC’s choice to triple the production increase compared to previous expectations accelerated the oil price decline: “The group of producers’ policy change appears to stem from a period of tensions over certain members exceeding production limits.”

Felipe Perez, an analyst at S&P, says that despite the uncertainties brought by OPEC there is a notion that Trump’s tariffs are short-lived and negotiating tools that might be used in discussions with Saudi Arabia, an OPEC+ member: “OPEC faces challenges in bringing consensus among members. If the price drop trend continues, the American producer will consider production plans and counter with the American campaign for more drilling, ‘drill, baby, drill.’” For Mr. Perez, a lower price could help OPEC+ rein in some members who, due to high foreign private capital in production, were exceeding quotas.

*By Kariny Leal, Valor — Rio de Janeiro

Source: Valor International

https://valorinternational.globo.com/
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Brazil concerned by threat to multilateral trade system

Despite lower U.S. tariffs, Lula administration warns of global risks

04/07/2025

Members of the Lula administration say there is no reason to celebrate Brazil’s inclusion in the lowest tariff tier under the sweeping measures announced last Wednesday (2) by U.S. President Donald Trump. While Brazil secured a “comparative advantage” with lower rates, officials warn the move could signal a breakdown of the multilateral trade system, with unpredictable and potentially harmful consequences for all countries.

This concern is shared by sources at the Planalto Palace and the Foreign Ministry, including Celso Amorim, special advisor to President Lula.

Mr. Amorim said that weeks of talks between Brazilian diplomats and representatives of the Office of the United States Trade Representative (USTR) helped secure Brazil a place among the few countries facing a 10% tariff—alongside Argentina, the United Kingdom, Australia, Singapore, Chile, and Colombia—nations with which the U.S. runs a trade surplus. By comparison, the new tariffs are 20% for the European Union, 24% for Japan, 25% for South Korea, and 32% for Indonesia.

“The Foreign Ministry did an excellent job of clarifying that the U.S. has a consistent surplus with Brazil,” Mr. Amorim told Valor. “It’s much better to start bilateral negotiations from that position than from one where the situation could be much worse [with higher tariffs]. I just don’t think we should be thanking the U.S. This is incompatible with the multilateral system. There’s nothing to celebrate.”

Defending the multilateral system, Mr. Amorim cited Brazil’s past victories, such as the 2014 resolution of the cotton dispute with the U.S. at the World Trade Organization (WTO), and the country’s success in overriding patents for HIV treatment drugs in the 1990s, backed by international bodies.

The full impact of the U.S. tariff package is still being assessed by the Brazilian government and business associations. At the presidential palace, officials believe this will be a long-term effort, as the final assessment depends on developments such as retaliatory measures from other countries and broader effects on global trade.

On Thursday (3), President Lula said Brazil would take “all appropriate measures to defend our companies and Brazilian workers.”

He said Brazil’s response would be guided by WTO rules and the reciprocity law passed by Congress on the same day as the U.S. tariff announcement.

One source said the Reciprocity Bill puts “all cards on the table” for Brazil. However, any retaliatory move will take time. For now, the focus is on negotiation.

Next week, a new round of talks will be held by Ambassador Mauricio Lyrio, the Foreign Ministry’s secretary for Economic and Financial Affairs, with the USTR. Officials in Brasília believe the negotiations could take months or even years. Brazil has already requested a return to tariff-free quotas for its steel exports to the U.S.—a demand that remains on the table.

The government is also coordinating with the private sector through industry groups like the National Confederation of Industry (CNI), the National Confederation of Agriculture (CNA), and the Brazil Steel Institute.

Milei’s U.S. tariff pledge

While Brazil continues to advocate for multilateralism, the current trade context could push the country to impose additional tariffs to prevent a flood of Chinese and other Asian goods—a scenario also being considered in the European Union.

There is growing concern in Brasília over the future of Mercosur. During a visit to the U.S. on Friday, Argentine President Javier Milei said he would align Argentina’s tariffs with a U.S. basket of 50 products.

This poses a challenge, as Mercosur is based on a Common External Tariff (CET) and joint trade negotiations with outside partners. If Mr. Milei follows through—something few expect—it could spell the end of the South American bloc, or at least Argentina’s exit from it.

Next Wednesday, President Lula will travel to Honduras for the summit of the Community of Latin American and Caribbean States (CELAC). Gisela Padovan, the Foreign Ministry’s secretary for Latin America and the Caribbean, said Thursday that while the U.S. tariff hike is not officially on the agenda, it may be mentioned in the summit’s final declaration.

Other sources expect the declaration to include a general “defense of multilateralism.” The issue may also be raised during Mr. Lula’s bilateral meetings with other leaders, which have yet to be confirmed.

  • By Fabio Murakawa – Brasília
  • Source: Valor International
https://valorinternational.globo.com/
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