Brazilian appetite for stocks falls amid tension with U.S.

XP survey with investment advisors from its platform shows sentiment toward equities has deteriorated

08/22/2025

The share of investors intending to add Brazilian stocks to their portfolios dropped from 34% in July to 21% in August, according to an XP platform survey conducted with investment advisors. The research shows that tension with the United States is increasing risk perception among Brazilian investors.

Conversely, the slice of investors looking to reduce stock allocation rose from 7% to 16% during this period. Meanwhile, the percentage of people who do not intend to change their investments increased from 59% to 64% over the same timeframe.

Investor sentiment toward the stock market has deteriorated. The share of investors who gave a score of 7 or higher to the equity market fell from 65% last month to 54% this month. The average response was 6.2 in August, below the 6.8 from the previous month. On average, investors expect the Ibovespa to remain at the current level of 135,000 points by the end of this year, down from 142,000 points in the previous survey.

Concern about fiscal policy decreased from 47% to 41%, but remains the biggest risk to the stock market. Meanwhile, concern about unstable politics grew from 22% to 28%. Concern about geopolitical risks increased from 4% to 12%.

Many advisors indicated that changes in the commercial relationship between Brazil and the U.S. led to a more defensive positioning by investors: 49% reported an increase in Brazilian fixed-income investments, 29% in dollar-denominated investments, and 11% in defensive Brazilian stocks. However, 38% of advisors stated there were no significant changes in portfolios.

Fixed income continues as the most preferred asset class. The percentage of investors interested in fixed-income investments rose from 73% to 77%. In contrast, interest in stocks fell from 36% to 31%, while interest in international investments climbed from 42% to 48%. Multi-market (or hedge) funds and equity funds remain the investments with the lowest interest, at just 9% and 6%, respectively.

Long-term focus is key

Most specialists recommend increasing allocation to Brazilian stocks at this time only if the investor is focused on long-term gains and can withstand the volatility that tends to occur in the short term. They say the stock market is cheap and will rise, but the problem is that it’s uncertain when this rally will happen.

Despite caution with equity investments, several specialists advise adding higher yielding fixed-income investments to portfolios, such as prefixed bonds and inflation-linked securities, already anticipating the beginning of interest rate cuts next year. The expectation is that the benchmark interest rate, the Selic, will remain at 15% until the end of 2025, but fall to 12.50% by the end of 2026.

Prefixed bonds and inflation-linked securities carry higher risk than securities that track the CDI or Selic because their rates fluctuate more and may eventually cause losses if redeemed before maturity. However, they may provide higher returns if interest rates decline, especially for investors who wait until maturity to withdraw their money.

*By Júlia Lewgoy, Valor Investe — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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Retailer Ultrafarma claimed statute of limitations, errors in lawsuits

Tax enforcement chief at São Paulo Finance Department negotiates plea deal with prosecutors

 

 

08/22/2025 

Before Operation Ícaro, which investigates corruption in the reimbursement of Tax on Circulation of Goods and Services (ICMS) credits involving the Ultrafarma and Fast Shop chains, the pharmacy retailer had already been facing lawsuits from São Paulo city and other municipalities in the state over unpaid taxes and fees. In some of these cases, the company argued that tax debts were barred statute of limitations, claimed procedural errors, or even paid part of the debts, but the proceedings remained in court.

A review of lawsuits filed with the São Paulo State Court of Justice, where the chain is concentrated, shows that some collections date back 13 years without successful payment.

One lawsuit filed by the São Paulo City Hall for nearly R$200,000, under the tax enforcement court, began in 2019, when the company failed to settle the initial claim. Ultrafarma argued that the debt certificate was flawed, but the court held that it was sufficiently clear and granted five days for settlement.

The case then stalled, remained suspended for a year in 2021, and only resumed on Wednesday (20), days after Operation Ícaro exposed the alleged corruption scheme, when the court reported that it was awaiting the terms of an installment plan.

Another lawsuit, from 2018, concerned unpaid health-waste collection fees totaling R$243,000 for 2012, 2013, and 2016. Since taxpayers can only be charged within five years of the obligation arising, only the 2012 debts were time-barred.

This debate dragged on for three years, with a change of judge, until the case advanced this month, on August 20, when the court reported that it had been included in a debt-recovery package prepared by the City Hall and the National Justice Council (CNJ), covering around 11,700 lawsuits. Ultrafarma is part of this group, but the installment plan is still pending.

In Santa Isabel (São Paulo), where Ultrafarma’s owner, Sidney Oliveira, lives, a 2022 lawsuit over a much smaller debt—R$740 in tax on services (ISS)—was paid nearly a year and a half later, but the case remains in court. “Silence will be interpreted as abandonment of the case, leading to its dismissal,” the tax enforcement court reported on July 29.

Ultrafarma’s lawyers, as well as the São Paulo and Santa Isabel city halls, declined to comment.

On August 12, the São Paulo state Prosecution Service launched Operation Ícaro, targeting Ultrafarma, Fast Shop, and the Finance Secretariat’s tax enforcement chief, Artur Silva Neto. Prosecutors are investigating whether Mr. Silva Neto received bribes to expedite Tax on Circulation of Goods and Services (ICMS) reimbursements for the companies.

On Thursday (21), Fast Shop director Mario Gomes had his R$25 million bail suspended and remains free after being released from temporary detention. Mr. Oliveira is seeking the same relief, claiming he lacks the funds.

Other companies cited in the investigation include Oxxo, fuel retailer Rede 28, and houseware chain Krystalmix. Authorities estimate R$1 billion may have been paid in bribes, with additional firms under scrutiny.

A potential plea deal by Mr. Silva Neto is adding pressure on the companies, given the possible revelations about the scheme. In case records, Judge Paulo Mello of the 1st Court for Tax Crimes even cited the potential impact of such a collaboration.

In recent days, executives in the food retail and pharmacy sectors have been exchanging messages to determine whether other competitors might also be implicated.

The concern is whether the alleged scheme involved not only expediting approvals but also inflating requests and creating fake reimbursement invoices, a line of inquiry that prosecutors were still pursuing last week, according to sources.

Valor has also learned that Smart Tax, a company owned by Mr. Silva Neto’s mother and allegedly the hub of the scheme, approached firms in the services sector, including mobile telecom operators, to offer ways to speed up reimbursements.

Executives from pharmacy chains told Valor that, in their dealings with the São Paulo Finance Secretariat, there is no direct access to tax auditors by phone or messaging—as alleged in the Ultrafarma and Fast Shop case. However, they said some officials act like “key account managers” for taxpayers with large ICMS volumes.

“They call us every month to check on sales performance, which helps them project ICMS collections,” said the CFO of a pharmacy chain. “We never know when we’ll get our credits released, but they want to know about revenues.”

The Ultrafarma investigation has also revived reports of personal disputes between Mr. Oliveira and Manoel Conde Neto, who founded Farma Conde in 1993, one of the most traditional chains in the Vale do Paraíba and North Coast areas.

Mr. Conde Neto was arrested in Operation Monte Cristo in 2017, which uncovered a tax-evasion scheme involving pharmacies and distributors. He was indicted, convicted in 2023 to four years and eight months in prison, but later received a judicial pardon under a plea deal.

He was also the first to name Mr. Oliveira to prosecutors and the Organized Crime Task Force (Gaeco) in a 2021 deposition. For some industry executives, this marked the beginning of Mr. Oliveira’s legal troubles.

“They haven’t spoken in years, and don’t want to hear each other’s names. Sidney hired some of Manoel’s former staff in the past, which caused problems,” said the owner of a family-run chain in São Paulo. “If Sidney is convicted, two of the industry’s most prominent businessmen could end up behind bars.”

According to prosecutors in São José dos Campos (São Paulo), the scheme involved products “traveling” between Goiás and São Paulo to pay less ICMS. In his deposition, Mr. Conde Neto cited Ultrafarma as an example: at one point, it sold two erectile dysfunction pills for R$0.67, when the ICMS cost alone would have been R$3.13.

“Until last year, Ultrafarma was selling at inexplicable prices, and it’s inexplicable that the tax authority didn’t shut them down. Even I underreported 10% of sales, while they underreported 60%,” Mr. Conde Neto told prosecutors at the time. Ultrafarma later paid R$31.9 million in fines following three tax assessments and struck a deal with prosecutors.

In a statement, Ultrafarma said it is cooperating with the investigation and that the information reported “will be duly clarified during the proceedings and will demonstrate innocence throughout the trial.” Mr. Conde Neto’s lawyers did not comment. The São Paulo Finance Department also declined to comment.

*By Adriana Mattos — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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Banks start blocking transactions of Justice Moraes

Mastercard cancelled by Banco do Brasil as financial institutions weigh potential legal impacts of Magnitsky Act sanctions

 

 

08/22/2025 

The cancellation of a credit card issued by Banco do Brasil (BB) marked the first known consequence of applying the Magnitsky Act to Federal Supreme Court (STF) Justice Alexandre de Moraes. The move, revealed Thursday (21) by Valor, reignited debate over the scope of the measure and the risks it poses for financial institutions.

The unprecedented step, combined with the law’s vague wording, has led banks to seek multiple legal opinions. For now, financial institutions are taking a narrow approach, complying with the act strictly as written. That means closing accounts of sanctioned individuals in U.S. subsidiaries and blocking cards with international networks. In Brazil, Mastercard, Visa, and Amex — all American brands — operate alongside Elo, controlled by BB, Bradesco, and Caixa.

In Mr. Moraes’ case, his card was canceled because it carried an American brand, not because BB has significant operations in the United States. He was offered an Elo card as a replacement, but it can only be used for domestic purchases, not dollar transactions. The justice does not hold accounts abroad, and banks have interpreted that nothing prevents him from maintaining his domestic BB account, through which he receives his salary.

Although this is the first time the Magnitsky Act has been applied to a Brazilian citizen, banks with U.S. operations are not entirely unfamiliar with the measure. Around 700 people worldwide are subject to sanctions, and financial institutions routinely cross-check that list against their client base.

An industry executive with decades of experience said the concern lies in the Trump administration’s “distorted use” of the law, originally designed to target terrorists and combat money laundering. “International sanctions of that kind, the ones that go onto OFAC’s [U.S. Treasury’s Office of Foreign Assets Control] list, are truly broad — no American company could have a relationship with a Brazilian bank holding an account for Moraes. But this law is not applicable to him, so Brazil should just stay put, wait for things to calm down, and this might all amount to nothing,” he said.

Another industry source noted that restrictions on Mr. Moraes are not as severe as those imposed on terrorists. “Banks are trying to do the minimum, within the law, with the options available, and then wait. If the U.S. government presses them, claiming the rules aren’t being enforced, they’ll adjust,” said another sector leader.

Much of the industry believes further sanctions can be avoided if the STF and the Brazilian and U.S. governments refrain from escalating tensions.

Even so, the climate is tense, partly because this is a technical application of a politically charged issue. The situation grew more complex after Justice Flávio Dino ruled that foreign laws must be ratified by local authorities before being enforced in Brazil.

On Wednesday (21), Mr. Moraes himself backed Mr. Dino’s view. “If banks decide to apply the law internally, they cannot. And then they could be penalized domestically,” he told Reuters.

Mr. Dino’s decision has prompted banking representatives to make the rounds in Brasília, seeking to prevent the crisis from worsening. Some interlocutors believe the restrictions adopted so far do not defy the minister’s ruling.

Similarly, a BTG Pactual report circulated this week suggested that banks could close or segregate accounts as an internal policy, avoiding direct confrontation with the STF.

Some industry voices argue Brazil could find support among American companies. Local banks are major consumers of U.S. card networks, technology providers, and service firms. “Brazil is among the top three markets for a major card network. Will it want to lose that?” asked a representative of a large bank.

Although not considered the base case, banking executives see risks of more radical measures if the dispute between Brazil and the United States worsens. “If Trump decides to push this to the limit, the consequences could be drastic,” one source said. “We’ve been consulting with many lawyers. For now, that’s not the expected scenario, but the list of sanctioned individuals could grow, penalties could deepen. In the extreme, an entire bank could be sanctioned, or even Brazil as a country,” said another.

BB declined to comment, as did other financial institutions, citing banking secrecy in Mr. Moraes’ case. The bank has been the target of social media rumors, and its shares are down 15.58% this year.

On Wednesday, BB president Tarciana Medeiros, without naming names, criticized those who undermine the institution. “It is highly irresponsible when a Brazilian calls into question the soundness and integrity of a company like Banco do Brasil,” she said. Her remarks echoed the rhetoric of government officials who have criticized Congressman Eduardo Bolsonaro (Liberal Party, PL, São Paulo) for lobbying in the U.S. for sanctions against Brazil.

Mr. Moraes did not immediately respond to requests for comment.

*By Talita Moreira and Álvaro Campos  — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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Antitrust body secures majority to approve BRF-Marfrig merger

CADE’s tribunal leans toward unconditional approval despite SALIC dispute

 

 

08/21/2025

Brazil’s Administrative Council for Economic Defense (CADE) has reached a majority in favor of approving the merger between giant meatpackers BRF and Marfrig without restrictions, even though the final vote has been postponed after Counselor Carlos Jacques requested more time to review the case.

So far, four counselors have voted to approve the deal, diverging from the position of the case’s rapporteur, Counselor Gustavo Augusto, who also favored approval but proposed restrictions on the Saudi Agricultural and Livestock Investment Company (SALIC). Through its subsidiary Salic International Investment Company (SIIC), the Saudi fund holds shares in the merged company and could potentially exercise political rights. The majority, however, opted not to rule on this point.

The issue was brought forward by Minerva, a competitor in the beef market, which argued that SALIC’s shareholding structure could give the fund undue influence over direct competitors in the fresh beef segment. Minerva, in which SALIC also holds a stake, warned of possible competitive distortions.

Minerva’s attorney, former CADE counselor Luiz Hoffmann, stressed during Wednesday’s oral arguments that “SALIC will indeed have an active presence in the post-merger scenario.” He also raised concerns about the combined purchasing power of BRF and Marfrig and the strengthened brand portfolio, since the two companies together control 37 brands.

Mr. Hoffmann argued that the deal should have been filed as an incorporation rather than a simple acquisition, which would affect how Marfrig’s control over the new entity is assessed. The case had initially been approved by the CADE’s General Superintendence but was escalated to the tribunal following Minerva’s appeal.

Representing BRF and Marfrig, attorney Victor Rufino countered that SALIC’s permanence in the new company is not guaranteed, since the Saudi fund has a defined exit period. Should SALIC remain a shareholder, he said, its position would be duly reported to the CADE.

Mr. Rufino dismissed Minerva’s claims as being driven more by “a private vendetta against Marfrig” than by legitimate competition concerns, pointing to ongoing disputes between the companies, including a breach-of-contract lawsuit and an arbitration proceeding.

In his vote, Rapporteur Gustavo Augusto emphasized that the merger represents a complex corporate restructuring rather than a mere acquisition of equity. “This cannot be characterized as a simple purchase of shares by a controlling shareholder. It involves a far-reaching corporate reorganization that reshapes the competitive landscape,” he said.

Mr. Augusto argued that concerns over the combined portfolio of BRF and Marfrig were overstated, noting that competitors such as JBS and Minerva remain capable of challenging the merged company’s market power. However, he acknowledged lingering uncertainty over SALIC’s potential influence, stating that the fund’s notification on its role does not rule out the exercise of political rights.

Counselor Victor Fernandes opposed Mr. Augusto’s approach, voting to approve the merger without addressing SALIC’s participation. His position was supported by counselors Diogo Thomson, Camila Cabral Pires Alves, and José Levi, forming the current majority in favor of unconditional approval.

BRF and Marfrig declined to comment on the matter.

*By Beatriz Olivon and Guilherme Pimenta, Globo Rural — Brasília

Source: Valor International

https://valorinternational.globo.com/

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How Brazil can attract more international investors

Executives from global investment firms outline what the country must do to strengthen its business environment

08/21/2025 

“If you build it, they will come.” The line made famous by the 1989 film Field of Dreams is repeated several times during a lively conversation at the Nonno Ruggero restaurant in the Hotel Fasano, São Paulo. But this is not a gathering of film buffs or art critics. Organized exclusively for Valor by the team behind the mega innovation event SP2B, the lunch brought together executives from some of the world’s largest investment companies.

The guests were Michael Safdie of Springhill Ventures (Israel), Jason Tan of Jeneration Capital (Hong Kong, Asia), and Pogos Saiadian of Greyhound Capital (Europe). Brazilian host Bernardo Zamijovsky, of VR Investimentos and one of the curators of SP2B, welcomed the group. Later that evening, Ricardo Kanitz of Spectra Invest (Brazil) joined them for a debate at SPHall.

On both occasions, the executives discussed how Brazil can become more attractive to international investors, particularly those interested in digital transformation ventures.

In short, the country faces four main challenges: high interest rates, exchange rates that disadvantage start-ups, a shortage of engineers, and the absence of models and organizations that integrate government and private capital under a unified innovation strategy.

As in the film, in which a farmer builds a baseball field on his land after hearing a mysterious voice—ultimately drawing legendary, long-deceased players to a historic game—the perception is that if Brazil lays the necessary groundwork, investors will come.

Below are the main topics discussed at the meeting:

Shortage of professionals

Between 2015 and 2022, approximately 6,500 Brazilian scientists left the country to work abroad, according to the Center for Strategic Studies Management, affiliated with the Ministry of Science, Technology, and Innovation. The main reasons are a lack of investment and frozen scholarships. In information technology, particularly among engineers, training remains insufficient. An estimated 159,000 graduates are needed each year, but only 53,000 currently complete their studies. This gap could result in a shortage of 106,000 professionals by 2029.

“We are exporting engineers, even though there is a shortage in the local market,” says Mr. Zamijovsky. Many remain in Brazil but are under contract with Big Tech companies, he adds.

In Southeast Asia, the problem is similar. In Indonesia, for example, too few engineers graduate, says Mr. Tan. To avoid this risk, countries such as China, India, and Israel invested heavily in training programs—and succeeded, he notes.

In Hong Kong, talented professionals can even obtain citizenship in just one year through a government program. “You have to start with the people. Otherwise, the [investor’s] money comes into the country, but it doesn’t stay.”

Local or global?

Even with the war in the Middle East, geopolitical risk has not affected the investment environment in Israel, says Mr. Safdie. The reason? “All companies are created with an international focus, mainly on the U.S.,” he explains, both in terms of consumers and fundraising.

“In terms of raising capital for Israeli high-tech companies, in the first half of the year alone we reached $10 billion—the same as the United Kingdom, close to China, and above India,” says Mr. Safdie, who is the son of a Brazilian father and speaks Portuguese fluently.

Is it mandatory for entrepreneurs to have an international outlook from the outset? “It depends,” replies Mr. Safdie. “If it’s a B2C company, definitely not, because there is a huge consumer market in Brazil. But if you look at the B2B market, you still need to focus abroad.”

Entrepreneurial qualities

“We look for three things,” says Mr. Saiadian. “One is being customer-obsessed. We notice this when we talk to the entrepreneur and they mention the customer and the problem to be solved several times. The second is being product-obsessed, with a focus on details and quality. Finally, it’s being very execution-oriented and moving quickly.”

Brazil operates in cycles, with several funds arriving simultaneously and then departing. “It becomes a desert.” Execution, he stresses, is even more important in these periods.

Interest rates and currency

“The volatility of our exchange rate is one of the biggest obstacles to attracting foreign investment in Brazil. We have experienced one of the most extended cycles of the dollar’s appreciation against other currencies, which has lasted more than 15 years. Many investors believe it will last forever. This perception drives capital away from Brazil to other emerging markets,” says Mr. Kanitz.

For Brazilian investors, the challenge is the interest rate, says Mr. Zamijovsky. “Even though the return on venture capital is attractive, the interest rate is 15% per year.” By comparison, the rate is 4.5% in Israel and 3% in China.

Quantity and price

Brazil has an advantage in the volume of customer purchases provided by its vast population, but the same does not apply to prices, notes Mr. Saiadian. Digital banks, for example, already have hundreds of millions of customers, demonstrating their numerical strength, but there are limits to what they can charge.

Greyhound Capital invested in a Japanese company that added new features to its software to the point where some customers now pay $1,000 per month for the service. In Brazil, customers value new features, but the ceiling is typically around $35.

Public and private

The innovation chain in Brazil will only be complete when there are models that integrate government and the private sector. This is a consensus position.

In Israel, according to Mr. Safdie, the Office of the Chief Scientist acts as an intermediary with an annual budget of approximately $500 million. The United Arab Emirates and Saudi Arabia have created incentive programs for companies that set up operations in the country or hire local staff, says Mr. Tan.

“It is essential to establish an international hub, such as Silicon Valley in the U.S. That is what we are going to try to do. São Paulo meets these conditions,” emphasizes Mr. Zamijovsky.

*By João Luiz Rosa — São Paulo
Source: Valor International
https://valorinternational.globo.com/

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Supreme Court justices meet with bank representatives

Banks still unclear on full impact of Justice Dino’s ruling putting check on effects of Magnitsky sanctions

 

 

 

08/21/2025

Justices of Brazil’s Federal Supreme Court (STF) have resumed meetings with representatives of financial institutions following a ruling issued Monday (18) by Justice Flávio Dino against the immediate enforcement in Brazil of foreign laws, court rulings, administrative acts, and executive orders.

Justice Cristiano Zanin met Tuesday (19) at 6:30 p.m. with Rodrigo Maia, former speaker of the Chamber of Deputies and now president of the National Confederation of Financial Institutions (formerly CNF, now FIN). The two had already met earlier this month after Mr. Zanin was appointed rapporteur in a case seeking to prevent the STF from allowing the blocking of Justice Alexandre de Moraes’s bank accounts. Since Monday, other justices have also met with bank representatives.

According to reporting by Valor, banks remain uncertain about the full scope of Dino’s decision. On one hand, they fear sanctions from the United States; on the other, fines from the Supreme Court should they fail to comply with the Brazilian order.

The ruling has fueled uncertainty in the sector. On Tuesday (19), the day after Mr. Dino’s move, banks lost more than R$38 billion in market value amid concerns that the justice’s reaction could trigger stricter enforcement of the law by the Donald Trump administration. Shares partly recovered yesterday.

Bankers head to Brasília

Through industry associations, financial institutions have been lobbying in Brasília to defuse tensions as relations between Brazil and the U.S. escalate.

Mr. Zanin is handling a case filed by Federal Deputy Lindbergh Farias (Workers’ Party, PT, Rio de Janeiro), leader of the PT in the lower house, requesting that the STF prevent Brazilian banks from blocking Mr. Moraes’s accounts. The justice was sanctioned in July under the Magnitsky Act.

On August 1, Mr. Zanin referred the matter to the Office of the Prosecutor General (PGR) and is awaiting its opinion. He has signaled that he intends to hear all parties involved, including banks, before issuing any ruling.

Earlier this month, Justices Gilmar Mendes and Moraes also held meetings with bank representatives, with the consensus at the time being that no accounts would be blocked. Should moves in that direction occur, however, the STF could step in to stop the enforcement of the Magnitsky Act in Brazil—as Mr. Dino effectively did on Monday (18). His ruling, though, came in a case unrelated to U.S. sanctions, instead involving lawsuits filed by Brazilian municipalities in the United Kingdom over environmental disasters.

Dino pushes back with irony

Justice Dino on Wednesday (20) mocked the financial market’s reaction to his ruling against the immediate enforcement in Brazil of foreign laws, rulings, and administrative acts. “I issued a decision yesterday [Tuesday] and the day before [Monday]. The one they say crashed the markets. I didn’t know I was so powerful: R$42 billion in financial speculation. Fortunately, age teaches you not to be impressed by small things. Obviously one thing has nothing to do with the other.”

“We should not be swayed by foam. This was a ruling for a specific case. The first technical challenge is understanding. A decision on acts by the U.S. has nothing to do with a drop in the stock market,” he added.

“It was a decision among so many obvious points of the principle of territoriality. Nothing heterodox, just a repetition of concepts that are established worldwide,” Mr. Dino continued. “There are Brazilian companies with extensive operations in the U.S. Imagine if Brazil’s Superior Labor Court issued a ruling saying labor relations there must follow Brazilian law. I don’t think it would be very well received.”

*By Tiago Angelo and Maira Escardovelli — Brasília

Source: Valor International

https://valorinternational.globo.com/

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Supreme Court at odds over Justice Dino’s ruling on foreign law

Some justices call for merging case with another one specifically connected with Magnitsky Act; Dino decision involved UK courts and mining disaster in Brazil

 

 

08/20/2025

Supreme Federal Court (STF) justices consulted by Valor assess that the application of the Magnitsky Act by banks operating in Brazil should be better discussed in the case under Justice Cristiano Zanin’s jurisdiction that specifically addresses the effects of U.S. sanctions. There is divergence in the Court regarding Flávio Dino’s order that foreign laws, administrative acts, executive orders and judicial decisions should not be automatically applied in Brazil.

The disagreement, with some exceptions, is less about content and more about form: for part of the Supreme Court members, it would be better for the debate to occur in Mr. Zanin’s case because it addresses the Magnitsky Act. The process conducted by Mr. Dino, meanwhile, discusses lawsuits filed in UK courts by Brazilian municipalities affected by environmental disasters.

In the case with Mr. Zanin, Federal Deputy Lindbergh Farias, Workers’ Party (PT) leader in the Chamber, seeks to prevent banks operating in Brazil from blocking the accounts of Alexandre de Moraes, sanctioned by the U.S. under the Magnitsky Act in July. On August 1, Mr. Zanin sent the request to the Attorney General’s Office (PGR). He awaits the body’s opinion.

Some magistrates say Mr. Dino’s decision is too broad and may cause confusion about its effects. They also say it is necessary to better hear the actors affected by the order and know how Brazilian banks may be impacted by the decision.

Others defended Mr. Dino. For them, STF decisions can exceed the scope of a concrete case. They also affirm that their colleague defended the Supreme Court from external interference.

The Magnitsky Act can affect any company that operates in the United States or conducts transactions with the American currency. Earlier this month, justices met with bank representatives to discuss the effects of the sanction. Justices Moraes, Zanin and Gilmar Mendes participated.

Brazilian banks fear U.S. sanctions

On that occasion, financial institutions did not demonstrate intention to impede operations in Brazil on their own, but expressed concerns about how to act in case of U.S. sanction threats.

On Monday (18), Mr. Dino ruled that foreign laws and judicial orders do not automatically apply in Brazil, nor do they bind Brazilian companies or affect assets located in the country.

The decision was made in a case discussing lawsuits filed in UK courts by Brazilian municipalities that were affected by the Mariana and Brumadinho mining disasters in Minas Gerais.

Mr. Dino’s decision has binding effect. According to the justice, it applies to “the controversy depicted in these proceedings and in all others where foreign jurisdiction – or another foreign state body – intends to impose, on national territory, unilateral acts over the authority of Brazil’s sovereignty bodies.”

Mr. Dino also stated that presuming immediate effectiveness of foreign acts constitutes “an offense to national sovereignty, public order, and common morality.”

*By Tiago Angelo — Brasília

Source: Valor international

https://valorinternational.globo.com/

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Local assets fall as Brazil-U.S. tensions escalate

Ibovespa drops 2%, dollar nears R$5.50, and long-term rates rise sharply after Supreme Court ruling; poll rumor also weighs on prices

 

 

08/20/2025 

Brazilian markets reacted strongly to a fresh escalation in diplomatic tensions with the United States. Heightened risk perception fueled a sharp increase in future interest rates and sent the dollar close to R$5.50, while the Ibovespa took a hit from steep losses in bank stocks. The sell-off intensified after Washington toughened its rhetoric in response to a ruling by Federal Supreme Court (STF) Justice Flavio Dino, who determined that foreign laws have no immediate effect in Brazil, raising concerns about the potential impact of the Magnitsky Act on the domestic financial sector.

Risk aversion deepened in the afternoon as traders also began factoring in the political landscape. Rumors about new popularity polls for President Luiz Inácio Lula da Silva rattled markets further, particularly in currency and interest rate trading.

In just two sessions, the real erased all of its recent gains, with the dollar closing up 1.19% at R$5.4993, the highest level since August 5. In the rates market, intermediate maturities priced in significant risk premiums, with the January 2029 DI climbing from 13.235% to 13.48%, its highest since July 31.

The Ibovespa, which had avoided Monday’s risk-off mood, ended Tuesday down 2.10% at 134,432 points, dragged by heavy losses in bank shares.

Real interest rates, measured by NTN-Bs (inflation-linked government bonds), also moved higher. Yields rose more than 10 basis points across nearly all maturities, reflecting both market stress and a hefty R$1.3 million supply of NTN-Bs offered by the National Treasury on Tuesday.

According to SulAmérica Investimentos CIO Luís Garcia, the market had remained relatively calm when tensions were limited to trade frictions or sanctions against specific officials. “But the Supreme Court’s signal could prompt a counter-response from Washington and lead to a much more troubling scenario,” he said.

Mr. Garcia warned that the greatest risk would be U.S. sanctions affecting Brazil’s access to the Swift payment system, which connects financial institutions worldwide. Such a move, he said, could disrupt foreign capital inflows, push the dollar back toward R$6, and fuel inflation expectations, potentially jeopardizing the Central Bank’s rate-cutting cycle.

The worst-case scenario, he added, would involve measures affecting not just new flows but also existing investments in Brazil.

For now, SulAmérica is taking tactical positions in local markets rather than holding assets for long. If tensions ease, Mr. Garcia sees room for the real to strengthen further and for future rates to fall, supported by Brazil’s monetary easing cycle.

Still, he noted that long-term rates have remained stubbornly high, even during periods of market optimism. “The exchange rate is the most popular risk gauge, but it doesn’t reflect fiscal concerns as strongly as the long end of the curve,” he said.

Adding to the day’s volatility, traders circulated rumors that an upcoming poll would show improving electoral prospects for the government, prompting investors to demand higher risk premiums.

A foreign fund manager, who requested anonymity, said risks are far from benign, especially since U.S. sanctions are politically driven and likely to escalate tensions. “Under these circumstances, markets can quickly turn very volatile, with rumors surfacing and undermining investor confidence even when denied,” the manager said.

On the political front, he argued that polls should not yet carry such weight, given the time remaining before elections and uncertainty over candidates. “But something has broken in the positive momentum, and that will have a lasting effect on investor confidence,” he said. “I’ll be more cautious going forward, especially in FX, and this reinforces my view that the DI curve should steepen—with weaker growth requiring lower short rates, while shaken confidence drives outflows at the long end.”

But not all share this skeptical outlook for the real. Nelson Rocha Augusto, chief economist and president of BRP, projects the dollar closer to R$5.40 by year-end, despite short-term swings. “I see four factors supporting this view: the interest rate spread will remain wide; U.S. exceptionalism will erode; as inflation falls and rates come down, foreigners will have better visibility for calculations and direct investment should increase; and tensions with Washington are likely to ease after the trial of former president Jair Bolsonaro,” he said.

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

Source: Valor International

https://valorinternational.globo.com/

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Brazil drafts big tech bills on content removal, child protection

Proposals require court orders for defamation takedowns, curb online fraud, and strengthen data protection authority

08/20/2025 

The bill will focus on content and the size of the companies
The bill will focus on content and the size of the companies — Photo: Pexels

The President Lula administration is preparing to submit to Congress, in the coming days, two bills aimed at regulating large technology companies. One will focus on competition, the other on online content.

According to government sources, the competition bill establishes annual revenue as a key criterion for defining which companies will be subject to the new rules. Firms with yearly revenues of around R$5 billion in Brazil and between R$40 billion and R$60 billion globally could fall within the scope of regulation.

Other qualitative factors will also be considered, such as data access and processing capacity, strategic importance for developing other businesses, and digital integration with adjacent markets. The government estimates that between five and ten companies operating in Brazil would meet these criteria.

By setting this “cutoff,” the Lula administration intends to focus regulation on the largest platforms, while providing a “safe harbor” for smaller firms. The aim, sources say, is to address digital monopolies in order to strengthen competition and level the playing field. The logic is to adopt preventive measures rather than corrective ones.

New powers for antitrust regulator

The competition bill would also grant new powers to Brazil’s antitrust watchdog, CADE, including the ability to curb the formation of oligopolies in the digital sector. To that end, it would create a new Digital Markets Superintendency within CADE to handle cases.

This body would be empowered to identify platforms and design customized measures for each. It would not, however, decide cases independently: all decisions would be submitted to CADE’s tribunal. According to officials, this reflects a concern with procedure and transparency. “The bill doesn’t bring a recipe, but rather a menu to guide CADE’s work,” said one source.

The government argues that regulation is needed to prevent tech companies from imposing exclusivity agreements or engaging in cross-market practices that could distort competition.

Social media and content rules

Alongside the competition bill, the government will submit another proposal focused on content regulation for digital platforms, particularly social media, with the goal of enhancing safety in the online environment. The scope would include services that intermediate products, services, and content.

According to officials, the principle is to address conduct that is already illegal offline, without creating a new digital penal code. The bill would impose administrative obligations on companies to tackle fraud and scams—described as an “epidemic”—and to improve protections for children and adolescents.

Because it involves content regulation, the proposal has drawn criticism from some civil society groups who warn of possible censorship. To defuse such concerns, the bill specifies that crimes against honor—such as defamation—could only be removed from platforms by court order. “If content could be removed merely by notification, it would trigger a war of notifications,” said one government source.

Exceptions are made for more serious crimes, such as terrorism and offenses against children and adolescents, which would allow immediate removal. Finally, the government plans to strengthen the National Data Protection Authority (ANPD), which would oversee platform compliance with these obligations.

*By Sofia Aguiar  and Renan Truffi  — Brasília

Source: Valor International

https://valorinternational.globo.com/

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Slow-moving Congress stalls reform decree for power sector

Delays installing committee to review decree could trigger expiration of electricity subsidies for low-income consumers

 

 

 

08/14/2025

The slow pace in Congress to set up the joint committee that will analyze Provisional Measure (MP) 1,300/2025 — the government’s proposal for reforming the electricity sector — has begun to cause concern within the Ministry of Mines and Energy, Valor has learned. The ministry’s main worry is the new model for the Social Tariff, which grants free electricity to low-income households.

Dubbed “Luz do Povo” (Light for the People), the new scheme offers free consumption of up to 80 kilowatt-hours (kWh) per month for beneficiaries. It has been in effect since July 5. The ministry believes the new rules are guaranteed for at least one tariff cycle — about a year. After that, one possibility would be to issue another MP next year to maintain the model.

At the National Electric Energy Agency (Aneel), however, the view is different. According to Valor’s sources, technical staff believe that if Congress fails to approve the MP, the new system would cease to exist immediately, as there would be no legal basis for the revised Social Tariff.

Lawyer Felipe Furcolin, a partner at Furcolin Mitidieri Advogados, says the continuation of the free allowance after the MP expires depends on how the relevant article of the Constitution governing MPs is interpreted. He notes that measures like the Social Tariff changes do not involve “established legal relationships” in the strict sense, which distinguishes them from cases recognized by previous Supreme Court rulings.

“Although actions have been taken, such as Aneel’s dispatch, the approval of the budget for the CDE [Energy Development Account], and even ordinary tariff reviews for certain distributors, these do not present the same level of individualization and bilateral obligations seen, for example, in an MP involving signed adhesion contracts and guarantee deposits,” Mr. Furcolin explained.

Similarly, lawyer Henrique Reis, a partner at Demarest, argues that while the subsidy is legitimate and socially justified, maintaining it after the MP’s lapse without conversion into law could face legal challenges.

“In principle, I understand that the discount from the MP would no longer apply. Just as the discount was applied immediately to the tariff in effect during Aneel’s approved cycle, the loss of effect of the provision that created the subsidy would have to be incorporated immediately into the current cycle,” he said.

The congressional committee’s installation had been scheduled for Tuesday (12), but the meeting was canceled for the second week in a row.

The government’s congressional leader, Senator Randolfe Rodrigues (Workers’ Party, PT, of Amapá), indicated that the decision to postpone came from Senator Eduardo Braga (Brazilian Democratic Movement, MDB, Amazonas), who was appointed by Senate President Davi Alcolumbre (Brazil Union of Amapá) to preside over the committee. Asked by Valor about concerns over deadlines, Mr. Braga said the government had not yet approached him about the matter.

Senate Infrastructure Committee Chair Marcos Rogério (Liberal Party, PL, of Roraima) said he sees no government effort to advance MPs in Congress. “The government should be the one in a hurry and get these committees working,” he said. “If there is no more careful and swift action, it will end up expiring.”

In a statement, the Brazilian Association of Electricity Distributors (Abradee) said it hopes deliberations begin as soon as possible, as the measures are both essential and urgent. “Abradee stresses that it is crucial for the MP to advance in its entirety, not just in the part concerning the social tariff. Without full review, the risk of further electricity bill increases is real.”

Aneel said in a note that it is monitoring the debate and awaiting the MP’s approval, and will assess the situation when called upon.

*By Marlla Sabino and Gabriela Guido, Valor — Brasília

Source: Valor International

https://valorinternational.globo.com/

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