Criminal probe reveals compliance gaps in Brazil’s financial sector

Investigation links fintechs and fund managers to money laundering tied to crime group PCC

 

 

 

08/29/2025

A major criminal investigation has exposed loopholes in Brazil’s financial and capital markets that allowed the powerful criminal organization First Capital Command (PCC) to infiltrate the formal economy. Two simultaneous operations launched Thursday (28) by Brazil’s Federal Police, with support from the tax authority, revealed weak oversight and blurred lines of responsibility, particularly within the fund management industry.

Under Brazilian financial and capital markets regulation, fund managers and administrators, like banks and fintechs, must comply with know-your-client (KYC) requirements. These rules are designed to ensure due diligence is conducted through to the ultimate beneficial owner, assessing reputational risks and signs of money laundering.

While administrators have a fiduciary duty to monitor fund portfolios, this doesn’t necessarily mean they were knowingly involved in criminal activity. However, they are responsible for conducting thorough background checks. “The likelihood that they failed to do this properly is high,” said a lawyer familiar with fund operations. “In some cases, the business model itself involves taking risks that others wouldn’t. They may not be deliberately complicit, but they turn a blind eye.”

Three fund administrators and one payment fintech were named in the investigation as key players in facilitating the movement and concealment of funds with suspicious origins.

According to documents seen by Valor, Reag Trust DTVM, Altinvest Gestão, and Trustee DTVM allegedly helped “move and conceal billions of reais from dubious sources.” Reag, which operates in both asset and fund management, had already resigned from managing eight of the ten funds under its control after detecting problems during internal monitoring last year.

Banco Genial, also mentioned in the court filings, dropped the multimarket private credit fund Radford—acquired one year ago—on the day the operation was made public. Genial said it was not a target of the investigation. Trustee had similarly exited its fund the day before the operation. Fintech BK Instituição de Pagamentos was also identified as central to the illicit financial scheme.

All the entities named denied any wrongdoing and said they are cooperating with authorities.

One asset management executive argued that it’s “impossible for a fund administrator, a bank, or any market participant to know what people are doing outside the formal economy,” noting that criminal matters ultimately fall to the police. Common measures taken in such cases include resigning from fund management or liquidating portfolios.

A fund industry representative noted that one vulnerability stems from fintechs investing in funds without revealing their end clients. These newer financial players are not currently required to report cash deposits over R$50,000 to the Financial Intelligence Unit (COAF), unlike traditional banks.

André Martinez, author of “Compliance Bancário Essencial” (Essential Banking Compliance), said the regulatory gap is not in the rules themselves—which he described as among the world’s toughest—but in enforcement. The emergence of fintechs, he said, “made it much easier for illicit money to flow.” “They’re all supposed to have compliance programs, but the breach is in willfully overlooking them.”

He added that existing guidelines require institutions to vet not just clients but also partners, suppliers, and employees, who can be co-opted into opening front accounts even in large banks. “The system feeds itself because everyone has sales targets to hit,” Mr. Martinez said. “Even a manager with no criminal ties might ignore a red flag if a R$1 million deposit from a pensioner helps him meet his monthly quota. Dirty money meets targets and boosts profits.”

Mr. Martinez cited a study by data bureau Quod, commissioned by Brazil’s banking federation FEBRABAN, showing some 10 million taxpayer IDs are suspected of being linked to scams involving front accounts. He added that Coaf lacks staff to review all suspicious activity reports, meaning many cases never reach prosecutors. Despite the scale of the current case, he believes it only affects a small part of the formal system.

“At a minimum, you need to know your client. Even fintechs and funds are already subject to high compliance standards, including anti-corruption and anti–money laundering rules,” said Eduardo Silva, president of the business ethics group Instituto Empresa. “While the market promotes corporate responsibility and sustainability, permissive mechanisms are still enabling organized crime to get in.”

Fund administrators know their investors (on the liability side), while asset managers are responsible for where the money goes (on the asset side), said one attorney, noting that Brazil’s Securities and Exchange Commission (CVM) has been vocal on this issue. Some firms, he said, knowingly take on risks to scale quickly by doing “things they shouldn’t be doing.”

Guilherme Cooke, a partner at law firm Lobo de Rizzo Advogados specializing in funds, cautioned against blaming the fund structure itself. “There have been other cases involving corruption by fund agents, but instead of holding individuals accountable, the whole industry gets blamed,” he said. He noted that fund transactions are in fact more transparent than in other corporate structures. “Funds don’t offer asset shielding, just some tax efficiency. You can’t do more through a fund than you could in a company.”

On Thursday, Brazil’s federal court authorized the full seizure of investment funds used for illegal financial activity, alongside the freezing of assets and bank accounts up to R$1.2 billion—the amount already flagged in tax assessments. The court also lifted banking and tax secrecy protections for individuals and companies under investigation.

João Paulo Gabriel, a prosecutor with the Special Organized Crime Task Force (Gaeco), said the investigation found direct links between Faria Lima–based fund operators and the PCC money laundering scheme.

“What we’ve identified in the fund management segment is coordinated action among firms, as well as with the criminal group. It’s not just a case of providing services to organized crime,” he said during a press briefing.

In a statement, the Brazilian Financial and Capital Markets Association (Anbima) said: “The investment fund sector is one of the most robust in the country’s capital markets and is subject to strict rules and controls that are internationally recognized.”

Brazil’s fund industry currently manages R$10 trillion in net assets, equivalent to 85% of GDP, across more than 32,000 funds and some 41 million accounts. The “Carbono Oculto” (Hidden Carbon) operation, as named by police, involves roughly R$30 billion and 40 funds, according to media reports.

Source: Valor International

https://valorinternational.globo.com/

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Coca-Cola stresses autonomy in Brazil despite tariffs

With planned investments of around R$7bn this year in Brazil, company says it contributed R$87.5bn to GDP

 

 

 

 

08/28/2025 

Amid geopolitical tensions and steep U.S. tariffs, the president of The Coca-Cola Company for Brazil and the Southern Cone, Luciana Batista, reaffirmed the group’s commitment to Brazil and the autonomy of its local operations despite global turbulence.

According to a study by consulting firm Steward Redqueen, the company contributed R$87.5 billion to the Brazilian economy in 2023, equivalent to 0.7% of the country’s GDP. The study underpins the launch of the new Coca-Cola System campaign in Brazil, titled “Feita com todo o Brasil” (“Made with all of Brazil”).

The campaign is no gamble. The tariff issue has escalated, particularly with measures taken by U.S. President Donald Trump. Analysts’ main concern in this context has been to gauge the impact of the dispute on business.

Global executives of groups such as Coca-Cola, Heineken, and Ambev have long highlighted the strong local presence of beverage giants as an advantage in times of volatility.

“The global context is relevant [for the new campaign],” Ms. Batista told Valor. According to her, localizing production is inherent to the business, given the high cost of transportation. This extensive operational presence, she said, is the main competitive edge of the industry compared with others.

“It is key to reinforce the autonomy we have in the Brazilian market, in continuing with our operations, our portfolio, and growth trajectory,” she said, stressing that most of the company’s inputs are sourced locally.

Some inputs, such as aluminum, have seen sharp volatility in recent months. The industry, Ms. Batista said, has already provided answers to such challenges. “We have a supply-chain resilience concept, with alternatives in times of shortage. After the pandemic, there was an aluminum shortage, so we shifted to returnable PET or glass,” she explained.

The turbulence goes beyond tariffs. Coca-Cola made headlines recently after Mr. Trump said he had persuaded the company to replace corn syrup with U.S. cane sugar in the production of its soft drinks in that country. The multinational said it plans to launch, in the second half of this year, a version that meets Mr. Trump’s request.

Sugarcane is already used in the formula in several countries, including Brazil, where it has been part of the original recipe since its launch in 1886. However, in the 1970s, soaring sugar prices led the American industry to adopt corn syrup as a cheaper alternative, supported by U.S. agricultural policy.

The Coca-Cola System in Brazil—comprising seven bottling groups (Andina, Bandeirantes, Brasal, Femsa, Solar Coca-Cola, Sorocaba, and Uberlândia) plus Leão—operates 33 factories nationwide.

Beyond its GDP impact, the study shows the company is responsible for generating more than 574,000 jobs throughout its production chain.

This is not the first time Coca-Cola has commissioned such a study in Brazil, but a change in methodology prevents comparison with previous editions. The advantage of the new approach, Ms. Batista said, is that it now allows comparisons across countries in the region. “This work made us realize that we are also a major exporter of fruit in the region for other Coca-Cola businesses,” she said. In Argentina, for example, the Coca-Cola System also accounts for 0.7% of GDP, while in Chile the figure reaches 1.2%.

The executive also pointed out that Brazil is seen as a central market for the multinational—currently, the country is Coca-Cola’s fourth-largest market by sales volume.

“We are in a long cycle. The company has been in Brazil for 83 years. This is not just a story of the past. It is a story of the future. We have a lot of room to grow,” she said.

Altogether, the Coca-Cola System plans to invest R$7 billion in Brazil this year. Among recent moves are R$380 million, alongside Femsa, to build its own Crystal mineral water factory in Rio Grande do Sul.

Also this year, the group concluded an R$886 million investment in Porto Alegre to rebuild and modernize Femsa’s plant, which had been damaged by floods in May 2024.

Ms. Batista was asked about the ongoing tax reform debate. Soft drinks have been included in the excise, known as the “sin tax,” applied to products considered harmful to health or the environment. “We do believe in the reform as something positive. But we also believe it is important to ensure equal treatment,” she said.

Asked by Valor, Alexandre Horta, president of the Brazilian Association of Soft Drink and Non-Alcoholic Beverage Industries (ABIR), said the country’s non-alcoholic beverage sector continues to stress the “inconsistency” of applying excise to sugary drinks. “Rather than demonizing a product, we continue to believe in dialogue to ensure legal certainty and predictability for companies,” he said.

*By Cristian Favaro — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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Organized crime infiltrates Brazilian fuel market

Wide-ranging R$7.6bn tax and product fraud included all sectors of industry and used fintechs for money laundering

 

 

08/28/2025

Brazilian authorities on Thursday (28) launched a massive operation to dismantle a wide-ranging fraud and money laundering network in the fuel sector, allegedly infiltrated by members of the Primeiro Comando da Capital (PCC), one of the country’s most powerful criminal organizations.

The Federal Revenue Service said the scheme encompassed nearly all links of the fuel chain controlled by organized crime — from importation, production, distribution, and retail sales to final stages of asset concealment and protection through fintechs and investment funds.

Search and seizure warrants were executed against roughly 350 targets — individuals and companies — across eight states: São Paulo, Espírito Santo, Paraná, Mato Grosso, Mato Grosso do Sul, Goiás, Rio de Janeiro, and Santa Catarina.

The operation mobilized more than 350 federal tax agents, supported by the São Paulo state public prosecutor’s office (MPSP) through its special organized crime unit (Gaeco), the federal prosecutor’s office (MPF), the Federal Police, state civil and military police, São Paulo’s treasury department (Sefaz/SP), the National Petroleum Agency (ANP), and the São Paulo state attorney general’s office (PGE/SP).

The National Treasury Attorney General’s Office (PGFN) also filed civil lawsuits to block more than R$1 billion in assets, including real estate and vehicles, to secure unpaid tax credits. Authorities estimate the scheme enabled more than R$7.6 billion in unpaid federal, state, and municipal taxes.

Investigations indicate that a sophisticated scheme laundered money coming from crime and obtained profits in the fuel production chain through the use of several operating companies to hide the criminal origin of the money. Tax evasion and product adulteration increased the profits.

Financial operations carried out through fintechs made it difficult to track the amounts transacted, according to the Federal Revenue Service. The laundered profits were then shielded in investment funds with several layers of concealment in order to try to prevent the identification of the real beneficiaries.

The Federal Revenue Service identified at least 40 investment funds, with assets of R$30 billion, controlled by the PCC. According to the agency, the operations took place in the financial market of São Paulo, through infiltrators on Avenida Faria Lima, as the main financial hub of São Paulo is popularly known.

The investigations indicate that one of the axes of the illicit plot is the irregular importation of methanol — the cargo arrives in the country through the Port of Paranaguá (Paraná), but is not delivered to the recipients registered in the invoices.

The product is diverted and clandestinely transported, with fraudulent documentation and in disagreement with safety standards, to gas stations and distributors to adulterate fuels and thereby generate billionaire profits for PCC. More than 300 gas stations in the country were identified as part of the scheme.

Investigators highlight that, in these establishments, consumers pay for volumes lower than those informed by the pumps or for adulterated fuels, outside the technical specifications required by the National Petroleum Agency (ANP).

At the same time, the Federal Police (PF) launched two operations in São Paulo and Paraná to curb the performance of organized crime in the fuel production chain.

The Ministers of Justice and Public Security, Ricardo Lewandowski, and of Finance, Fernando Haddad, alongside the Director-General of the Federal Police (PF), Andrei Rodrigues, and the Deputy Secretary of Audit of the Federal Revenue Service, Andrea Costa Chaves, will give a press conference later this morning to detail the two PF operations against organized crime in the fuel sector.

In São Paulo, State authorities and the Federal Revenue Service will present details of the action of the billionaire money laundering scheme by the PCC. Participating in the press conference are the head of the Public Prosecutor’s Office of São Paulo, Paulo Sérgio de Oliveira Costa; the Secretary of Security of São Paulo, Guilherme Derrite; the Special Secretary of the Federal Revenue, Robinson Barreirinhas, in addition to prosecutors. Both press conferences are scheduled for 11 a.m.

Importers acted as intermediaries, purchasing abroad naphtha, hydrocarbons, and diesel with resources from formulators and distributors linked to the criminal organization. Between 2020 and 2024 alone, more than R$10 billion in fuels were imported by those investigated.

In turn, formulators and distributors, in addition to gas stations also linked to the organization, repeatedly evaded taxes in their sales operations. The Federal Revenue has already constituted federal tax credits totaling more than R$8.67 billion against individuals and companies that are part of the scheme.

Another fraud detected involved fuel adulteration. Methanol, supposedly imported for other purposes, was diverted for use in the manufacture of adulterated gasoline, with serious damage to consumers.

The formulators, distributors, and gas stations were also used to launder money of illicit origin. There are indications that the convenience stores and the managers of these stations, in addition to bakeries, also participated in the scheme.

Tax auditors from the Revenue identified irregularities in more than 1,000 gas stations distributed across 10 states. Most of these stations played the role of receiving cash or through card machines and moving crime proceeds for the criminal organization through their bank accounts in the money laundering scheme. Between 2020 and 2024, the financial movement of these stations was R$52 billion, with a very low tax collection that is incompatible with their activities. The stations have already been fined by the Revenue in more than R$891 million.

However, about 140 stations were used in another way. They had no movement between 2020 and 2024, but, even so, they were recipients of more than R$2 billion in fuel invoices. Possibly, these simulated acquisitions served to hide the movement of illicit amounts deposited in distributors linked to the criminal organization.

The amounts were inserted into the financial system through fintechs, companies that use technology to offer digital financial services. The Federal Revenue identified that a payment fintech acted as a “parallel bank” of the criminal organization, having moved more than R$46 billion from 2020 to 2024. The same people controlled other smaller payment institutions, used to create a double layer of concealment. The fintech also directly received cash. Between 2022 and 2023, more than 10,900 cash deposits were made, totaling more than R$61 million. This is a procedure completely strange to the nature of a payment institution, which operates only with book money.

The use of fintechs by organized crime aims to take advantage of loopholes in the regulation of this type of institution. These loopholes prevent the tracking of the flow of resources and the identification, by control and inspection bodies, of the amounts moved by each of the fintech’s clients individually.

One of these loopholes is the use of the “pool account,” an account opened in the name of the fintech itself in a commercial bank through which resources from all its clients transit in a non-segregated manner. This was how financial clearing operations between distributors and gas stations were carried out, as well as financial clearings between companies and investment funds managed by the criminal organization itself. The fintech was also used to make payments to collaborators and for personal expenses and investments of the main operators of the scheme.

Another loophole is the non-obligation to provide information to the Revenue on the clients’ financial operations through the e-Financeira system. In 2024, the Revenue promoted regulatory changes regarding the e-Financeira aiming to give greater transparency and reduce the opacity of payment institutions, changes that were revoked at the beginning of 2025 after a wave of fake news on the subject.

Thus, the fintech was a powerful financial hub of the criminal organization, but invisible to control and inspection actions.

The money of illicit origin was reinvested in businesses, properties, and other investments through investment funds that received resources from the fintech, making it difficult to trace and giving it an appearance of legality.

The Revenue identified at least 40 investment funds (multimarket and real estate), with assets of R$30 billion, controlled by the criminal organization, mostly closed-end funds with a single shareholder, usually another investment fund, creating layers of concealment. Among the assets acquired by these funds are a port terminal, four alcohol-producing plants (two more plants in partnership or in the process of acquisition), 1,600 trucks for fuel transport, and more than 100 properties, among which six farms in the interior of São Paulo State, valued at R$31 million, and a residence in Trancoso (Bahia), acquired for R$13 million.

The evidence indicates that these funds are used as a way to conceal and shield assets, and suggest that the fund managers were aware of and contributed to the scheme, including failing to comply with obligations to the Revenue, so that their transactions and those of their shareholders would be hidden from inspection.

Source: Valor International

https://valorinternational.globo.com/

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Brazil to fast-track tax refunds for companies hit by U.S. tariffs

Fiscal relief measures are part of broader aid package for exporters

 

 

 

08/28/2025

Companies affected by the 50% tariff hike imposed by the United States on Brazilian products will be given priority in the processing of tax credit refunds and reimbursements. These credits are used to offset federal taxes and contributions owed by companies. In addition, these businesses will benefit from extended deadlines to pay federal taxes and installments related to federal debt settlements.

The tax relief measures were outlined in an ordinance issued by Finance Minister Fernando Haddad and form part of the “Brazil Sovereign” plan, a government program launched last week with credit lines and other measures to support exporters impacted by the U.S. sanctions introduced by President Donald Trump.

The regulation states that priority will be granted to requests already submitted through the electronic system known as Per/Dcomp (Electronic Request Program for Refund, Reimbursement or Compensation and Declaration of Compensation), as well as to new claims submitted within six months of the regulation’s publication, which occurred last Friday (22). This deadline may be extended for another six months by the Federal Revenue, Brazil’s tax agency, and the measure applies only to taxes under its jurisdiction.

Eligible companies include private-sector exporters of goods that generated at least 5% of their total revenue between July 2024 and June 2025 from products subject to the additional U.S. tariffs. Sole proprietors (MEIs) and rural producers with a corporate taxpayer registration (CNPJ) may also qualify.

The Ministry of Development, Industry, Trade and Services (MDIC) will soon publish a table listing the affected products by Mercosur Common Nomenclature (NCM), which companies will need to consult to verify whether they meet the 5% revenue threshold.

The same regulation also extends deadlines for the payment of federal taxes and for installments related to debt settlements made with the Attorney General of the National Treasury (PGFN) or the Federal Revenue. Taxes originally due in August may now be paid by the last business day of October, and those due in September by the last business day of November. These extensions apply exclusively to companies impacted by the tariff increase.

The Finance Ministry said the deferral will have no fiscal impact in 2025, since the payments will still be made within the same fiscal year. It is designed as temporary relief during the first two months the tariffs are in effect. The ministry also said the tax credit refund prioritization will not affect fiscal balance. “There was no change in the rules for approving refunds,” it said in a note to Valor.

Tiago Sbardelotto, an economist at XP Investimentos, confirmed the measure should not impact public accounts, since it only changes the order in which refunds are processed. “The main effect is likely to be timing, more concentrated use of credits early on, and less later in the year,” he said.

He noted that the prioritization works in tandem with an increase in the refund percentage under Reintegra, a federal program that reimburses exporters for taxes paid in order to boost competitiveness abroad.

“In other words, the government is making a larger volume of tax credits available [by raising Reintegra rates] and at the same time speeding up access to those credits. While not limited to this specific type of credit, these will likely be the most relevant right now,” he explained.

Cutting in line

Tax attorneys interviewed by Valor raised concerns about how this “cutting in line” will work and whether companies that are not eligible could be harmed. They argued that this should not happen. The Finance Ministry rejected the idea that other companies would be disadvantaged.

“The prioritization is legitimate to give businesses some relief, but it’s a regulatory measure that essentially ignores the chronological order of requests,” said Priscila Faricelli, a partner at law firm Demarest. She acknowledged that the government is facing a large backlog of credit refund requests, but warned that skipping the line could lead companies not covered by the measure to take legal action if they feel harmed by the break in chronological order.

Ms. Faricelli pointed out that Brazil’s Supreme Federal Court (STF) recently ruled that the chronological order must prevail in cases involving the reimbursement of credits from the government to private-sector parties. That ruling involved court-recognized credits, which must be paid through court-ordered payments known as precatórios, rather than through administrative requests. “The courts have consistently upheld the chronological order for precatórios,” she said.

The Finance Ministry said that companies not affected by the U.S. tariffs will not be harmed by the prioritization. “Granting a refund to one company does not mean denying it to another,” the ministry said in a statement. “We will continue to review all cases to ensure that all valid refunds are granted.”

*By Jéssica Sant’Ana and Beatriz Olivon — Brasília

Source: Valor International

https://valorinternational.globo.com/

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Chief of Staff warns against dropping high-income taxation from reform

Rui Costa says removal of compensatory measures could impact funding for schools and hospitals

 

 

 

08/27/2025 

The president’s Chief of Staff, Rui Costa, warned on Wednesday (27) that removing compensatory measures from the government’s income tax reform proposal could undermine public services such as schools and hospitals. Speaking about congressional negotiations, he argued that sometimes “irrational strategies to damage the federal administration prevail.”

Mr. Costa’s remarks refer to behind-the-scenes maneuvering by opposition lawmakers to strip out provisions that would help offset revenue losses from expanding the income tax exemption to those earning up to R$5,000 per month. The government’s bill includes a 10% tax on high-income earners. Without that provision, new measures would be needed to cover the fiscal cost of the expanded exemption.

While Mr. Costa said it would be difficult for Congress to reject the overall project, he admitted compensatory measures could be removed. “That would create difficulties in keeping schools and hospitals running, because any government in the world needs resources to provide public services,” he said during a live interview on the program Bom Dia, Ministro.

The Lula administration is pushing for a vote on the reform this week, fearing that former president Jair Bolsonaro’s trial at the Supreme Court—scheduled to begin September 2—could heighten political tensions and delay the agenda.

As reported by Valor, lawmakers see the release and payment of congressional earmarks as key to smoothing approval in the lower house, though resistance remains. A faction of Brazil Union, for example, is lobbying to strike the 10% high-income tax. Meanwhile, Mr. Bolsonaro’s Liberal Party (PL) is pressing for the exemption threshold to be raised further, to R$10,000.

Mr. Costa also addressed President Luiz Inácio Lula da Silva’s recent appeal for ministerial loyalty, delivered Tuesday (26) during a cabinet meeting at the Planalto Palace. Mr. Lula told ministers they may attend partisan events but must consistently defend the government, especially in opposition forums.

Defending Mr. Lula’s stance, Mr. Costa argued that members of the governing bloc need discipline: “Otherwise you hold ministries, but end up voting against the government,” he said. “If you’re in the government, you must defend not Lula personally, but the administration.”

According to Mr. Costa, ministers should respond directly to criticism. “If a person doesn’t defend their own work, it becomes hard for the public to understand,” he said.

Sources told Valor that Mr. Lula avoided singling out ministers or parties during Tuesday’s meeting, but he cited a recent example: the federation event formalizing ties between Brazil Union and the Progressives Party (PP). During the event, PP leader Ciro Nogueira criticized the government, yet, Mr. Lula complained, “not one minister raised a hand to defend” the administration.

The episode highlights mounting friction between the government and its coalition partners. Together, Brazil Union and the PP control four ministries but have increasingly clashed with the president.

Adding to the tension, Mr. Lula also mentioned Brazil Union president Antonio Rueda, reportedly saying he disliked Mr. Rueda and that the feeling was mutual. The remarks followed weeks of unease after Mr. Rueda publicly criticized the government’s handling of tariff negotiations with the United States.

*By Sofia Aguiar, Valor — Brasília

Source: Valor international

https://valorinternational.globo.com

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Speaker endorses income tax, administrative reforms

Hugo Motta also defends legislative immunity proposal opposed by Supreme Court: “It’s not a retaliatory measure”

 

 

 

08/27/2025 

Chamber of Deputies Speaker Hugo Motta (Republicans of Paraíba) said on Wednesday (27) he expects few changes to the government’s bill that raises the monthly income tax exemption threshold to R$5,000. Speaking at the Agenda Brasil event, organized by Valor, O Globo and CBN radio, Mr. Motta also criticized Washington’s lack of openness to negotiate over its new tariff package and pledged to work “hand in hand” with President Luiz Inácio Lula da Silva on administrative reform.

On the tax bill, Mr. Motta stressed that the special committee report coordinated by Federal Deputy Arthur Lira (Progressives Party of Alagoas) was approved unanimously, giving it strong momentum heading into the floor vote. “I expect there will be amendments and highlights, but given the construction of the text, there is a strong chance it will be maintained,” he said. He is set to meet Senate President Davi Alcolumbre (Brazil Union, Amapá) this week to coordinate voting timetables. The government wants the bill approved in both chambers before the end of September.

Mr. Motta said the rapporteur has yet to be chosen for the provisional measure that outlines compensatory policies for sectors hit by the U.S. tariff hikes. Even so, he praised the draft and signaled preference for concentrating all related proposals into that measure.

On U.S.-Brazil trade tensions, Mr. Motta accused Washington of refusing to engage in dialogue, calling Brazil’s sovereignty “non-negotiable.” He said the U.S. is listening “only to one side,” and argued that the new tariffs violate WTO rules. “It’s a lose-lose game,” he warned.

Mr. Motta also commented on a proposed constitutional amendment (PEC) that would expand parliamentary protections, requiring congressional approval before lawmakers can be investigated. He rejected the notion that the initiative is retaliatory against the Supreme Court, framing it instead as a move to ensure greater independence of the legislature. This is being interpreted as a reaction to the Federal Supreme Court (STF), which has intervened to increase transparency of earmarks and criminalize corrupt lawmakes.

“There is a sense across parties that this activity needs clearer legal limits. Some decisions have gone beyond what is constitutionally guaranteed to lawmakers. It’s not a retaliatory or reactionary measure. It’s a measure that the Legislative understands that is should discuss to provide more independence to Congress,” he said.

On administrative reform, Mr. Motta said he discussed the matter directly with President Lula and intends to advance the project collaboratively with the Executive. “We won’t make a reform that pleases everyone, but creating a more efficient state means reviewing what isn’t working. I spoke with President Lula about working hand in hand. There will be divergences—that’s democracy. We’ll figure out what the viable proposal is and face the issue,” he stated.

*By Murillo Camarotto, Valor — Brasília

Source: Valor International

https://valorinternational.globo.com/

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Brazil to expand tariff relief to suppliers of affected exporters

Second phase of the Sovereign Brazil plan will include credit lines, guarantees, and tax incentives to support broader export chain

08/27/2025

A second phase of the Sovereign Brazil plan will support companies affected by the 50% tariff imposed by U.S. President Donald Trump, said Guilherme Mello, secretary of Economic Policy at Brazil’s Finance Ministry. In this new phase, the plan’s credit lines, guarantees, and insurance mechanisms will be extended to suppliers of directly impacted companies.

The provisional presidential decree (MP) that created the Sovereign Brazil program already goes beyond assisting companies that export to the United States, Mr. Mello explained. In his view, the measures complement the consumption tax reform by giving Brazilian exporters a competitive edge they never had before. Until now, Brazil’s tax and credit structures had not favored export activity, he said.

The MP changes the rules for accessing the Export Guarantee Fund (FGE), previously limited to large companies. It will now be available to micro and small businesses, which are more vulnerable but also generate more jobs. In addition, the privately managed Foreign Trade Guarantee Fund (FGCE) will receive a capital injection to cover possible defaults in export operations. Additional support will come from guarantees offered by the Operations Guarantee Fund (FGO) and the Investment Guarantee Fund (FGI).

“This package is a true game-changer for Brazil’s exporters,” Mr. Mello said. He added that the new structure will remain in place after the effects of the tariffs have passed.

The contributions to the guarantee funds depend on approval of Supplementary Bill 168/2025, which has not yet been assigned a rapporteur. Mr. Mello believes the bill could move quickly once a political agreement is reached. “I think Congress also sees this as a priority,” he said.

Mr. Mello also said there is room for Brazil’s GDP to grow about 2.5% this year. Although the economic slowdown in the second quarter may be slightly sharper than expected, he noted that growth could stabilize—or even turn slightly positive—in the second half of the year. That outlook will depend on the balance between the impact of the tariffs and the effectiveness of the government’s policy response.

Main excerpts from the interview with Valor:

Valor: What are the structural measures that the Sovereign Brazil plan brings to the export sector?

Guilherme Mello: The most structural part is the change in the export credit model. Until now, the FGE was only accessible to a small group of large companies. After the Car Wash investigation, in particular, export financing fell into a sort of limbo, there was even an ideological campaign against it. It was painted as harmful, when in fact the opposite is true. Export financing is a fundamental part of any country’s development strategy. So what we’ve done is approve a tax reform that exempts investments and exports, and now we’re rebuilding, modernizing, and strengthening our export financing system by removing barriers to the use of the FGE.

Valor: What were those barriers?

Mr. Mello: Access to the fund was restricted to large companies. We’ve reallocated R$30 billion to support the diversification and export credit lines we’re offering under the Sovereign Brazil plan. This will increase access to the FGE with cheaper credit lines, because we’re using this financial surplus as funding. We’re also transforming the Foreign Trade Guarantee Fund (FGCE).

Valor: What changes are being made to the FGCE?

Mr. Mello: The FGE is currently a public fund in which 100% of the risk is assumed by the federal government. When a company buys insurance, it pays a premium. If the company defaults, the FGE steps in. Since it’s a public fund, when it pays out to the exporter, it affects the primary budget balance. What we’re doing is turning the FGCE into a first-loss coverage fund. In that setup, the FGE’s capital isn’t touched, it’s protected. Depending on the contract, the FGCE can cover up to 40% of losses, for example. And because the FGCE is private, it can move much more quickly to support small businesses. We’re also enabling the use of other private insurance options through the FGCE. We’re working with CAMEX [Brazil’s Foreign Trade Chamber] to accelerate case reviews, since anti-dumping measures are not allowed under international rules.

Valor: So this is a complete overhaul of the export credit and insurance system?

Mr. Mello: Yes, we’re overhauling the entire insurance model, providing full funding, and eliminating export-related taxes through the tax reform. This package is a true game-changer for Brazil’s exporters.

Valor: Will the changes to the FGCE and FGE go beyond the Sovereign Brazil plan and become permanent?

Mr. Mello: Yes, they are structural. Of course, the funds we allocate to the FGCE under Sovereign Brazil must be used for that plan. But nothing prevents the government from injecting new resources in the future for use in other areas or initiatives.

Valor: So the structure will remain available for future programs?

Mr. Mello: Exactly. And the Sovereign Brazil is designed in an important way. It not only prioritizes support for the most heavily affected companies with lower interest rates, but also provides credit lines to help them diversify markets and adapt their production.

Valor: And what about the companies indirectly affected by the tariffs?

Mr. Mello: In this first phase, we focused on directly affected companies. But we will move forward with a second phase to include companies that are indirectly affected and that are also seeing significant drops in revenue.

Valor: So the second phase will happen for sure, or is it still under evaluation?

Mr. Mello: It will happen. The timeline is under evaluation, as well as the tech development required. For now, our priority is to operationalize the measures already announced. There’s an urgent task of building the technological capability so that BNDES [Brazilian Development Bank] and the banks have the necessary data—such as company tax ID numbers—for those eligible.

We expect this tech development to be ready by September 7 or 8. From that point, the bank will be able to start operating the new credit line. It’s important to stress: the credit lines will operate, but for small and mid-sized businesses to access them, they will need guarantees. Banks won’t issue loans without them to companies that are heavily affected. That’s why we proposed the supplementary bill to allocate funds to the guarantee mechanisms.

Valor: So it’s crucial for Congress to approve the bill soon to avoid small and medium-sized businesses being denied loans?

Mr. Mello: It would be very important for Congress to approve the bill by early September, so that when the credit line goes live, it reaches all affected companies, not just the larger ones.

Valor: And how is the legislative process going?

Mr. Mello: These things can move very quickly once an agreement is reached.

Valor: There’s no rapporteur yet, and no vote is expected this week. Is the delay concerning?

Mr. Mello: I wouldn’t say it’s concerning, but it is a topic already under discussion, and we’ll push to speed things up. I think Congress also sees this as a priority. Obviously, no one wants to leave anyone behind. Failing to support companies—especially small and mid-sized ones that are more financially vulnerable but account for a large share of jobs—would come at too high a cost. We still believe there’s some room for the economy to maintain that 2.5% [growth] pace, but we have to keep a close eye on developments.

Valor: Once the bill is passed, will the government issue a provisional presidential decree for extraordinary credit to inject funds into the guarantee mechanisms? And will the funds be disbursed quickly after that?

Mr. Mello: Very quickly. We may need to make some adjustments to the fund rules, but banks already work with these funds.

Valor: Will additional resources be needed in the second phase, when the plan is extended to suppliers?

Mr. Mello: No. We designed the plan to fit within the resources outlined in the bill: R$4.5 billion in contributions to guarantee funds and up to R$5 billion from Reintegra [a tax refund program for exporters]. Reintegra is also a way for us to support exporters who still operate under a tax regime that generates accumulating credits. When we say “up to” [R$5 billion], it’s based on a preliminary estimate assuming all affected companies would have access. But Reintegra will also follow prioritization criteria, so it’s likely the amount will end up being lower.

Valor: Is this package enough to deliver the structural reforms, or is there more to come beyond the supplier issue?

Mr. Mello: From a structural standpoint, I think it’s enough. It addresses the main bottlenecks: access to the FGE, a second, faster and simpler private fund (FGCE) that covers first losses, and low-cost funding for the process. The combination of export credit reform and tax reform—which removes the burden of taxes on exports—will give Brazil’s export sector a level of competitiveness it has never had.

Agribusiness is a major exporter, but it has distinct advantages that were built over time: through Embrapa, technological development, and investments by the entrepreneurs themselves. But this kind of structured support never existed for industry. Only a few specific industrial sectors have managed to integrate into global export chains. The steps we’re taking now are essential for reversing that trend.

Valor: Will the new Reintegra include prioritization criteria?

Mr. Mello: Yes. We’ll issue regulations outlining how Reintegra will prioritize companies, which will also depend on the bill’s [approval].

Valor: Some industrial sectors are calling for faster anti-dumping measures to prevent a flood of foreign products into Brazil. Do you agree?

Mr. Mello: Some sectors have faced very tough competition that severely hampers their investment plans. We’re working with CAMEX to speed up case assessments, since anti-dumping actions must follow international rules. This is different from what the U.S. is doing with its tariffs, which lack economic or commercial justification and are completely outside internationally established trade rules. Dumping is another matter. We’ve already been in talks with several sectors, and we’re working to speed up all the required procedures for cases where there is clearly an impact on domestic production.

Valor: And what about safeguard measures?

Mr. Mello: Safeguards can also be used if dumping or other unfair practices are confirmed. But again, everything must follow international trade conventions.

Valor: Now turning to the macro outlook. The IPCA-15 inflation index for August showed deflation, and GDP figures will be released next week. What should we expect?

Mr. Mello: When the tariff hike began, some economists said it could be inflationary. I said the impact on inflation would be small, and if any, it would tend to be disinflationary. And I believe that view is proving accurate. A combination of factors explains it: the appreciation of the real, which is stable around R$5.40; the drop in food prices; and the fact that the Brazilian economy is clearly slowing compared to the first quarter as expected.

We’re now seeing that the second-quarter slowdown is a bit sharper than initially forecast, mainly due to the cumulative and lagging effects of monetary policy. We still expect slight growth in the second quarter, and near-stability in the last two quarters of the year.

Valor: What could change this outlook?

Mr. Mello: Many factors, beyond monetary policy, can push activity levels up or down. For example, in July, the federal government paid court-ordered debts [precatórios]. So while interest rates are weighing on the economy, the precatórios may provide some support. Credit is still growing, and now with the new policies we’ve announced, more credit could become available. The final balance of these forces will determine the pace of growth,, whether closer to 2% or 2.5%.

Valor: What’s your bet?

Mr. Mello: We believe there’s still room for the economy to maintain 2.5% growth, but we need to watch closely. Obviously, a 15% interest rate sustained for months has an impact on activity, that’s what it’s designed to do. Based on the metrics we have, the slowdown in the second quarter was more pronounced than expected. But we still see prospects for slight growth or stability in the final quarters, based on the overall balance of factors. And we still don’t know the full net effect of the tariffs.

Valor: And what are the prospects for 2026?

Mr. Mello: Fiscal policy will likely be closer to neutral, while monetary policy should remain tight, though probably less so than this year. The drop in interest rates could give credit a bigger boost, and the set of policies we’ve adopted will encourage companies to take a more export-oriented approach, which requires investment. So we still see potential growth close to our long-term trend in 2026. Of course, this will depend on how the economy performs through the end of this year, the statistical carryover, and how monetary policy evolves.

Valor: Are you concerned that compensation for the income tax reform might not be approved?

Mr. Mello: I believe Congressional leaders understand the importance of maintaining neutrality. The rapporteur included it in his report. I’d say this isn’t just a fiscal issue, it’s about tax justice. Anyone opposing compensation isn’t just standing against the government or damaging public finances and macroeconomic stability. They are defending the continuation of Brazil’s current income inequality.

*By Lu Aiko Otta, Jéssica Sant’Ana and Ruan Amorim — Brasília

Source: Valor International

https://valorinternational.globo.com

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Canada resumes trade talks with Mercosur amid U.S. tariff hike

Brazil plans trade mission to Toronto in September as negotiations restart

 

 

 

 

08/26/2025 

Brazilian Foreign Minister Mauro Vieira and Canada’s Minister of International Trade Maninder Sidhu announced on Monday (25) the resumption of negotiations for a possible free trade agreement between Canada and Mercosur, the South American bloc currently chaired by Brazil. As Valor had reported, Canada is one of Brazil’s top bets to diversify its export markets in response to the tariff hikes imposed by U.S. President Donald Trump.

As part of this effort, Mr. Vieira confirmed a Brazilian business mission is scheduled for Toronto from September 10 to 12 to strengthen commercial ties. A face-to-face meeting between lead negotiators from both sides is also planned for October in Brazil to advance the talks.

According to Brazil’s Foreign Ministry, Mr. Sidhu will remain in the country until Wednesday (27), with a visit to São Paulo’s industry federation FIESP on Tuesday. In a joint statement with Mr. Vieira, the Canadian minister said he had also met with Vice President and Minister of Development, Industry and Trade Geraldo Alckmin, and with Energy and Mines Minister Alexandre Silveira.

Mr. Vieira said the reopening of talks followed discussions held in June between President Lula and Canadian Prime Minister Mark Carney on the sidelines of the G7 summit in Alberta.

He emphasized that both Brazil and Canada are concerned about “the rise of trade restrictions” and measures that “distort legitimate trade flows without technical justification” while weakening the principles that should guide such relations. He stressed that the two countries share the goal of strengthening the rules-based multilateral trading system, with the World Trade Organization (WTO) playing a central role.

Mr. Sidhu noted that at a time when rules-based trade “is under threat,” Canada is seeking partners with a “like-minded” approach to preserve this framework.

The U.S. has slapped Brazil with a 50% tariff, with limited exceptions, while Canada faces a general 35% tariff on its exports, also with several exemptions. Canada is pursuing its own bilateral trade deal with Washington.

Trade ties

Mr. Vieira highlighted that economic relations between Brazil and Canada are already significant. In 2024, Canada ranked as Brazil’s ninth-largest export market and moved up to seventh place in the first seven months of 2025.

Bilateral trade between the two countries reached $9.1 billion in 2024, with Brazilian exports to Canada totaling $6.3 billion, up nearly 10% from the previous year. Canada is also the 11th-largest foreign investor in Brazil, with direct investments amounting to $28 billion.

Diversifying partnerships

Beyond Canada, Brazil is pursuing negotiations with the United Arab Emirates and engaging in dialogue with India and Vietnam. Vietnam, in particular, has been identified by President Lula as a potential partner for a Mercosur free trade agreement.

To advance these efforts, the Foreign Ministry is preparing two presidential trips for October. Mr. Lula will attend the Association of Southeast Asian Nations (ASEAN) summit in Malaysia, and is also expected to make a state visit to Indonesia, a country of over 280 million people with significant consumer market potential.

*By Renan Truffi, Sofia Aguiar and Andrea Jubé, Valor — Brasília

Source: Valor International

https://valorinternational.globo.com/

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Federal probe sought for Banco do Brasil rumors

Attorney General’s Office asks Federal Police to investigate fake news spread by Bolsonarists that could “trigger true bank run”

 

 

 

 

 

08/26/2025

The Attorney General’s Office (AGU) has asked the Federal Police to open an investigation into the spread of fake news targeting the National Financial System. The request came after Banco do Brasil (BB) appealed to the AGU to take action against attacks on the institution by Bolsonaro supporters.

In its filing, the AGU cited posts with the potential to “foment a true bank run for the withdrawal of funds” and damage Brazil’s economy. The request was sent to the Federal Police last Friday (22) and disclosed on Monday (25). Spreading false information against a financial institution is considered a crime.

“Since August 19, 2025, several social media accounts have been circulating fake news involving agents of the national financial system, especially Banco do Brasil, in reaction to the bank’s institutional stance regarding sanctions imposed by the U.S. Treasury Department through OFAC [Office of Foreign Assets Control], under the so-called Magnitsky Act,” said the AGU’s National Office for the Defense of Democracy (PNDD), which authored the request.

In a letter sent Friday, Banco do Brasil pointed to posts by federal lawmaker Gustavo Gayer (Liberal Party, PL, Goiás) and lawyer Jeffrey Chiquini, who defends Filipe Martins, a former aide to ex-president Jair Bolsonaro (PL). Both urged clients to withdraw their money from banks. The bank also cited a post by Federal Deputy Eduardo Bolsonaro (PL of São Paulo), currently on leave, claiming BB was headed for bankruptcy.

According to the bank’s letter, Bolsonaro supporters have been misusing a section of BB’s own statement to claim it would not enforce Magnitsky sanctions in Brazil, citing the part in which the bank said it would act “in compliance with Brazilian law.”

The AGU said the circulation of messages encouraging depositors to pull their money out was intended to pressure financial agents and generate “chaos” in the National Financial System. “There is a coordinated campaign of mass postings seeking to terrorize society with the imminent prospect of a system-wide collapse,” the filing read.

The PNDD asked for an investigation into the material facts and their authorship, “which may also overlap with criminal probes already under way under the jurisdiction of the Supreme Court.”

In the formal complaint, the AGU specifically mentioned only Mr. Chiquini’s posts. In a statement, the lawyer denied authorship of the post cited and said his remarks concerned stock investments amid growing “legal uncertainty,” which, he argued, makes the market unpredictable. He said his comments merely anticipated a market movement. “My remarks are far from constituting a criminal offense; they are simply an observation of the reality of U.S. law, which has been widely discussed by jurists worldwide. Just read the Magnitsky Act to understand the obvious,” he said.

In response to the bank’s letter, Mr. Gayer’s office said the lawmaker’s comments did not mention any financial institution directly. “Gayer commented on the consequences of Justice Moraes’ statements, which themselves could lead to a collapse in Brazilian banks,” his staff said. Eduardo Bolsonaro did not respond before publication.

Justice Alexandre de Moraes was sanctioned under the Magnitsky Act in July. Earlier this month, Supreme Court Justice Flávio Dino ruled that foreign laws, administrative acts, and executive or judicial orders should not be automatically applied in Brazil. Shortly after, Moraes warned in an interview that Brazilian banks could face punishment if they enforced U.S. sanctions against Brazilian assets.

Banco do Brasil, which manages payroll for Supreme Court staff, canceled at least one U.S.-branded credit card held by Mr. Moraes, Valor revealed last week.

The sharper decline in some blue chips — including Banco do Brasil — weighed on the Ibovespa on Monday. BB shares closed down 2.20%, while the benchmark stock index finished flat, edging up 0.04% to 138,025 points.

Market participants attributed part of BB’s negative performance to the news that the bank had filed its complaint with the AGU, alleging Bolsonarists were trying to sow “chaos” in the system. “What Eduardo [Bolsonaro] has been saying doesn’t help BB, but picking a fight with Bolsonarists isn’t good either,” one trader said, requesting anonymity.

The sell-off comes at a sensitive time for BB shares, which are already under pressure from second-quarter results and uncertainty about how banks will implement Magnitsky sanctions.

Igor Barenboim, chief economist at Reach Capital, said banks understand the risks of failing to comply with Magnitsky sanctions. He added that there has been a surge in legal consultations to assess the scope of the measure. “Large banks are managed very professionally. As difficult as this situation is, they will find a solution that doesn’t harm their business,” he said. “We see only a remote risk of this going wrong, and we believe shareholder value will remain protected,” he added, noting his firm was holding positions in the banking sector.

By Giullia Colombo, Tiago Angelo and Bruna Furlani, Valor — Brasília and São Paulo

Source: Valor International

https://valorinternational.globo.com/

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Brazil’s mid-month inflation gauge shows first monthly drop in a year

Consumer prices fall 0.14% in August; 12-month rate eases to 4.95%

 

 

 

08/26/2025 

Brazil’s IPCA-15 consumer price index fell 0.14% in August, reversing July’s 0.33% increase, the Brazilian Institute of Geography and Statistics (IBGE) reported Tuesday (26). It was the first monthly decline since July 2023, when the index slipped 0.07%. In August 2024, the gauge had risen 0.19%.

The IPCA-15 is a preview of the broader IPCA inflation index. It reflects the spending patterns of households earning between one and 40 minimum wages across nine metropolitan areas, plus Brasília and Goiânia. The main difference from the full IPCA is the data collection period and geographic coverage.

The result came in slightly above market expectations. A Valor Data survey of 22 consultancies and financial institutions projected a 0.22% drop, with forecasts ranging from a 0.28% decrease to a 0.09% gain.

Over 12 months, inflation slowed to 4.95% from 5.3% in July. The rate had stayed above 5% for five straight months, starting in March, when it reached 5.26%. Analysts had expected 4.88%, with estimates ranging from 4.80% to 5.26%.

The Central Bank’s target for 2025 is 3%, with a tolerance band of 1.5 percentage points in either direction.

Among the nine spending categories that make up the IPCA-15, household goods and clothing shifted back to positive territory, moving from -0.02% to 0.03% and from -0.10% to 0.17%, respectively. Health and personal care rose more sharply, from 0.25% to 0.64%, while personal expenses jumped from 0.25% to 1.09% and education from 0% to 0.78%.

Food and beverages fell more steeply, from -0.06% to -0.53%, while housing moved from a 0.98% gain to a 1.13% drop. Transportation and communication also turned negative, falling 0.47% and 0.17%, respectively.

Diffusion index

Price increases were more widespread in August. The diffusion index—which measures the share of items registering price gains—rose to 57.2% from 51.2% in July, according to Valor Data. Excluding food, often one of the most volatile components, the index jumped to 64.9% from 51.2%.

*By Lucianne Carneiro — Rio de Janeiro

Source: Valor International

https://valorinternational.globo.com/

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