Brazil nears internet universalization

Streaming services reach 25% of households in 2024, banking access is growing with use of Pix, and almost every household has cell phones

 

 

 

07/25/2025

In total, internet access already reaches 93.6% of all households in 2024—compared with 92.5% in 2023.
In total, internet access already reaches 93.6% of all households in 2024—compared with 92.5% in 2023. — Photo: Mariakray/Pixabay
 

In 2024, the Brazilian population had almost universal access to the internet; access to online banking services was also rapidly expanding, influenced, among other factors, by Pix; video streaming services were accessed in one in four homes; and nearly 100% of households had cell phones.

Last year, the country still had 20.5 million people without internet access; 2.1 million households lacked any kind of phone; and access to technology and related services was still limited to higher-income households.

This snapshot of access to technology in the country was detailed by the Brazilian Institute of Geography and Statistics (IBGE). On Thursday (24), IBGE released the Continuous PNAD: Characteristics of Information and Communication Technology survey (PNAD TIC). Conducted annually, the survey measures the evolution of Brazilians’ access to technological services and devices.

Among the 188.5 million people aged 10 or older in the country, 89.1%, or 168 million, declared to have internet access, 2.1% more than in 2023 (164.528 million). In total, internet access already reaches 93.6% of all households in 2024—compared with 92.5% in 2023.

The growth rate of internet access in households has been gradually decreasing in each survey round. This lower level of annual growth, the researchers reported, reflects an almost universal access to the internet in Brazil.

Among the reasons for accessing the internet, mapped by IBGE, “accessing banks and other financial institutions” was the one that showed the greatest growth between 2023 and 2024. “More and more people are using banks through mobile apps, for example,” commented Leonardo Quesada, an IBGE researcher.

Asked if the result could also have been impacted by increased use of Pix, the expert agreed that “it’s a reasonable hypothesis.”

On the other hand, 20.5 million people still had no internet access in 2024, or 10.9% of people aged over 10. In practice, 5.1 million households in the country had no internet access.

Lack of knowledge about the service and economic reasons were mentioned as reasons. Of those who did not use the internet, 45.6% reported not knowing how to use it, followed by those declaring lack of need (28.5%); expensive service (7.5%), and expensive equipment (3.4%).

Streaming gains

Another aspect surveyed was the use of video streaming services in the country, which reached 43.4% of Brazilian households with TV sets, or 32.654 million households, in 2024. In 2023, they were accessed in 42.1% of households with TV sets, or 31.107 million. Around 1.5 million households began to access streaming services between 2023 and 2024.

Cell phone use reached 97% of all households last year, higher than in 2023 (96.7%) and the highest share in the historical series since 2016 (93.1%).

This means that, last year, the country had 167.5 million people aged 10 or over with cell phones, 88.9% of the population in this age group. However, in 2024, 20.9 million people in Brazil still did not have a cell phone, representing 11.1% of the population aged 10 and over. The survey also showed that 2.1 million households did not have any kind of phone.

“We see that where [tech] equipment is available, the average income is much higher,” Mr. Quesada said. “Income is an important factor in explaining these differences, but, for example, when it comes to cell phone ownership, the cost of the device is still an important factor,” he noted.

In the IBGE survey, the main reason for not having a cell phone among public school students—that is, among students who don’t pay tuition, and mostly come from lower income households—was that the device was too expensive (27.7%). However, when private school students who did not have a device were asked the same question, the main reason was concern about privacy or security (33.4%).

In the results on lack of a phone and other services provided by tech devices, IBGE researchers also noted regional disparities.

The lack of phone access remained highest in 2024 in households in the Northeast (absence in 4.7% of households in the region) and North (3.2%). In the other, wealthier regions, this percentage did not exceed 2% for the same year.

Also last year, 24.3% of households in the country had access to a paid cable or satellite television service. However, in the Southeast region, the wealthiest in the country, the percentage was 31.1%. In the North and Northeast, the share was, respectively, 16.5% and 13% last year.

In the case of paid video streaming services, the average real monthly income per capita in households with this service was R$2,950 in 2024. In those without the service, it was less than half, R$1,390.

  • By Alessandra Saraiva — Rio de Janeiro
  • Source: Valor International
  • https://valorinternational.globo.com/
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Corn ethanol producer FS resumes expansion with R$2bn investment

Company to build new plant in Mato Grosso following financial recovery

 

 

 

07/25/2025

FS, Brazil’s second-largest corn ethanol producer, has resumed its expansion strategy after a three-year pause marked by financial strain. The company announced on Thursday (24) a R$2 billion investment to build its fourth corn ethanol plant, to be located in Campo Novo do Parecis, in the state of Mato Grosso.

The decision to move forward with expansion follows two crop years of financial tightening, during which FS faced rising debt levels stemming from earlier investments amid reduced cash flow. At the close of the 2023/24 harvest, the company’s leverage ratio (net debt to EBITDA) stood at 6.34 times, increasing to 7.39 times by the end of the first quarter of the 2024/25 crop year.

However, that ratio dropped to 2.52 times by the end of the most recent harvest, supported by a rebound in ethanol prices and higher sales volumes.

With healthier finances and rising demand anticipated due to a higher ethanol blend in gasoline, FS decided the time was right to revive its growth strategy.

Construction of the new plant began in June and is scheduled for completion by December 2026. Once operational, the facility will have an annual production capacity of 540 million liters of ethanol, 350,000 tonnes of DDG and DDGS (animal feed co-products), 69,000 tonnes of corn oil, and 56,000 megawatt-hours (MWh) of electricity.

In a statement, CEO Rafael Abud said the decision to invest in Campo Novo do Parecis was “reinforced by the approval of the Future Fuel project, which paved the way for E30 and soon E35.” Starting August 1, Brazil will increase the mandatory blend of anhydrous ethanol in gasoline from 27% to 30%.

Despite the operational improvements, FS still lacks access to lower-cost credit lines. In its latest rating review on July 1, Moody’s reaffirmed the company’s “AA-.br” rating on the national scale and “Ba3” globally, but with a negative outlook, citing persistent inflation and high interest rates in Brazil.

Moody’s noted that while FS has reduced its leverage, the company’s interest coverage remains under pressure, and any new funding raised in the domestic market is likely to come at a higher cost. In the most recent harvest, FS’s interest coverage ratio (EBIT to interest expenses) was 1.7 times—typically considered insufficient, as the market expects this metric to exceed 2.0 times for financial comfort.

The new investment will raise FS’s capital expenditures this season. Last season, the company spent R$370.9 million on expansion-related capex, primarily for incremental capacity improvements at its existing facilities. Even with those investments, FS posted R$1.32 billion in net operating cash flow after capex.

The company’s growth plan also includes a fifth plant in Querência (Mato Grosso), where preliminary work such as site grading and basic infrastructure is already underway. FS has yet to disclose the investment amount or financing details for that project. The company also declined to comment on how it plans to finance the fourth plant or what return on investment it expects.

*By Camila Souza Ramos, Globo Rural — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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U.S. eyes Brazil’s rare earths as Lula government pushes for talks

Finance Minister Fernando Haddad signals credit line to support Brazilian companies hit by potential U.S. tariffs

 

 

 

07/25/2025 

With the United States showing interest in Brazil’s so-called rare earths, the Lula administration on Thursday (24) called on Washington to return to the negotiating table to find an alternative to the 50% import tariff announced by President Donald Trump.

Finance Minister Fernando Haddad publicly reinforced the government’s strategy, advising business leaders to challenge the measure in U.S. courts in an effort to mitigate the impact of the unilateral decision. He also revealed that the contingency plan to be submitted to President Lula includes a range of proposals, including a credit line.

Mr. Haddad said more than 10,000 Brazilian companies could be harmed by the tariff hike, which is set to take effect on August 1. The government has tried to negotiate a solution—relying on backchannel communications through political and business intermediaries to appeal to Mr. Trump—but has received little response from the White House.

In light of the situation, the government is preparing a support package for affected Brazilian firms. Minister Haddad said a “menu of measures” is ready and will be presented to Mr. Lula next week. It will be up to the Brazilian president to decide which ones to implement and to what extent.

“This is a political decision that necessarily rests with him, given the sensitivity and importance of the issue,” Mr. Haddad said in an interview with Itatiaia radio. He declined to give further details, but confirmed the plan includes a credit line and measures “permitted under international law.”

On the investigations by U.S. authorities into Brazil’s Pix instant payment system, Mr. Haddad suggested the U.S. may be motivated by profit.

“Pix is now being accepted in Europe, in the U.S., in Argentina, at no cost to those countries. Who is that hurting? It’s hurting those who profit from financial transactions,” he said.

President Lula said Thursday that Mr. Trump has shown no interest in negotiating a way out of the trade conflict. In his view, if Mr. Trump truly wanted a resolution, he would have already made a phone call, which hasn’t happened.

President Lula said he is good at “playing cards” and warned that if Mr. Trump is bluffing, he’s ready to call it and double the challenge. “Brazil is used to negotiating,” he added during an event in Minas Gerais.

President Lula also demanded respect from the U.S. government and challenged Mr. Trump to explain “what his problem is” with Brazil, while warning that retaliation is on the table. “If the United States wants to negotiate, Lula is ready to negotiate. But I only take disrespect from Dona Lindu,” he added, referring to his late mother. He implied that American discomfort may stem from Brazil’s regulation of social media and the success of Pix.

Race for strategic minerals

In his speech, Mr. Lula also mentioned U.S. interest in Brazil’s strategic mineral resources.

“We have 12% of the world’s fresh water to protect. We have 215 million people to protect. We have all our oil to protect. All our gold to protect. All the rich minerals you want to protect. And no one touches them. This country belongs to the Brazilian people,” he said.

The remark was a response to reports that the U.S. chargé d’affaires in Brasília told representatives of the Brazilian Mining Institute (IBRAM) that the United States is interested in reaching agreements with the Brazilian government to secure access to so-called critical and strategic minerals such as lithium, niobium, and rare earths. In response, he was reportedly told that any such negotiations must be led by the federal government, not by private-sector executives.

Global competition for these strategic minerals, which are crucial for technological development and the energy transition, is at the heart of growing tensions between the United States and China. These resources are essential for sectors such as defense, telecommunications, and energy.

Vice President Geraldo Alckmin, who also serves as Minister of Development, Industry, Trade, and Services, said there is “a very long agenda to explore and advance” in ongoing talks with the U.S. when asked specifically about American interest in critical minerals.

“There are countless areas,” he said, referring to discussions he has had in recent days with representatives from several sectors, including mining.

Mr. Alckmin also met on Saturday (19) with U.S. Commerce Secretary Howard Lutnick. The vice president described the 50-minute conversation as positive and said Brazil reaffirmed its willingness to negotiate with the United States.

*By Ruan Amorim, Sofia Aguiar and Renan Truffi — Brasília

Source: Valor International

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CIDE – ROYALTIES PAYMENT.

CIDE – ROYALTIES PAYMENT.

 

 By Edmo Colnaghi Neves (PhD).

 

Companies that send payments abroad as royalties under contracts with or without technology transfer are subject to a tax called CIDE (Contribution for Intervention in the Economic Domain Royalties).

 

However, in the case of technology transfer service contracts, this requirement is unconstitutional, which has led many companies to court. The leading case (the first case to be judged on the subject) is on the Supreme Federal Court’s agenda for August 6, 2025. Two judges of the panel have already voted differently on the matter, with the reporting judge voting for the partial unconstitutionality of the law, with regard to contracts without technology transfer.

 

If the unconstitutionality is declared, there may be modulation, when the decision regarding applies to future payments of the taxpayers and the right to recovery of amounts paid in the past being valid only for those who have already filed a lawsuit before said judgment, which may be concluded on August 6.

 

Therefore, we recommend evaluating the advisability of filing a lawsuit before this date.

 

July 2025.

 

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Local assets rebound in line with global markets

Short-term easing of tensions between Brazil and U.S. and globally weaker dollar boost real, Ibovespa, interest rates

 

 

 

07/22/2025 

After two weeks of negative performance driven by escalating trade tensions with the United States, Brazilian markets saw a reprieve on Monday. With the U.S. dollar weakening globally and no new retaliatory measures announced by President Donald Trump against Brazil, local assets bounced back, reflected in modest gains in the stock market, a stronger real, and falling interest rates.

By the end of the session, the dollar had fallen 0.41% to R$5.5644 in the spot market, while the Ibovespa gained 0.59% to close at 134,167 points. Internationally, the DXY index—which tracks the dollar’s performance against a basket of major currencies—fell 0.64% by the time Brazilian markets closed, reaching 97.85 points.

Tensions between Washington and Brasília intensified last week following precautionary measures by Brazil’s Federal Police against former President Jair Bolsonaro (Liberal Party, PL) and the U.S. government’s retaliatory move to revoke visas of Supreme Court justices. However, on Monday, there were no new developments, which, combined with a weaker dollar among both developed and emerging market currencies, brought relief to Brazilian markets, according to Eduardo Aun, macro portfolio manager at AZ Quest.

“There was a lot of concern over the weekend that the U.S. might impose sanctions beyond tariffs, but in the end, that didn’t happen. It could have been worse. Markets were pricing in the risk of something much harsher,” Mr. Aun noted. As a result, he said, markets corrected on Monday after the worst-case scenarios failed to materialize.

Mr. Aun pointed out that the Brazilian real had already been outperforming other emerging market currencies, largely driven by the carry trade—borrowing in low-interest-rate currencies to invest in higher-yielding ones like the real. With short-term yields in Brazil offering 8% to 9% returns and expectations for lower volatility, the currency had become particularly attractive.

However, Mr. Aun warned that Trump’s proposed 50% tariffs could reverse this favorable dynamic. Trade balance impacts are expected to dampen Brazil’s economic growth, and uncertainties around the scope of the tariffs are likely to keep market sentiment cautious until there is more clarity after the August 1 deadline. “The natural response is to reduce positions,” he said.

Morgan Stanley remains bullish on the real, citing the Brazilian Central Bank’s hawkish stance as a key support factor. “We maintain our view that the window of opportunity for real appreciation remains open (likely through August), assuming no escalation in tariff rhetoric from the U.S.,” analysts at the American bank wrote in a client report.

In the interest rate markets, concerns over worsening Brazil-U.S. relations were evident early in the session, with rates rising despite improved inflation forecasts reflected in the Focus Report. However, fixed-income traders reported signs of foreign capital inflows, helping to push down long-term rates. This movement also tracked the decline in U.S. Treasuries, with 10-year yields falling from 4.423% to 4.384%. Brazil’s DI rate for January 2029 fell from 13.64% to 13.59%.

On the stock exchange, Petrobras preferred shares rose 0.19%, while Vale shares jumped 2.73%. Market participants remain closely monitoring the flow of capital in the Brazilian equity market. In recent days, foreign investors have posted eight consecutive sessions of net outflows, while local institutional investors recorded six straight days of net inflows through July 17.

Last Thursday alone, foreign investors withdrew R$883.8 million, bringing the monthly outflow to R$5 billion. Meanwhile, institutional investors added R$886 million, though their monthly balance remains slightly negative at R$117.3 million.

XP equity strategist Raphael Figueredo noted that foreign investors appear to be locking in profits and adjusting their positions, while domestic institutional investors are viewing the recent market correction as a buying opportunity. “Local investors are positioning themselves for potential rate cuts and improved second-quarter earnings from listed companies,” Mr. Figueredo said.

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

Source: Valor International

https://valorinternational.globo.com/

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Gol and Azul argue codeshare deal before CADE

Antitrust agency flagged deal after airlines announced merger talks;

 

 

07/22/2025 

CADE officials question elimination of overlapping routes
CADE officials question elimination of overlapping routes — Photo: Divulgação

Gol and Azul have denied before Brazil’s Administrative Council for Economic Defense (CADE) that their codeshare agreement constitutes an “associative contract” or violates competition law. The two carriers submitted their responses to CADE late Friday (18), addressing inquiries from Commissioner Carlos Jacques, the case rapporteur reviewing the partnership.

In May 2024, Gol and Azul announced their codeshare agreement. Earlier this year, they also opened talks on a potential merger. Back in April, CADE’s technical division, the Superintendence-General (SG), had argued that the codeshare deal should have been reported to the antitrust authority and amounted in practice to an “associative contract” between rivals. Although the SG archived the case, the CADE Tribunal later reopened it. If CADE’s commissioners find that the agreement was improperly executed without prior notification, the airlines could face fines.

One of the commissioner’s main questions was whether Gol or Azul had discontinued any overlapping routes after the codeshare agreement took effect.

Gol responded that changes in flight networks—including frequencies, connections, and schedules—are routine in the airline industry and were not influenced by the codeshare deal. The company stated that, based on routes with overlapping services at the time of the codeshare signing and flight schedules published by Brazil’s civil aviation regulator (ANAC), two regular overlapping routes were discontinued. However, Gol did not specify which routes.

Gol further argued that labeling the codeshare as an associative contract is “based on incorrect premises and is fundamentally flawed.”

“It is impossible to equate the codeshare agreement with precedents involving actual infrastructure sharing,” the airline said. Gol maintained that the SG’s conclusion was based on the mistaken assumption that codeshare agreements involve shared infrastructure. Gol insisted the agreement involves only code-sharing, without the creation of a joint enterprise or shared risks and returns, thereby ruling out classification as an associative contract.

Azul echoed this argument in its response, emphasizing that flights sold through the codeshare account for only a small portion of its total revenue.

Azul also stated that since the codeshare’s implementation, there has been no integration or sharing of operational systems, airport infrastructure (including staff or check-in counters), or any essential assets for conducting business.

Furthermore, Azul argued that the agreement does not include joint pricing arrangements. “The parties do not exchange any pricing or operational information that could lead to any coordination between their activities,” the company said.

Eric Hadmann Jasper, an attorney and professor of economic law, said it is “natural” for Gol and Azul to frame their codeshare agreement within precedents that do not treat such arrangements as associative contracts.

He added that CADE could, in principle, fine the airlines. “However, there have been cases where CADE found that a transaction should have been notified but refrained from applying a fine, citing unclear precedents and regulations,” Mr. Jasper noted.

In a recent interview with Valor, CADE President Gustavo Augusto pointed to the codeshare agreement as one of the Tribunal’s top cases for the second half of the year.

“I expect the Tribunal will address these issues in the coming semester, and even if we find no infraction, we may still require that the codeshare be formally notified and reviewed. Depending on the Tribunal’s decision, it could also influence the direction of the proposed merger,” he said.

Gol declined to comment, and Azul did not immediately respond to requests for comment.

*By Beatriz Olivon and Guilherme Pimenta, Valor — Brasília

Source: Valor International

https://valorinternational.globo.com/

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U.S. companies take legal action against Trump over ‘Brazil tariff’

Two orange juice importers argue the tariff on Brazil will slash profits and drive up retail prices

 

 

 

07/22/2025 

Two U.S. importers have taken the first step in challenging Donald Trump’s proposed sanctions against Brazil, laying out arguments that could pave the way for similar actions by other companies and intensify pressure on Washington.

On July 18, orange juice importers Johanna Foods and Johanna Beverage Company filed a request for declaratory and injunctive relief with the U.S. Court of International Trade in New York, aiming to block Trump’s threat to impose 50% tariffs on Brazilian goods.

Based in Flemington, New Jersey, the plaintiffs are premium food manufacturers, producers, and distributors of fruit juices, beverages, and yogurts.

In the lawsuit, the companies argue that the proposed tariffs—set to take effect on August 1—exceed the president’s authority under the International Emergency Economic Powers Act and constitute an unconstitutional delegation of power.

Robert Facchina, executive director of both companies, stated in a declaration attached to the 150-page lawsuit that the tariff would harm the group financially, increase retail prices by roughly 20% to 25% for consumers, and could trigger layoffs in the U.S.

“Brazil’s tariff will result in a significant, and perhaps prohibitive, price increase on a staple of the American breakfast,” the importers warn.

The filing also challenges the rationale behind Mr. Trump’s proposed tariff, citing his reference to “the way Brazil treated former President Bolsonaro,” “Brazil’s insidious attacks on free elections and the fundamental rights of Americans to freedom of expression,” and “the long-standing and very unfair trade relationship.”

The suit notes that Mr. Trump’s letter does not cite any legal or statutory basis for imposing a 50% tariff against Brazil. It asserts that the letter “does not constitute proper executive action, is not an Executive Order, does not refer to or incorporate any Executive Orders, or modify or amend any existing Executive Order.”

Moreover, the document points out that Mr. Trump “has not identified any unusual or extraordinary threat originating outside the U.S. that is a threat to the national security, foreign policy, or economy of the U.S.,” nor has he “declared a national emergency as the basis for imposing the Brazil Tariff.”

The two importers claim that Mr. Trump’s imposition of a 50%—or higher—tariff on Brazilian orange juice will cause substantial and immediate financial harm to both their companies and American consumers.

Brazil is the world’s leading producer of orange juice and the second-largest supplier to the U.S., accounting for more than half of all orange juice sold in the American market.

“The 50% tariff imposed on Brazil by the Trump administration will significantly affect the petitioners’ businesses, resulting in an estimated additional cost of at least $68 million over a twelve-month period, which exceeds any single year of profits in the petitioners’ 30-year history,” the importers state in their complaint.

They argue that the imposition of the tariffs undermines their ability to plan, fulfill production requirements, and manage cash flow, “as the additional costs impose an immediate and uncontrollable financial burden that our current profit margins cannot absorb.”

Without “relief from these tariffs,” the importers warn they will face potential layoffs of unionized employees, reduced production capacity, and an existential threat to the long-term viability of their operations. Together, the companies support nearly 700 jobs in the U.S. and make significant contributions to the economies of New Jersey and Washington.

They further argue that the increased costs associated with the so-called Brazil Tariff will compel them to raise prices for customers, leading to an estimated 20% to 25% hike in retail prices for consumers.

The filing also highlights the steep decline in domestic orange juice production—particularly in Florida—which has dropped by more than 95% over the past 25 years due to citrus greening disease, hurricanes, and urban sprawl, rendering the U.S. supply insufficient for its production needs.

According to the plaintiffs, Florida’s orange harvest for 2025 is projected to fall by approximately 33% compared to last year, marking the lowest output in 95 years. Brazil and Mexico now account for roughly 95% of U.S. orange juice imports.

In conclusion, the companies assert that the imposition of the Brazil Tariff—particularly the 50% rate—is unlawful and urge the court to bar the Trump administration from enforcing the measure.

*By Assis Moreira, Valor — Geneva

Source: Valor International

https://valorinternational.globo.com/

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Barclays sees “fertile ground” for market volatility ahead of 2026 election

Chief Brazil economist Roberto Secemski says foreigners are growing more cautious while local investors stay optimistic

 

 

07/21/2025 

Diverging positions between local and foreign investors in Brazilian assets—driven by differing assessments of the 2026 electoral landscape—may translate into heightened volatility in domestic market dynamics as the election approaches. In this environment, any shift in expectations—even in structurally unchanged areas such as fiscal policy—could trigger sharp repricing in the markets. This is the view of Barclays’ chief Brazil economist, Roberto Secemski, following a recent round of meetings with clients in Brazil and abroad.

“At the beginning of the year, locals were very pessimistic, while foreigners were less so—which tends to be their usual stance. Now, I see the opposite: locals are more constructive, and foreigners more skeptical,” said Secemski, who attributes this shift mainly to expectations surrounding a possible political regime change in next year’s election—expectations he found to be “much stronger among local investors than foreign ones.”

In an interview with Valor, Mr. Secemski noted that this could lead to increased instability in domestic markets due to electoral news. “This discrepancy in analysis will be confronted with reality,” he said. “If we experience a shift in scenarios that are potentially binary, it could lead to a discontinuity in asset performance… Understanding investor positioning better, it seems there are conditions in place that could result in greater volatility. It’s a fertile ground for that.”

According to Mr. Secemski, this scenario helps explain the recent instability in Brazilian assets. “Trump is an example that triggered this reassessment of political probabilities,” he said, referring to U.S. President Donald Trump’s announcement of 50% tariffs on Brazilian imports starting August 1. “This raises questions among investors—rightly so—given Brazil’s still-fragile fiscal situation.”

During his discussions with clients, Mr. Secemski observed that local investors tended to downplay the importance of events that, in other circumstances, might have had a stronger impact on asset prices. He noted that Brazil’s fiscal outlook remains largely unchanged from earlier in the year, even if some adjustments have extended the life of the fiscal framework for this year—and possibly the next.

“But we haven’t seen changes that would lead the fiscal issue toward debt stabilization. Still, the market narrative has changed significantly—particularly among locals, who have shrugged off some fiscal headlines that foreigners have not been so quick to dismiss,” said Mr. Secemski.

With the prospect of a regime change, local investors have effectively priced in a “new fiscal arrangement,” he said. “This has reduced anxiety, especially compared to what we saw in November and December of last year. But foreign investors assign a much lower probability to this scenario.”

Foreign investors, he added, still carry a “residual memory of the market turmoil” at the end of last year. “That left many investors with zero exposure. So there’s some hesitation to come back,” he said. Between November and December, a worsening in fiscal risk perception, combined with a more challenging global environment following Trump’s U.S. victory, triggered a significant selloff in Brazilian assets. The dollar rose to R$6.30, and the yield curve priced in a Selic rate above 17%.

“There’s also the impression [among foreigners] that the electoral process is still far off, with a lot of uncertainty around who the candidates will actually be and what conditions they’ll be running under,” the economist added.

Mr. Secemski also noted a changed global environment. Six months ago, with Mr. Trump just beginning his term, the outlook was for a strong dollar globally. “Today, that story has flipped 180 degrees. The expectation is for a weaker dollar, which supports emerging markets. We must consider that, but in Brazil’s idiosyncratic component, we don’t see significant changes. For a fiscal outlook that’s still the same, market conditions were much more stressed at the end of 2024 than they are today,” he emphasized.

The differences between local and foreign investor views also help explain current positions in domestic assets, Mr. Secemski said. “Most local clients are in fixed-income positions [betting on interest rate cuts] and long the real \[betting on appreciation of the Brazilian currency], although not at full capacity. Abroad, we also see investors long the real—a fairly universal move given the weak dollar and high carry—but not with the same exposure in interest rates,” he said.

That positioning is somewhat unusual, as foreign investors typically show a greater appetite for rate positions, especially at longer tenors. The focus on FX, however, reflects some reluctance among foreigners to take on greater exposure to domestic financial assets amid lingering political uncertainty.

“I think the rates component is more linked to the need for clearer evidence of economic deceleration, which isn’t yet visible—especially in labor market data,” Mr. Secemski said. “The improvement in current inflation is mostly in tradable goods and food—largely due to the stronger real. There’s no conclusive sign of a consistent trajectory toward the inflation target, which calls for caution on rate bets, while FX conditions are more favorable externally,” he noted, citing this year’s more than 10% drop in the DXY index, which tracks the dollar against a basket of major currencies.

As Brazil gets closer to the 2026 presidential election and different probabilities are assigned to electoral scenarios, investor pricing and positioning may shift, Mr. Secemski said. “These are very dynamic events. Moreover, the external environment remains volatile and uncertain. Any change in the perceived likelihood of a political regime shift could trigger shocks,” he said.

*By Anaïs Fernandes and Victor Rezende, Valor — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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Vivara to elect new chair as founder steps down for health reasons

Marina Kaufman Bueno Neto to take over as board chair at jewelry retailer

 

 

 

 

07/21/2025 

Vivara, Brazil’s largest jewelry chain, confirmed on Friday (18) key leadership changes previously reported by Valor. Citing health reasons, founder and majority shareholder Nelson Kaufman will step down as chair of the board. His daughter, Marina Kaufman Bueno Neto, currently vice chair and with the company since 2007, will take over the role. Mr. Kaufman will remain a signatory to the shareholders’ agreement.

Paulo Kruglensky, Mr. Kaufman’s nephew, was named vice chair. A former CEO who led one of the company’s most significant growth periods, Mr. Kruglensky spent 17 years at Vivara before stepping down in 2024. His departure followed Mr. Kaufman’s controversial decision to retake the helm of the company.

Mr. Kaufman submitted his resignation on Friday, and the changes will be formally approved at an extraordinary shareholders’ meeting. Valor has learned that Icaro Borrello will remain CEO and that the company is discussing initiatives to improve metrics such as cash flow and margins.

Mr. Kaufman suffered a stroke last year and is recovering gradually, which prompted the decision to strengthen the board. The company declined to comment.

*By Adriana Mattos — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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Public debt will keep rising without tough fiscal reform, study warns

MCM 4Intelligence projects debt-to-GDP ratio above 100% in multiple scenarios within 10 years

 

 

07/21/2025

Brazil’s public debt is on track to exceed 100% of GDP within the next decade, even if a mild fiscal reform package is approved, according to a study by consultancy MCM 4Intelligence. The analysis, which ran thousands of simulations based on Brazil’s economic and fiscal performance over the past 20 years, highlights growing concerns among economists ahead of this year’s elections.

In a scenario where no policy changes are made, there is a 53% chance that the debt-to-GDP ratio will surpass 100% within ten years, with a 61% probability of crossing this threshold at any point during that period. The baseline assumptions include a real interest rate of 5%, average GDP growth of 2.4%, and a primary surplus of 0.5% of GDP. Brazil’s gross debt currently stands at 76.1% of GDP.

Under a scenario involving diluted reforms, the probability of debt exceeding 100% within a decade still reaches 25%, rising to 32% when considering the possibility of it happening at any point in the next ten years. This projection assumes that, starting in 2027, the government achieves an average primary surplus of 1.5% of GDP through a set of measures: delinking healthcare and education spending from GDP growth and adjusting them only for inflation; indexing pensions and other social benefits to inflation plus half of real GDP growth; cutting wage bonuses to half the minimum wage; reducing legal tax exemptions by 10%—which the Finance Ministry estimates at over R$800 billion—and trimming parliamentary budget earmarks by 10%, from R$50.4 billion in 2025.

The study’s conclusions diverge sharply from the outlook of Dario Durigan, the Executive Secretary at the Finance Ministry. Speaking at a Brazilian Development Bank (BNDES) event earlier this month, Mr. Durigan said it was possible to resolve Brazil’s debt challenge within five years “through spending controls and fiscal rebuilding.” He acknowledged that returning to primary surpluses at the current Selic interest rate level is “neither viable nor feasible,” but suggested there was room for interest rate cuts “soon.”

The analysis by economists Alexandre Teixeira, Renan Martins, and political consultant Ricardo Ribeiro uses stochastic modeling, which employs historical averages and standard deviations of key variables to generate thousands of possible debt trajectories.

“The advantage of this method is that it produces not just a single forecast but a wide range of possible outcomes, allowing us to gauge the likelihood of specific events,” said Mr. Teixeira.

The diluted reform scenario was designed as a softer version of a much stricter package that has been circulating among market economists in recent months. The harsher version, however, is widely seen as politically unfeasible, given strong opposition from President Luiz Inácio Lula da Silva and powerful congressional lobbies. It includes eliminating real increases for pensions and social benefits, tightening eligibility for welfare programs such as the BPC, ending the wage bonus, making deeper cuts to tax expenditures, and slashing parliamentary amendments to the average level seen between 2020 and 2024.

According to MCM’s estimates, such a strict package could generate an average primary surplus of approximately 3% of GDP over ten years. “With this level of fiscal adjustment, it’s not hard to show the debt could be stabilized,” Mr. Teixeira noted.

Other institutions have reached similar conclusions. A recent World Bank study estimated the effort needed to stabilize Brazil’s debt trajectory at 3% of GDP. The Independent Fiscal Institution (IFI) calculated the required primary surplus at 2.4%.

A tougher fiscal adjustment could lead to a 3% primary surplus within a decade, MCM says

The study also tested a third scenario, using the same parameters as the diluted reform case but with two adjustments: it assumes the reforms enhance fiscal credibility, lowering the real interest rate to 4.5%—the same level recorded between 2016 and 2019 after the approval of Brazil’s spending cap—and reducing interest rate volatility by halving its standard deviation.

In this case, the probability of debt exceeding 100% of GDP virtually disappears. “The key takeaway is that investors need to view the reform as sufficient. For any reform to be effective, it must clearly signal debt stabilization,” Mr. Teixeira said. “A reform that is too lenient may not achieve this goal.”

Other institutions, such as IFI, have also published stochastic scenarios, though typically based on their baseline cases. In its latest Fiscal Monitoring Report, IFI estimated a 72.7% chance of gross debt surpassing 90% of GDP by 2029.

In the annexes to the 2026 Budget Guidelines Bill (PLDO), the government indicated that the likelihood of debt exceeding 100% of GDP is low and only materializes in an “adverse scenario” involving a 100 basis point Selic rate shock starting in September 2025.

The Finance Ministry, through its press office, said Mr. Durigan’s comments reflect the baseline scenario prepared by the National Treasury’s technical team, which assumes compliance with the fiscal targets set in the new framework. Under this scenario, debt peaks at 84% of GDP in 2029 before declining gradually. This aligns with the Treasury’s latest Fiscal Projections Report, which forecasts a debt peak of 84.3% of GDP in 2028.

The ministry added that its projections “rely on parameters consistent with current macroeconomic conditions and reaffirm the economic team’s commitment to gradual, responsible, and sustainable fiscal consolidation.”

A recent report by Warren Investimentos did not assign probabilities but outlined three potential scenarios. Not even the baseline scenario—which includes indexing the minimum wage to inflation from 2027 and freezing public sector wages until 2030—was able to stabilize debt by 2035. Only in the “adjustment scenario” does gross debt decline after peaking at 92% of GDP in 2029. In this case, the primary surplus would reach 1.7% of GDP by 2030 and 2.0% by 2035.

However, the measures in this scenario appear politically challenging: ending the minimum wage valuation rule and freezing public sector wages; abolishing the wage bonus; changing the minimum spending rules for healthcare and education; halving parliamentary earmarks; and cutting the federal contribution to the Fundeb education fund from 23% to 19%.

*By Marcelo Osakabe — São Paulo

Source: Valr International

https://valorinternational.globo.com/

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