Minister says Lula’s low approval is shared cabinet burden

After pushback on poor poll numbers, communications minister defends strategy and insists all ministers must take responsibility

04/04/2025

Brazil’s minister of Social Communication, Sidônio Palmeira, said on Thursday that all cabinet ministers bear responsibility for President Lula’s low approval ratings, as indicated by recent opinion polls.

He was asked about the matter following an event organized by the communications ministry (Secom) to promote the government’s achievements. Mr. Palmeira showed frustration with journalists, who focused more on the president’s declining approval rates than on the event itself.

“I find it a bit amusing—we just held an event here, which is an important moment to talk about the government’s accomplishments. I think we should focus on that, and yet you’re all asking about polls. We can talk about the polls,” he said. “I’m not trying to wash my hands of the issue—at all. I believe approval rating is a shared responsibility among all ministers and areas: political, administrative, communication—everyone.”

Mr. Palmeira was appointed after President Lula publicly expressed dissatisfaction with his predecessor, Congressman Paulo Pimenta. Many had blamed the government’s weak approval ratings on communication failures, a point Mr. Lula made at a party event in December when he criticized the administration’s messaging.

A political strategist behind Mr. Lula’s 2022 campaign, Mr. Palmeira introduced changes to Secom’s team and the tone used on social media. It was also his idea for Mr. Lula to read from a prepared speech during Thursday’s event—departing from the president’s usual improvisational style.

Still, despite the shake-up in the communications office, President Lula’s approval ratings have continued to plummet in every major poll in recent months.

“My job isn’t to debate the president’s or the government’s approval ratings. My job is to inform the public about government initiatives and how they can benefit from them,” Mr. Palmeira said. “If the public is well informed, then I believe I’ve done my job. Whether they approve or disapprove of the government—that’s not for us to define.”

Mr. Palmeira also pushed back against claims that Thursday’s event—which showcased the administration’s achievements over the past two years—was a campaign-style move.

“That’s a mistaken interpretation. The event’s main purpose was to communicate what the government has done,” he said. “As a minister, I’m not thinking about political campaigns. I’m thinking about government actions.”

The latest poll, released Wednesday by Genial/Quaest, showed a seven-point rise in disapproval of the Lula administration since January, reaching 56%—the highest level recorded by the institute since it began tracking Mr. Lula’s performance in April 2023. Approval ratings dropped to 41% from 47%.

The sharp decline surprised officials at the presidential palace, who had seen signs of stabilization in recent internal tracking polls commissioned by Secom.

Despite that, sources in the administration remain optimistic about a rebound in President Lula’s popularity. The Planalto Palace is betting that recent changes at Secom, improved communication of government programs, and initiatives such as the Public Security constitutional amendment and a proposal to exempt Brazilians earning up to R$5,000 from income tax will help reverse the negative trend.

Officials also believe that many Brazilians are unaware of government initiatives and are therefore not taking advantage of them. Thursday’s event, which drew around 3,000 people to the Ulysses Guimarães Convention Center auditorium, was part of an effort to close that gap.

Privately, and despite the poor poll numbers, presidential aides still see Mr. Lula as the front-runner for reelection in 2026. They argue that dissatisfaction in some regions—such as the Northeast—and among certain voter groups reflects “very high expectations” placed on the president. In the words of one government insider, “you don’t fall out of love overnight.”

That belief was reinforced on Thursday when new data showed President Lula would still win the election in every simulated matchup.

*By Fabio Murakawa, Estevão Taiar and Ruan Amorim — Brasília

Source: Valor International

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Retailers brace for fallout from U.S. tariffs on Chinese goods

Industry fears an influx of low-cost imports and pressure on local jobs and production as Chinese sellers seek new markets

04/04/2025

Brazilian retailers and consumer goods manufacturers are expressing concerns about the potential impact of the U.S. government’s recent decision to impose higher tariffs on certain Chinese products, according to industry representatives. As of May 2, items shipped from China and Hong Kong to the United States that cost up to $800—previously exempt from import duties—will now be taxed at a 30% rate.

There is growing apprehension that some of these goods, which are often cheaper than those produced locally, could be redirected to Brazil. Industry leaders also fear that the Chinese government might increase export subsidies to support businesses hit by the new U.S. tariffs—measures that could further distort global trade.

The Brazilian Textile and Apparel Industry Association (ABIT) warned of a potential “avalanche of Asian imports,” which could overwhelm domestic producers in what has been dubbed the “blouse war”—a metaphor for the fierce competition between foreign and local brands in Brazil’s retail market originated from the flood of cheap clothes from China.

As Asian products become more expensive for U.S. buyers, online marketplaces and merchants selling through those platforms may look for alternative markets to offset revenue losses. They could also attempt to absorb part of the new 30% duty, potentially with government backing from Beijing.

According to Jorge Gonçalves Filho, president of the Retail Development Institute (IDV), foreign companies selling in Brazil already pay a combined 44.6% in taxes, factoring in import duties and the standard 17% state-level sales tax (ICMS). In states where ICMS reaches 20%, the total tax burden rises to about 50%. For domestic retailers, the effective tax rate can be as high as 80% to 100%, depending on the sector.

“They [Asian companies] pay half of what we do,” Mr. Gonçalves said. “That imbalance makes the country more vulnerable to imports. It’s only natural they would look for alternatives after Trump’s tariffs. This could harm us, and we’re waiting to gather data to assess the impact,” he added. “If countries with more protectionist policies begin subsidizing prices here in Brazil, we’ll quickly feel the consequences, especially in terms of job losses.”

Mr. Gonçalves cited data from Brazil’s General Register of Employed and Unemployed Persons (CAGED), which shows an uptick in retail job creation since August, when the country began taxing shipments under $50 at a rate of 20%, ending the previous tax exemption.

Although many of these platforms depend on consumer demand, some produce and sell their brands. They often use subsidies to boost sales—such as covering part of the taxes paid by customers—or adopting aggressive pricing strategies in certain countries through incentives offered to third-party sellers.

These e-commerce websites have the autonomy to define their pricing and tax strategies on a country-by-country basis. In 2023, Shein partially covered ICMS taxes for buyers in Brazil.

According to two sources familiar with the lobbying efforts of Chinese platforms in Brasília, foreign marketplaces have been developing contingency plans since the beginning of the year. Until the announcement by former U.S. President Donald Trump earlier this week, the expected tariff increase was 10%, not 30%—a rate that could also be applied as a flat $25 per item, rising to $50 after June 1.

While more mature markets such as Japan and the United Kingdom—both with lower import duties—are natural targets for redirected shipments, Brazil’s significance as a fast-growing consumer market means that some of the redirected goods are likely to land there too, according to industry insiders.

On social media, ABIT president Fernando Pimentel warned that several major exporters of textiles and garments to the U.S. are likely to be severely impacted by the new American tariffs. Even with the new duties, taxes in the U.S. remain lower than in Brazil.

“We don’t yet know how they’ll respond to this tax tsunami,” Mr. Pimentel wrote on LinkedIn. “But given how vital these exports are to their economies, they will seek new markets—and here lies the danger: that Brazil becomes a prime destination, putting pressure on local production, investment, and employment.”

He called for immediate “legitimate trade defense measures” to avoid being overwhelmed by a flood of low-cost Asian imports. “We were already actively working on this front, and now we must double down,” he said.

The largest Asian consumer goods platforms operating in Brazil include Shopee, Temu, Shein, and AliExpress.

Shein declined to answer questions about potential impacts in Brazil and said it would respond via AMOBITEC, a trade group representing mobility and technology companies. AMOBITEC said that it is too early to evaluate the consequences of the U.S. decision, and emphasized that Brazil’s high taxes—among the highest in the world—remain a barrier to large-scale market shifts.

“We cannot lose sight of the fact that taxes on purchases in Brazil remain the highest globally,” the group said, noting that the announcement alone is unlikely to significantly alter current trade flows.

AliExpress, Shopee, and Temu did not respond to requests for comment.

According to the director of a textile manufacturer in Minas Gerais state, Brazil could soon face a “torrent” of Chinese imports due to the U.S. tariff changes.

When asked whether Brazil’s relatively closed economy might shield it from such a wave, he said that even with the 20% import tax and ICMS, Asian platforms continue to grow rapidly in Brazil—often outpacing domestic retailers—making the country an attractive alternative.

To illustrate the scale of the potential impact, the U.S. Customs and Border Protection processes over 4 million shipments of up to $800 per day. In Brazil, the Federal Revenue Service reported about 187 million international parcels in 2024 so far—an average of 520,000 per day.

*By Adriana Mattos — São Paulo

Source: Valor International

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U.S. tariff hike could ease Brazil’s inflation outlook for 2025

Economists see inflation closer to 5% than 5.5%; Treasury yields fall

04/04/2025

The sweeping global tariffs announced on Wednesday (2) by U.S. President Donald Trump—on what he dubbed “Liberation Day”—may create downward pressure on Brazil’s inflation outlook for this year. Economists now see inflation numbers hovering around 5%, rather than above 5.5%. The median projection in the Central Bank’s Focus survey currently points to an IPCA official inflation rate of 5.65% in 2025 and 4.5% in 2026.

Inflation expectations embedded in NTN-B bonds (Brazilian Treasury notes indexed to the IPCA) due in May 2025 fell to 5.64% on Thursday, from 5.96% the day before, 6.48% five days ago, and 9.83% a month ago, according to Warren Rena. For NTN-Bs maturing in August 2026, implied inflation fell to 4.95%, down from 5.27%, 5.42%, and 6.26% over the same periods.

Despite the downward bias, projections remain above the upper limit of the inflation target, set at 4.5%. Brazil was less affected by the newly announced tariffs, as its products will face a 10% surcharge—the minimum rate imposed by the Trump administration.

If the situation remains as it is, the measure could result in higher inflation in the U.S., slower growth there, and a broader global economic slowdown, said Andréa Angelo, chief inflation strategist at Warren. These effects, she noted, could weaken the U.S. dollar, easing inflationary pressure on goods in Brazil.

Ms. Angelo pointed out that when the real strengthens against the dollar, the pass-through to consumer prices tends to be smaller than when the Brazilian currency depreciates. Still, an exchange rate of R$5.50 to the dollar, for example, could reduce Brazil’s goods inflation and lead to a 0.27 percentage point drop in the IPCA, bringing the projection to 5.2%. On Thursday, the dollar’s exchange rate closed at R$5.62. “There’s also the possibility that Asia will face a glut of goods, since it won’t be exporting as much to the U.S.,” she added.

Inflation risks

Mirella Hirakawa, head of research at Buysidebrazil, said that inflation risks for 2025, which had been tilted to the upside, now appear more evenly balanced. The consultancy had already projected a lower inflation rate for 2025 than the market consensus, with a year-end IPCA of 5.2%. Last week, the forecast was revised upward to 5.4%, and the 2026 projection increased from 4.4% to 4.6%.

“I think that for 2025, we and the market will likely meet halfway—somewhere between 5.4% and 5.5%. But for 2026, the projections shouldn’t change much,” Ms. Hirakawa said. She noted that the estimates do not yet factor in the impact of private payroll-deductible credit in 2025 or the income tax reform scheduled for 2026.

She said Thursday’s drop in Brazil’s exchange and interest rate markets reflects the relatively limited impact of the U.S. tariffs on Brazil, combined with a higher risk of recession in the U.S. than of global price pressure. “But we’re talking about a potential new world order, with a high degree of uncertainty around the new map of trade agreements.”

She sees two possible scenarios: one where all countries reduce tariffs and economies become more open—including the U.S.; and another where nations retaliate against the U.S. and forge new trade deals among themselves, with the U.S. left out.

“In my view, regardless of the scenario, the U.S. will feel the inflationary effects before any hard data on activity. Initially, uncertainty will play a larger role in the slowdown, but the most significant impact would come in the second half of the year, possibly reinforcing fears of a recession—which could become a self-fulfilling prophecy,” she said.

The Trump administration’s tariff hike could trigger responses from other trade partners, potentially sparking a trade war that would hurt the global economy. Still, Brazil stands to lose less than other countries, said Iana Ferrão, economist at BTG Pactual. The extent of that loss, however, will depend on how much the global economy deteriorates, she noted.

‘Impoverishment Day’

Sergio Vale, chief economist at MB Associados, called “Liberation Day” an “Impoverishment Day,” saying it would “shackle the American population to much higher prices.” For Brazil, he said, the announcement strengthened the country’s growing alignment with China and bolstered commodity trade chains. The relatively mild tariff rate imposed on Brazil helped strengthen the real through expectations of an improved trade balance, he added.

“The idea of a stronger trade balance with China and other countries, combined with accelerated progress on trade deals with Europe, for example, should help keep the exchange rate lower in the coming months. As a result, the real is likely to remain around R$5.70 throughout 2025,” Mr. Vale said.

This stronger exchange rate supports MB’s IPCA estimate of 5.1% for 2025 and helps push inflation away—for now—from levels above 5.5%, he said. “Still, both this year and next, when we expect 4.5%, inflation is likely to end President Lula’s term near the upper limit of the target range.”

The combination of a stronger real, moderate global slowdown risk, and a possible increase in oil supply in May, as announced by OPEC+, led Banco Pine to lower its 2025 IPCA forecast from 5.25% to 5.1%. “Given our outlook for the domestic and global economy, we feel relatively comfortable with this projection,” said Cristiano Oliveira, head of economic research.

XP expects some recovery in commodity prices and the U.S. Dollar Index (DXY) in the coming weeks, despite the high level of uncertainty. It also does not anticipate a near-term interest rate cut from the Federal Reserve. As a result, XP maintained its exchange rate forecast at R$6 to the dollar at the end of 2025 and R$6.20 in 2026. Still, the brokerage acknowledged that the probability of stronger Latin American currencies—beneficial for inflation and monetary policy—has increased.

XP also lowered its 2024 goods inflation forecast from 4.7% to 4.3%, driven by first-quarter currency gains. However, it now assumes a yellow flag for electricity tariffs in December, with an additional surcharge. This kept its 2025 IPCA forecast at 6%. For 2026, the forecast rose from 4.5% to 4.7% due to the expected impact of income tax reform.

  • By Anaïs Fernandes — São Paulo
  • Source: Valor International
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High interest rates weigh on business confidence in Brazil

Business Confidence Index falls 0.6 points in March to 94 points, lowest level since November

04/02/2025

The impact of rising interest rates drove the decline of the Business Confidence Index (ICE) in March. The index fell by 0.6 points last month to 94 points, its lowest level since November 2023, due to a sharp drop in the retail sector, where the cost of installment payments significantly affected sales.

Compiled from the confidence levels of the four sectors covered by the business surveys conducted by the Fundação Getulio Vargas’s Brazilian Institute of Economics (Ibre-FGV), the ICE was dragged down by a 2.4-point fall in retail confidence, which dropped to 83.1 points. The other sectors—industry, construction, and services—all posted gains in March. Industry confidence increased by 0.1 points to 98.4 points; services rose 1.2 points to 92.9 points, and construction increased 0.7 points to 95.0 points.

“I see a sharper decline in retail goods that hinge on credit. Interest rates are likely starting to take effect,” said Aloisio Campelo, a researcher at Ibre-FGV overseeing the ICE survey.

The economist added that high interest rates are also making consumers more cautious, especially amid high household debt. Mr. Campelo noted that sales of durable and semi-durable goods posted the weakest performances in March. “Food wasn’t behind the weak retail performance in March,” he claimed.

Mr. Campelo said that despite the March drop and the steep decline in retail, the overall ICE reading for the month “is not all bad.” He acknowledged negative aspects, such as the index’s third consecutive monthly decline, but pointed out that recent ICE downturns have largely concentrated in retail and services. On the positive side, he highlighted the resilience of the industrial and construction sectors.

“Short-term indicators show that industrial activity remains resilient. Confidence in construction declined, but there’s a limit to how far it can fall given government programs targeting the sector,” Mr. Campelo argued.

Among the components of the overall index, the ICE decline in March was driven by worsening expectations. The Expectations Index (IE) fell 1.4 points from February to 91.5 points, while the Current Situation Index (ISA) edged up 0.3 points to 96.5 points.

It was the fifth straight decline for the IE. The sharpest drop was in expected demand over the next three months, which fell 1.9 points to 91.4 points. Expectations for business conditions six months ahead declined 0.9 points to 91.8 points.

*By Rafael Rosas — Rio de Janeiro

Source: Valor International

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Amaggi partners to generate carbon credits in Rondônia

Agribusiness company teams up with NaturAll Carbon on regenerative agriculture project spanning 25,000 hectares

04/02/2025

Amaggi, Brazil’s largest domestically owned agricultural trading company, has partnered with Anglo-Brazilian climate-tech firm NaturAll Carbon to launch a carbon credit project based on regenerative agriculture.

The initiative will be carried out at Fazenda Carolinas, a 25,000-hectare farm located in Corumbiara, Rondônia. The farm comprises both degraded pastureland and areas under conventional farming, which will be restored using regenerative techniques.

Juliana Lopes, Amaggi’s director of ESG, communications, and compliance, said the practices to be implemented include no-till farming, crop rotation (soy, corn, and cotton), the use of cover crops, and replacing chemical pesticides with biological alternatives. These strategies support atmospheric carbon capture and soil sequestration.

“Amaggi has already been implementing regenerative agriculture for some time. It is a core part of our decarbonization plan,” Ms. Lopes said. In addition to capturing carbon, regenerative agriculture improves soil quality and fertility, she added.

Carbon sequestration will be measured through physical sampling, computer modeling, continuous soil monitoring using geoprocessing tools, and remote sensing technologies.

Alexandre Leite, co-founder and CEO of NaturAll Carbon, estimates that Amaggi could achieve an average carbon capture rate of 2 tonnes per hectare per year—totaling 50,000 tonnes across the 25,000-hectare area. This would enable the issuance of two carbon credits per hectare annually, or 50,000 credits in total. The exact number of credits will be calculated each year following an audit that certifies the captured carbon.

The project will be certified by Verra, the world’s leading certifier of voluntary carbon credits. It will use methodology VM0042 (ALM – Agricultural Land Management), a global standard for soil carbon sequestration.

NaturAll Carbon will also be responsible for securing buyers for the carbon credits. Issuance and sales are expected to begin in 2026, following third-party verification of the additional carbon captured through regenerative practices.

The credits will be sold in the voluntary carbon market, where companies opt to reduce emissions and trade credits independently of regulatory requirements.

According to Mr. Leite, demand for carbon credits in the voluntary market is rising, and Brazil is well-positioned to meet this demand. “Brazil has 40 million hectares of degraded pastureland that could be converted to regenerative agriculture. That represents huge potential for carbon credit generation,” he said.

Amaggi aims to expand the project to other company-owned farms and to its partner producers. The company currently cultivates grains and cotton on 400,000 hectares. In 2023, it launched the Amaggi Regenera program to encourage its 5,600 partner producers to adopt regenerative practices. According to Ms. Lopes, ten producers have already joined the program.

Amaggi is also investing in renewable energy sources, including small hydroelectric power plants, and preserving legal reserve surpluses. The company is evaluating the possibility of generating carbon credits from these efforts as well.

*By Cibelle Bouças, Globo Rural — Belo Horizonte

Source: Valor International

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Congress advances bill enabling Brazil to fight foreign trade barriers

Proposal inspired by U.S. law clears Senate and moves to Lower House amid Donald Trump’s tariff war

04/02/2025

The Senate approved a bill establishing legal mechanisms for the Brazilian government to retaliate against potential trade barriers or protectionist measures affecting the competitiveness of Brazilian products in international trade. Known as the Reciprocity Bill, the proposal passed on Tuesday (1) by the upper house now moves to the Chamber of Deputies for analysis.

The initiative gained traction in Congress amid the tariff war promoted by U.S. President Donald Trump. In addition to the previously announced 25% tariffs on Brazilian steel and aluminum imports, Mr. Trump is expected to unveil this Wednesday reciprocal trade tariffs targeting all countries. The U.S. president has dubbed the date “Liberation Day.”

The bill was approved by the Senate’s Economic Affairs Committee (CAE) Tuesday morning and later cleared the full Senate in an expedited process. The plenary vote became possible after the Senate president, Davi Alcolumbre (Brazil Union Party), accepted a request from Senator Randolfe Rodrigues (Workers’ Party), the government’s leader in Congress. This allowed the proposal to be immediately sent to the Lower House. If the bill had been forwarded directly from the CAE, it would have faced a five-day waiting period, as established by the internal rules.

After the vote, Lower House Speaker Hugo Motta (Republicans Party) said lawmakers could vote on the bill in the plenary session later this week. The rapporteur in the house will be Congressman Arnaldo Jardim (Citizenship Party). In the Senate plenary, the rapporteur, Senator Tereza Cristina (Progressive Party), said she hoped the Lower House would vote on the bill as soon as this Wednesday.

“As this is an exceptional matter, we are already in talks with leaders to bring it to a plenary vote this week,” Speaker Motta told reporters.

The proposal was drafted in consultation with the Ministry of Foreign Affairs, the Ministry of Industry and Trade (MDIC), and the private sector. It was inspired by U.S. legislation and grants powers to the Foreign Trade Chamber (CAMEX) to suspend trade and investment concessions, as well as obligations related to intellectual property rights, in response to unilateral policies or practices by countries or economic blocs that negatively affect the international competitiveness of Brazilian products.

The bill also aims to shield Brazil from what Senator Tereza Cristina described as “disguised protectionism,” such as the European Union Deforestation Regulation (EUDR), which will come into effect at the end of the year. The European regulation introduces unilateral measures with environmental requirements that go beyond Brazilian legislation.

The bill establishes criteria for CAMEX’s intervention in response to three types of actions by other countries: “Those that interfere with Brazil’s legitimate and sovereign choices through threats or the application of trade and investment measures; those that violate or undermine benefits granted to Brazil under any trade agreement; and those that impose unilateral measures based on environmental requirements that are more stringent than the environmental protection standards, rules, and parameters adopted by Brazil”—a clear reference to the EUDR.

The proposal also authorizes CAMEX’s Strategic Council (CEC) to adopt countermeasures, such as restricting imports of certain products or suspending concessions, either separately or cumulatively. The text indicates that these countermeasures should be “proportional to the economic impact” caused to Brazil by the initial actions of the targeted countries.

Another provision requires the Ministry of Foreign Affairs to conduct diplomatic consultations to “mitigate or nullify the effects of the measures and countermeasures.” CAMEX will also be responsible for establishing mechanisms to periodically monitor the effects of the adopted countermeasures and the progress of negotiations.

Despite the tariff dispute with the U.S. government, Senator Tereza Cristina argued during the CAE session that the bill does not encourage tariff retaliation and was drafted to apply to all countries, without targeting specific nations or blocs such as the United States or the European Union. “This bill is not a retaliation. It is a protection when Brazilian products are retaliated against,” the senator emphasized when casting her vote.

The CAE president, Renan Calheiros (Brazilian Democratic Movement), also rejected the idea that the approval of the bill constituted an attack on the U.S. but defended the tools it provides to the federal government. “It is undoubtedly a legitimate response to the American tariff hike,” Mr. Calheiros said. “We are equipping Brazilian legislation with reciprocity mechanisms. If the government chooses to adopt reciprocity measures, it will no longer lack the legal framework to do so.”

As previously reported by Valor, the senator’s bill aims to protect all Brazilian goods and products—not just agribusiness—in both economic and environmental terms. The proposal stresses the need for a “clear reaction” by the government and the adoption of a “credible mechanism” to fight barriers and protectionism.

The inclusion of room for negotiation was a new element introduced in Senator Tereza Cristina’s report and differed from the original text authored by Senator Zequinha Marinho (We Can Party). The initial proposal included the concept of environmental reciprocity and sought to create barriers for products from countries with lower environmental protection standards than Brazil’s.

*By Caetano Tonet and Gabriela Guido — Brasília

Source: Valor International

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Construction sustains steel demand as manufacturing industry declines

Consumers complain about high prices; producers se Chinese competition as unfair

04/01/2025

Amid weakened demand across various industrial sectors, the construction sector continues to sustain steel consumption in Brazil. Driven by housing and infrastructure projects, construction companies keep purchasing, while other segments are either scaling back or increasing imports to cut costs.

The Brazilian market is grappling with a surge of Chinese steel imports, putting pressure on domestic steelmakers’ results. Over the course of 2024, imports have reached nearly 25% of total steel consumption in some moments. However, the penetration of imports in the construction industry remained lower, as long steel products—such as rebar, bars, and profiles used in metal structures—are less vulnerable to Asian competition.

“If not for the domestic demand from the construction industry, 2024 would have been very challenging, possibly even resulting in losses,” said Silvia Nascimento, president of Aço Verde Brasil, noting that 2025 will resemble the past year, with construction continuing to uphold demand.

The construction sector has increased its steel purchases due to the growth in real estate production since the pandemic, remaining high despite rising interest rates, fueled by the My Home My Life housing program (MCMV). According to the Brazilian Construction Industry Chamber (CBIC), 60% of current steel consumption stems from real estate and 40% from infrastructure, though infrastructure projects use proportionally more steel.

In 2024, the number of new housing units launched in the country rose by 18.6%, according to CBIC, with 383,500 new units put up for sale, half of which belong to the MCMV, launches under this program increased by 44% in a year.

Companies like Gerdau benefit from this scenario, as they focus their production on long steel products. In a February interview with Valor, CFO and Investor Relations Director Rafael Japur indicated that the outlook is positive for the first half of 2025, although uncertain for the second half.

“There is uncertainty in some key sectors, such as construction, regarding the effects of a stronger interest rate hike and real estate financing,” he explained.

Rebar imports totaled 156,000 tonnes from January to September, compared to a domestic sale of 2.75 million tonnes. Although the participation is still low, it has grown since the pandemic, noted Dionyzio Klavdianos, president of the Materials, Technology, Quality, and Productivity Committee at CBIC. In 2020, the ratio was 15,200 tonnes imported to 3.28 million tonnes sold domestically.

During that period, steel shortages encouraged imports, which allowed the construction sector to “become more familiar” with foreign producers, Mr. Klavdianos said. Turkey is the largest rebar exporter to Brazil, but it can also come from Egypt and Latin American countries. Chinese producers do not have the required certification to sell to the Brazilian market, although they could obtain it if there is interest, the director argued.

“Given the increasing cost of selling to the U.S., the Chinese industry could become interested in the Brazilian market, resolve this technical barrier issue, and start to supply rebar to construction,” he pointed out.

Domestic producers remain the preferred choice in the segment as they offer high-quality materials and additional services, such as on-site support, Mr. Klavdianos explained. There is also a challenge for small construction companies to bear the cost of imported steel, which must be paid upfront, and a fear of confronting the steel industry, which could impose higher prices on Brazilian construction companies if the volume of imports rises too much. “You would still need to buy from them,” the CBIC director said.

Currently, steel is not the most burdensome material in construction projects. According to the sector’s inflation indicator, the National Construction Cost Index (INCC), rebar saw a 5.84% increase over the past 12 months, compared to a 7.32% overall indicator by March. Ana Maria Castelo, project coordinator at the Fundação Getulio Vargas’s Brazilian Institute of Economics (Ibre-FGV), noted that although other materials saw higher increases, such as PVC pipes (17.6%) and concrete blocks (8.12%), steel is extensively used in construction, so any increase is felt in the sector.

In addition to rebar, used in building foundations and infrastructure structures, steel mesh—which is placed inside the walls of low-income housing—is gaining ground, particularly in the sector that has grown the most in the country. As Mr. Klavdianos explains, this material is key for the reinforced concrete wall construction system, the most used in MCMV, because it reduces project completion time—the faster they deliver it, the quicker the companies receive funds from Caixa Econômica Federal.

The steel industry has moved to request the government to increase the import tax on wire rod, a type of steel that forms the basis for mesh—in other specifications, it is also used to make nails and wires. The matter is currently under study. According to the CBIC, 172,000 tonnes of wire rod were imported by September from the same countries producing rebar, while the domestic industry sold 1.2 million tonnes during the same period.

According to the director, despite government support for the national steel industry, increasing import costs would lead to a general rise in material prices, directly impacting construction costs and the attractiveness of the MCMV, one of its main programs.

Meanwhile, other crucial sectors for steel consumption, such as machinery and equipment, are showing reduced growth. The segment claims that rising input costs, especially domestic steel, compromise its competitiveness.

In an interview with Valor, José Velloso, executive president of ABIMAQ, said the machinery and equipment sector has been reducing its revenue—and therefore its steel demand—over the past decade, reflecting the segment’s contraction in the country. According to him, most companies are not large enough to buy directly from steelmakers due to the volume required. Over 90% of manufacturers source from distributors, paying higher prices.

“Most companies in the sector do not import steel; they are medium-sized, with a transaction volume around R$100 million. They don’t meet the minimum volume,” he explained. According to the executive, the price of the input in Brazil compared to international prices is the factor most affecting competitiveness. “The price of rolled steel increased by 12% to 17% from May 2024 to January 2025,” he pointed out.

Other representative entities, such as ANFAVEA (National Association of Vehicle Manufacturers), also advocate for local producers to lower their prices, arguing that the cost of domestic steel inflates final products and undermines competitiveness against international players. When contacted, ANFAVEA declined to comment. In this scenario, the price gap between Brazilian and international steel has gained prominence.

On the other hand, Instituto Aço Brasil—representing the country’s major steelmakers—has stated that production costs are higher due to factors like tax burdens, electricity, and logistics. Moreover, Chinese steel is subsidized by the Beijing government. The entity declined to comment on the matter.

Analyzing foreign trade data on steel imports, Rodrigo Scolaro, an economist at GEP Costdrivers, highlighted the increase in Chinese steel imports, particularly in flat steel used for industrial processes like machinery and automobile manufacturing.

“When we talk about industries importing [steel], that involves the parts industry. Last year, we had import quotas in Brazil that did not meet the desired result of curtailing imports,” he said.

According to Mr. Scolaro, while steelmakers are pressuring the government for trade defense measures, auto parts and automakers are working in the opposite direction, advocating against additional taxes on imported steel.

When contacted, SINDIPEÇAS, representing the auto parts industry, declined to comment.

The government is closely monitoring the situation. Discussions are underway in the Ministry of Development, Industry, Trade, and Services (MDIC) about potential safeguards or anti-dumping tariffs to curb the rise of imported steel, but no decision has been made yet.

*By Robson Rodrigues and Ana Luiza Tieghi — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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U.S. targets Brazil two days before tariff hike

Report mentions Brazil in six of its 397 pages; Trump aides forecast tariffs of 20% or higher

04/01/2025

The United States accused Brazil and several other countries of imposing numerous barriers against American products, in a 397-page report released on Monday (31) by the Office of the United States Trade Representative (USTR), just two days before the sweeping tariff hike announced by President Donald Trump, which he has called “Liberation Day.”

In Washington, D.C., Mr. Trump’s aides seem convinced the president is determined to impose higher tariffs. The tariff increases could reach 20%, impacting virtually all of the U.S.’s trade partners. However, aides admitted they did not know the final scope of the plan to be announced by Mr. Trump. Negotiators who have been in Washington said they would not be surprised if the tariff hike reaches 25%.

On this so-called “Liberation Day,” the “reciprocal tariffs” regime could generate an additional $600 billion per year in revenue for the U.S., or $6 trillion over a decade, according to Peter Navarro, a hardline advisor close to Mr. Trump. On top of this, an additional $100 billion per year would come specifically from a 25% tariff on foreign automobiles.

Although Brazil argues it has a trade deficit with the U.S., nearly six pages of complaints against Brazilian trade practices in the USTR report pave the way for higher tariffs on Brazilian products under the principle of reciprocity.

The Trump administration argued in the document that Brazil “imposes relatively high tariffs on imports across a wide range of sectors, including automobiles, automotive parts, information technology and electronics, chemicals, plastics, industrial machinery, steel, and textiles and apparel.”

It also complained that Brazil’s bound tariff rates are often much higher than the applied rates, creating significant uncertainty for U.S. exporters in the Brazilian market, as “the government frequently modifies tariff rates within the flexibilities of MERCOSUR.” The USTR added: “The lack of predictability with regard to tariff rates makes it difficult for U.S. exporters to forecast the costs of doing business in Brazil.”

The “2025 National Trade Estimate Report” was submitted to Mr. Trump and Congress. Jamieson Greer, head of the USTR, said that no American president in modern history had recognized the comprehensive and harmful foreign trade barriers faced by U.S. exporters more than President Trump. He added that, under the president’s leadership, the administration was working to address what he sees as unfair and non-reciprocal practices, seeking to restore fairness and put American companies and workers first in the global market.

The USTR noted that trade barriers are not fixed in their definition but can broadly include “laws, regulations, policies, or government practices—including non-market policies and practices—that distort or impair fair competition.” These include measures that protect domestic goods and services from foreign competition, artificially promote exports of specific domestic goods and services, or fail to provide adequate and effective protection of intellectual property rights.

In the pages dedicated to Brazil, the U.S. highlighted ethanol tariffs as the primary barrier. It noted that between 2011 and 2017, the bilateral ethanol trade was virtually duty-free. However, Brazil then imposed tariffs, initially at 20%, followed by the establishment of a quota that reduced what had been “robust” trade, and in 2018 set the tariff at 18%​.

“The United States continues to engage with Brazil to lower its ethanol tariff to provide reciprocal treatment for trade in ethanol between the United States and Brazil,” the document said​.

The report also raised other complaints. One relates to the Industrial Product Tax (IPI) of 16.25% ad valorem applied to cachaça, while other alcoholic beverages, including U.S. imports, are subject to a 19.5% IPI​.

It noted that, in the audiovisual sector, Brazil imposes several taxes on foreign products that do not apply equally to domestic products. It also pointed out that remittances to foreign producers of audiovisual works are subject to a 25% withholding tax​.

The USTR complained that Brazil restricts the entry of certain types of remanufactured goods, such as earthmoving equipment, automotive parts, and medical equipment. With a few exceptions, Brazil generally prohibits the importation of used consumer goods​.

It also mentioned automatic and non-automatic import licensing, inconsistent documentation requirements for importing certain types of goods, regulations on biofuels, sanitary and phytosanitary barriers, and obstacles to foreign companies’ participation in government procurement processes. Furthermore, it questioned Brazil’s enforcement of intellectual property rights, efforts to combat piracy, and barriers to the acquisition of services and digital trade​.

Ongoing dialogue

Talks between Brazil and the U.S. continue. A phone call was scheduled for Monday (31) between Foreign Minister Mauro Vieira and the USTR head, Jamieson Greer. The call was seen as part of these ongoing negotiations, but no major breakthrough was expected. Neither side issued a statement about the content of the conversation or whether it actually took place.

As Valor reported on Saturday, in the midst of uncertainty in Washington, American signals pointed to specific issues involving Brazil.

The country is unlikely to escape new tariffs. Mr. Trump—and not only him in Washington—is fixated on Brazil’s ethanol import tariff of 18%, compared to 2.5% in the U.S. When he signed the executive order to prepare reciprocal tariffs, the first country he mentioned was Brazil, and the first product was ethanol.

On Wednesday, no exceptions were expected in the case of steel—meaning there would be no quotas requested by Brazil, at least initially. It remains unclear whether there will be exceptions for other so-called reciprocal tariffs. Six days ago, Mr. Trump said he did not want “too many exceptions” in the package—but he could always change his mind at the last minute.

A potential deal trading lower ethanol tariffs in Brazil for a quota on U.S. semi-finished steel exports will likely remain on the radar in Brasília and Washington after April 2.

*By Assis Moreira  — Geneva

Source: Valor International

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