Delinquency rises among small firms, but banks remain unconcerned

Higher-risk debt among SMEs climbs to 8.9%, partly due to new accounting rules

 

 

 

11/10/2025

The share of loans classified as “higher risk” for micro, small, and medium-sized enterprises (SMEs) has been rising since the beginning of the year. Data from Brazil’s Central Bank shows the rate climbed from 8.2% in January to 8.9% in September.

Part of the increase reflects the impact of new accounting rules under Resolution 4,966. Still, banks acknowledge that SME delinquency is growing and requires attention, though it has not yet reached alarming levels. The expected cut in the benchmark Selic rate early next year also offers some relief.

The higher-risk assets indicator includes financial instruments and credit operations classified as “stage 3” under Resolution 4,966, which covers loans with serious recovery issues. The resolution took effect at the beginning of this year. Meanwhile, SME delinquency rose from 4.5% in January to 5.4% in September, after peaking at 5.5% in August, the highest since May 2018.

The Central Bank’s most recent Monetary Policy Report estimated that about 70% of the increase in overall delinquency in the first half of the year is linked to the effects of Resolution 4,966.

Ricardo Jacomassi, partner and chief economist at TCP Partners, noted that the credit market has grown rapidly despite high interest rates. The Selic stands at 15%, and the Central Bank’s Monetary Policy Committee (COPOM) has signaled that it will remain high “for quite a prolonged period,” as stated in the latest minutes.

Financial tools

Mr. Jacomassi said part of the difference in behavior between SMEs and large companies lies in the financing tools available. Large companies have access to structured operations, bond issuance, and more collateral. “Small and mid-sized firms don’t have the same options and are heavily reliant on working capital loans and receivables-backed credit,” he said.

In the third-quarter earnings call, Santander’s CFO Gustavo Alejo said short-term delinquency has improved, especially among individual borrowers. “All ‘vintages’ are performing well, but we see some concern in the small business segment,” he noted.

At Itaú Unibanco, SME delinquency rose 0.1 percentage point from the second to the third quarter, “due to normalization following the end of grace periods under government programs.” At Bradesco, the rate declined, and CEO Marcelo Noronha said he sees room for further drops, even though the bank’s overall delinquency rate is expected to remain relatively stable in the coming quarters.

A Central Bank study in its latest Financial Stability Report found that during interest rate hikes, smaller companies are the first to be affected, hurting their repayment capacity. “They’re hit faster because their debt rollovers are shorter, which directly increases their interest expenses,” the report said.

Ricardo Moura, head of investor relations, M&A, and strategy at Banco ABC Brasil, agreed. He noted that smaller firms did not benefit as much from capital markets expansion in recent years and are now forced to borrow at higher rates from banks during this tightening cycle. “They don’t have longer-term liabilities and end up suffering more.”

At ABC Brasil, a conservative credit approach led to a drop in mid-sized company delinquency between June and September. Still, Mr. Moura said he does not expect further declines ahead.

In a statement, Décio Lima, president of Brazil’s small business agency Sebrae, said the rise in SME delinquency is “moderate and compatible” with the current economic cycle. “This is not a sign of uncontrolled deterioration, but a natural adjustment in a more selective credit environment with higher financial costs,” he said.

He added that expectations for the coming months are for stability or gradual improvement, driven by a more predictable economy and stronger support and debt renegotiation measures. “There are challenges, but also tools and ways to address them responsibly.”

New accounting standard

Resolution 4,966 adopts an expected-loss model, replacing the previous incurred-loss approach. Under the new rule,financial institutions must use economic analysis to estimate potential defaults. It also delays the write-off of problematic assets, which raises the numerator over time and ends up increasing measured delinquency.

“Banks must provision based on the probability of future defaults, using macroeconomic and sectoral forecasts,” explained Gisele Assis, a partner specializing in payments and regulation at the law firm /asbz.

The Brazilian Association of Banks (ABBC) said economic conditions are contributing to the rise in SME defaults. However, much of the increase in high-risk loan balances is due to the new accounting standard.

“The changes in how financial institutions recognize expected losses and write-offs have affected how credit operations are allocated to stage 3. This will take time to adjust as lenders recalibrate their internal recovery metrics,” the ABBC said in a note.

The Brazilian Federation of Banks (FEBRABAN) also said the uptick in SME delinquency is partially due to the new rule but also reflects real increases driven by high interest rates. It cited government-backed programs like Pronampe, which offers credit to small businesses at Selic-linked rates. “With the likely scenario of no further Selic hikes, we could see improvement starting early next year,” the federation said.

FEBRABAN added that large companies continue to benefit from ample liquidity in capital markets. “Still, there are some isolated signs of risk, such as bankruptcy filings, which deserve attention.”

7.6 million SMEs behind on payments

The challenges facing SMEs are also reflected in other indicators. Data from credit bureau Serasa Experian showed that by July, 7.6 million small and medium-sized companies in Brazil were behind on at least one financial obligation—ranging from bank loans to utility bills or supplier payments—totaling 54 million overdue debts.

Camila Abdelmalack, chief economist at Serasa Experian, said the slowdown in credit availability has made it harder for SMEs to refinance or roll over debt. “We came from a period of greater credit availability and easier renegotiation. With tighter credit, these difficulties are now showing up in rising delinquency,” she said.

*By Gabriel Shinohara and Álvaro Campos — Brasília and São Paulo

Source: Valor International

https://valorinternational.globo.com/

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Amazon COP30 opens in Belém amid geopolitical tensions

Disputes over trade, emissions and finance may stall UN climate conference agenda from the start

 

 

 

 

 

11/10/2025 

The first United Nations climate conference ever held in the Amazon begins Monday (10) in Belém, Pará, under a challenging geopolitical backdrop that threatens to stall COP30 in its opening hours.

Global trade, lack of public funding for climate cooperation, and limited ambition to cut greenhouse gas emissions loom over the conference, dubbed variously as the Forest COP by Amazonians, the COP of Truth by President Luiz Inácio Lula da Silva, the COP of Implementation by diplomats, the COP of Action by business leaders, and the COP closest to environmental tipping points by scientists.

Trade, financing, and ambition are the three contentious issues that could surface right after the official opening and bring negotiations to a halt. “At other COPs, we pulled off acrobatics. At this one, we’ll need magic,” one negotiator said.

“We never know how COPs end, but with COP30, we don’t even know how it will begin,” said Marcio Astrini, executive secretary of Climate Observatory, Brazil’s largest civil society network focused on climate, comprising 160 environmental organizations, research institutes, and social movements.

The two-week summit risks being stalled from the outset because none of the three flashpoint issues is on the agenda agreed by nearly 200 delegations at COP29 in Baku, Azerbaijan, in 2024. Yet, the coalitions pressing for their inclusion are central to climate negotiations.

Divisive issues

China and India are leading the bloc of developing countries that want to debate “unilateral measures” in Belém. Trade and environmental policy are increasingly overlapping on the global stage—the stalled EU-Mercosur trade deal being one example.

Developing nations view recent European actions as unilateral and incompatible with the United Nations’ climate framework, which operates on consensus. One such example is the European Union Deforestation Regulation (EUDR), which bans the import of products like beef, soy, and timber linked to deforestation after December 2020.

The most divisive issue is the Carbon Border Adjustment Mechanism (CBAM), the EU’s plan to tax imports of carbon-intensive products, such as cement, steel, aluminum, and fertilizers, produced in countries with looser emission regulations. The EU argues this levels the playing field for its own regulated industries, but emerging economies see it as protectionism.

Although unilateral measures are not on the official agenda, developing countries are pushing for their inclusion. With the absence of the United States and Donald Trump’s tariff policy, the EU stands alone in rejecting the debate in Belém. The bloc insists trade should be discussed at the World Trade Organization (WTO), not climate forums. Opponents argue that carbon emissions fall squarely within the United Nations Framework Convention on Climate Change (UNFCCC), and thus belong at COPs.

A similar standoff derailed a preparatory meeting for COP30 in June in Bonn, Germany, and could resurface in Belém right after the opening session.

Climate finance tensions resurface

Even more politically sensitive is climate finance. Article 9.1 of the Paris Agreement, now ten years old, requires developed countries to provide public funds to help developing nations adapt to and mitigate the climate crisis.

But reopening this issue could reignite debate over the new collective climate finance goal set at COP29. In Baku, countries agreed that developed nations should mobilize at least $300 billion per year by 2035. However, it remains unclear whether this will be public funding or loans, potentially deepening debt in poorer countries.

The broader goal is to reach $1.3 trillion annually by 2035 from all sources. While developed nations are expected to lead, others may also contribute.

In COP29’s final plenary, India strongly objected to the absence of a requirement that rich nations provide public funding, as stipulated in the Paris Agreement. This unresolved issue could further delay the start of COP30.

More ambitious targets

Another late-breaking issue comes from small island developing states in Central America and the Pacific, devastated by increasingly frequent hurricanes and floods. These nations, which bear little historical responsibility for emissions, want COP30 to address the lack of ambition in national climate plans, known as NDCs (Nationally Determined Contributions).

They argue that the goal of limiting global warming to 1.5°C, enshrined in the Paris Agreement, is likely to be missed, putting their survival at risk. Although critical, this issue is also not on the official agenda.

“Every COP starts with trouble,” said a negotiator. “The three major hurdles at COP30 are connected. Solving trade and financing may unlock ambition.”

The latest UN synthesis report on climate pledges submitted through September 30 shows emissions declining, but far too slowly. Only 64 NDCs—representing one-third of global emissions—were analyzed, a small sample given that 196 countries and the European Union are signatories of the Paris Agreement. The United States, historically the largest emitter and currently the second-largest, is exiting the process.

A separate report from the United Nations Environment Programme (UNEP) offers even grimmer news: current national plans through 2035 put the world on track for a “climate breakdown.”

If existing policies remain in place, global warming could reach 2.8°C above pre-industrial levels; the best-case scenario is 2.3°C. “We must face the hard truth,” said UNEP Executive Director Inger Andersen at the report’s release two days ago.

Rising adaptation costs

Adapting to extreme weather in developing countries could cost more than $310 billion annually by 2035. One previous COP pledge from wealthy nations was to double adaptation funding from $20 billion to $40 billion by the end of 2025. Not only is this far below what’s needed, it’s also not being fulfilled.

“Too many companies are making record profits from climate destruction, spending billions on lobbying, misleading the public, and blocking progress. Too many leaders remain beholden to these interests. Too many countries lack resources to adapt or are left out of the clean energy transition. And too many people are losing hope that their leaders will act,” said UN Secretary-General António Guterres at the COP30 Leaders Summit in Belém.

Mr. Guterres also offered reasons for optimism. Scientists say there’s still time to avoid the worst. In 2025, clean energy surpassed coal as the world’s leading electricity source. In 2024, global investment in clean energy reached $2 trillion, $800 billion more than in fossil fuels.

Tropical forest fund

Even before its official start, COP30 has produced two notable outcomes. First is the launch of the Tropical Forests Forever Fund (TFFF), a Brazilian-led initiative to protect forests across more than 70 countries. On the first day of the Leaders Summit, it secured $5.5 billion in funding and support from over 50 countries. “It may be considered a historic day,” said Carlos Rittl, global director of public policy for forests and climate change at the Wildlife Conservation Society.

The second is the Roadmap from Baku to Belém, co-authored by COP30 President André Corrêa do Lago and COP29 President Mukhtar Babayev. The report outlines how to mobilize the $1.3 trillion needed annually for the green transition and climate adaptation in developing countries. “It can be done. The money exists,” Mr. Corrêa do Lago said.

More progress could follow. In the coming days, a coalition may form to reduce methane emissions, among the most potent greenhouse gases. Another expected outcome is an alliance to align carbon markets and propose principles to harmonize the world’s emerging green taxonomies.

While economic disputes have brought climate talks to the brink, they may also pave the way for solutions. COP30 is also the first to elevate ethics as a central theme in climate negotiations, a pioneering initiative championed by Brazil’s Environment and Climate Change Minister Marina Silva.

*By Daniela Chiaretti — Belém

Source: Valor International

https://valorinternational.globo.com/

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Ternium buys Nippon and Mitsubishi’s last stakes in Usiminas

Deal marks shift for Japanese steel group amid Brazil’s tightening market and end of strained partnership

 

 

 

11/06/2025 

Ternium’s purchase of the remaining stakes held by Nippon Steel and Mitsubishi in Usiminas consolidates a long-anticipated power shift in Brazil’s steel industry. The deal stems from three converging factors: Nippon’s global strategy to redirect capital toward higher-growth markets such as the United States, India, and Southeast Asia; the adverse dynamics of Brazil’s steel sector, pressured by rising imports, especially from China; and the breakdown of a partnership long marred by conflict and gridlock.

The transaction, valued at $315.2 million, covers 153.1 million common shares and raises Ternium’s stake in Usiminas’ controlling group from 51.5% to 83.1%. Usiminas shares closed Thursday (5) at R$5.55, up 0.73%. The move did not catch the market off guard, as Ternium had already increased its stake in the controlling group in 2023.

The 2018 peace agreement between Ternium and Nippon allowed five years of relative coexistence, but Nippon had been seeking opportunities elsewhere, a strategy underscored by its recent acquisition of U.S. Steel. Analysts had noted that Brazil had become a lower priority, and Nippon’s exit reduces its exposure to a challenging market.

In Brazil, steel imports have risen despite quota and tariff measures. According to Instituto Aço Brasil, an industry think tank, 5.1 million tonnes of steel entered the country between January and September 2025. The impact has been felt through falling prices, squeezed margins, and operational cutbacks, such as the shutdown of blast furnaces. Usiminas announced that it would reduce its 2025 investments to a range between R$1.2 billion and R$1.4 billion, down from a previous projection of R$1.4 billion to R$1.6 billion.

Internally, Usiminas faces the challenge of resuming investments to maintain industrial competitiveness. Its focus is on refurbishing coke batteries, a critical project for ensuring self-sufficiency in steelmaking inputs and cutting energy costs. At the same time, its mining arm requires strategic decisions, as current reserves are expected to supply its steel operations only until 2031.

“The sale of Usiminas shares aims to mitigate the risk of further devaluation, as no significant recovery in Brazil is expected in the near term,” said Nippon Steel Vice President Takahiro Mori during a conference call.

The announcement brings an end to the long-running conflict between the Italian-Argentine group and the Japanese shareholders. The new structure unifies decision-making, shortens approval times, and facilitates industrial planning, investment, and capacity optimization.

Relations between Nippon and Ternium had long been tense. “There was a cultural clash in management styles. The financial strain at Usiminas, struggling plants, and differing responses to the crisis likely accelerated the end of this partnership,” said a source familiar with the matter.

Ternium declined to comment, while Usiminas stated it does not discuss matters related to its shareholders. With consolidated control, Ternium is expected to accelerate synergies, boost cost efficiency, and focus on higher value-added products—moves that also protect the asset from potential acquisition by competitors.

Market reactions have been largely positive, though not without caution. Citi analysts described the deal as neutral to positive for Usiminas, noting that Ternium already held control and no major management changes are expected. However, the transaction simplifies governance and may allow faster strategic execution under a single controlling shareholder.

“The main risk for minority shareholders is the possibility of delisting without tag-along rights,” wrote analysts Gabriel Barra, Pedro Ferreira De Mello, and Stefan Weskott.

According to Artur Bontempo Filho, a steel and iron ore analyst at Wood Mackenzie, Ternium’s consolidation is likely to streamline governance, a process already underway since 2023 with key leadership changes. One example was the appointment of Marcelo Chara as CEO, aligning Usiminas more closely with the management model and strategic direction of the Italo-Argentine group.

“The extension of the contract with Porto Sudeste represents an important step for Mineração Usiminas SA (MUSA)’s logistics strategy, securing seven additional years of operations with options to expand volume and duration if ore production increases. The company also expects to supply its steel plant with existing reserves at least until 2031, with some flexibility for extension,” Mr. Bontempo said.

Ownership shifts have been a recurring theme for Usiminas. Eleven years after Brazil’s antitrust regulator, Cade, ordered Companhia Siderúrgica Nacional (CSN) to sell its stake in Usiminas, businessman Benjamin Steinbruch finally bowed to regulatory pressure, selling 4.99% of his shares to Globe, a company controlled by the Batista brothers (owners of J&F), for R$263.3 million. Even so, a court ruled that antitrust watchdog CADE must set a fine for the delay in complying with the order. CSN did not immediately respond to requests for comment.

*By Robson Rodrigues — São Paulo

Source: Valor International

https://valorinternational.globo.com

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Companies seek strategies to distribute tax-free profits

Brazilian firms consider issuing debt or using cash to pay dividends in 2025 before new tax takes effect

 

 

 

11/07/2025 

A growing number of companies are looking for ways to distribute dividends tax-free before a new levy on profits takes effect. On Wednesday (6), Brazil’s Senate approved a bill that increases the income tax exemption threshold to R$5,000 per month and, in exchange, introduces a 10% tax on dividends starting in 2026.

Publicly-traded and private companies have begun consulting tax experts to explore alternatives. Some are even considering issuing debt to cover the payment of untaxed profit reserves. Others are weighing the use of available cash to pay part of their dividends in 2025 while capitalizing the remaining amount into profit reserves.

This rush to fall under the current tax regime is rippling through markets. Brazil’s stock exchange has seen a wave of inflows from investors seeking to benefit from untaxed earnings still accrued in 2025. In the foreign exchange market, an increase in dividend remittances from Brazilian subsidiaries to parent companies abroad is expected by year-end.

Some companies have already announced billion-real dividend payments. This week, Axia (formerly Eletrobras) disclosed an extraordinary dividend distribution of R$4.3 billion, drawing from its statutory reserve, with payment scheduled for this year. More companies are expected to make similar announcements in the coming weeks to secure tax-free status for their distributions.

The strategy is tied to Bill 1,087/2025, which fulfills President Luiz Inácio Lula da Silva’s campaign promise to expand the income tax exemption. To offset the revenue loss, the bill introduces a 10% withholding tax on dividends. However, it exempts profits already incorporated into shareholders’ equity, a provision companies are relying on.

Dividend approval

To qualify for the exemption, companies must approve the dividend distribution by the end of 2025, with the actual payment allowed to take place over the course of 2026, 2027, and 2028. There is an ongoing effort to extend the deadline for approval to April 30, 2026, under discussions tied to a separate bill on betting taxation.

Despite the three-year window to complete the payments, there is a legal contradiction when it comes to publicly traded corporations governed by the Corporations Law. Under that law, if a company announces a dividend, it must pay it within the same fiscal year. This means companies announcing dividends in 2025 would need to disburse them before December 31.

To avoid legal risks, more conservative firms are looking for ways to distribute accumulated profits before the year ends. Some have advocated for changes to the bill to grant full exemption for all retained earnings, which would resolve the issue.

Strategies under consideration include issuing debt securities such as debentures or using available cash to pay dividends now, then raising debt from controlling shareholders to restore the cash position.

Some companies that would typically carry out extraordinary debenture amortizations have decided to conserve cash to fund dividend payments this year. Another option is to capitalize profit reserves now and reduce capital later.

High leverage

Bank executives told Valor that the issue is causing concern, as some companies seeking financing to pay dividends are already highly leveraged.

Other companies are expected to announce dividend payments this year, in line with the bill, but postpone actual disbursement to the following three years. Some legal interpretations argue that the bill allows this, even for public companies.

Retained earnings amount to billions of reais and may have accumulated over the past 30 years, since the enactment of Law 9,249 in 1995, which established the current exemption for dividends.

Erickson Oliveira, partner at the law firm Levy & Salomão, said he has been fielding client queries. He noted that while the bill has been revised, the conflict with listed company rules remains unresolved, and that solutions must be evaluated case by case.

Debt issuance

Daniel Loria, former director at the Special Secretariat for Tax Reform and currently a partner at Loria Advogados, said his firm is also seeing increased demand. Private companies, which are not subject to the same scrutiny as listed firms and lack minority shareholders, are more inclined to take on debt. Others are expected to follow the bill’s guidelines and distribute dividends by 2028.

Among listed companies, Mr. Loria said, there is concern that announcing dividends this year while deferring payment could prompt pushback from investors demanding compliance with the Corporations Law. Many are expected to use available cash for 2025 distributions and then capitalize the remaining balance.

As dividend taxation increases, companies are also revisiting how to return value to shareholders. One alternative under review is expanding share buyback programs, common among U.S. companies, as a way to avoid tax exposure. However, firms are weighing the potential impact on stock liquidity.

*By Fernanda Guimarães — São Paulo

Source: Valor International

https://valorinternational.globo.com/

 

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China lifts ban on Brazilian poultry imports after avian flu case

Decision takes immediate effect and crowns months of negotiations led by Brazil’s Agriculture Ministry

 

 

 

11/07/2025

China announced on Friday (7) that it would lift its ban on poultry imports from Brazil, a measure put in place after an avian flu outbreak was detected in May this year. China’s General Administration of Customs made the announcement.

The ban was implemented after confirming a case of avian flu on May 15 at a commercial farm in the municipality of Montenegro, Rio Grande do Sul. Even after Brazil declared itself free of the disease in early June, Chinese restrictions remained in place.

According to the official statement, the decision to lift the ban takes effect immediately and was made “based on the results of the risk analysis” conducted by China’s sanitary authorities. In September, a Chinese technical mission visited Brazil to audit the federal inspection system and verify the country’s sanitary control measures.

Brazil is the world’s largest exporter of chicken meat, shipping to 151 countries, with China as its leading destination. In 2024, the Asian country imported 353,400 tonnes of the product, generating $786.9 million in revenue. From January to May, before the outbreak, exports to China had already reached 228,000 tonnes, worth $547 million.

“Brazil has become a reliable food supplier in terms of quality, delivery safety, competitive pricing, and sanitary standards. This is evidenced by the full reopening of markets after the avian flu case,” said Agriculture Minister Carlos Fávaro.

Industry celebrates

The Brazilian Association of Animal Protein (ABPA) said the reopening of China’s market to Brazilian chicken was the result of “a broad and professional negotiation effort,” emphasizing the roles of the Ministry of Agriculture, the Vice Presidency, the Foreign Affairs Ministry (Itamaraty), and the private sector.

“There was an extensive and highly professional negotiation process, which included the renegotiation of sanitary certificates to prevent total suspensions in case of new outbreaks. Alongside that, there was an intense diplomatic effort led by the Brazilian government and private entities under ABPA’s leadership to resume exports to suspended markets. The reopening of China crowns the success of this major coordinated effort under Minister Fávaro and his team,” said ABPA president Ricardo Santin in a statement.

The association also mentioned that the process involved control and eradication measures against avian influenza, the restoration of Brazil’s sanitary status with the World Organization for Animal Health (WOAH), and diplomatic negotiations led by the Agriculture Ministry.

Following China’s decision, all major importers of Brazilian chicken meat have now resumed purchases. Recently, the European Union also announced the reopening of its market.

*By Gabriela Weiss, Globo Rural — São Paulo

Source: Valor International

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Central Bank shuts Drex platform, clearing path for stablecoins

Cost, privacy concerns lead to pivot as banks explore their own digital currencies

11/05/2025

Drex’s second phase, launched in October 2024, is expected to conclude with a final report in early 2026
Drex’s second phase, launched in October 2024, is expected to conclude with a final report in early 2026 — Photo: Divulgação/Banco Central

Brazil’s Central Bank has decided to shut down the blockchain-inspired platform used in the first two phases of Drex, its central bank digital currency (CBDC) project. The move signals a major shift in direction, prompted by high maintenance costs and unresolved privacy issues in transaction processing, people familiar with the matter told Valor.

The decision followed a meeting on Tuesday (4) between the Central Bank and private-sector consortia involved in the project. Valor had already reported in August that the Drex platform based on distributed ledger technology (DLT) would not be used in the next stage of development. Discussions for phase three are expected to begin in early 2026.

Experts say the weakening of Drex opens the door to privately issued tokenized assets and stablecoins, which may replace a state-backed CBDC.

Shift to private alternatives

Stablecoins are cryptocurrencies pegged 1:1 to traditional currencies, offering the programmability of digital assets without the need for intermediaries to settle transactions.

Henrique Teixeira, Latin America head of tokenization platform Hamsa, said shutting down Drex is a “cold shower” for those involved in its development but does not mean the end of tokenization in Brazil. “Banks are likely to develop their own stablecoins now,” he said.

In April, Itaú Unibanco said it was exploring the possibility of launching its own stablecoin, pending regulation from the Central Bank, which is expected this month.

Mr. Teixeira pointed to Safra Bank as a model: in September, it issued a dollar-pegged stablecoin to provide clients with exchange rate exposure at lower cost, avoiding Brazil’s financial transactions tax (IOF) and traditional foreign exchange market fees.

Banks could also launch real-pegged stablecoins to settle transactions involving tokenized assets that are currently outside the crypto world, such as debentures, receivables, and investment funds. “Initially, the winners will be those who can move fastest. Larger banks, in the S1 and S2 categories—which include financial institutions with the largest volume of assets and most systemic importance in Brazil—have more resources and expertise, giving them an edge,” he said.

Banking groups back decision

The Brazilian Federation of Banks (FEBRABAN) said in a statement that shutting down the platform reflects the Central Bank’s commitment to “security and stability in the future infrastructure.” The federation added that it remains part of the Drex support group.

The Brazilian Association of Banks (ABBC), which represents smaller institutions, said that even with the current platform shut down, its member banks have the technology to connect their Drex use cases to other networks. ABBC had been testing the tokenization of Bank Credit Notes (CCBs) in the project.

Blockchain provider BBChain, part of ABBC’s Drex consortium, said phase two “fulfilled its purpose” and that the Central Bank recognized the need for further technological evolution. “New market-driven business models may meet requirements without the regulatory constraints of the pilot,” the company said.

Stablecoin trend mirrors global shift

The growing preference for stablecoins over CBDCs aligns with global trends. Shortly after taking office, President Donald Trump signed an executive order banning the creation of a U.S. CBDC and encouraging the use of private stablecoins.

Drex was launched in 2023 with a pilot focused on tokenizing deposits and transactions in federal government bonds. The second phase, launched in October 2024, is expected to conclude with a final report in early 2026. Both phases used a DLT network as the testing platform.

Phase three will continue with business case studies for Drex but on a technology-neutral basis. Privacy solutions tested earlier failed to strike the balance between ensuring transaction confidentiality and maintaining Central Bank oversight. Looking ahead, one of Drex’s goals is to resume tokenization studies to create a settlement environment where the currency is issued by the Central Bank.

The Central Bank did not respond to a request for comment by press time.

*By Gabriel Shinohara and Ricardo Bomfim, Valor — Brasília and São Paulo

Source: Valor International

https://valorinternational.globo.com/

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Trump tariffs boost Klabin’s kraftliner exports amid trade shift

Asian and African buyers turn to Brazil as they diversify suppliers

 

 

11/05/2025 

Amid a turbulent geopolitical landscape, Klabin has gained ground in international markets with its kraftliner paper, used for packaging production. From July to September, exports accounted for 85% of the company’s kraftliner volume, up from 77% a year earlier, supporting its strong quarterly performance.

Part of this growth was expected due to the ramp-up of production at the Puma II project in Ortigueira, Paraná state. But a key driver was also Klabin’s entry into new markets, said Gabriela Woge, the company’s head of corporate finance and investor relation

“We’re expanding mainly in Asia, in countries like China and India, as well as Morocco and other places where Klabin hadn’t operated before,” Ms. Woge said in an interview with Valor.

With the U.S. imposing tariffs, many of these countries have sought to diversify suppliers to reduce reliance on American products, creating opportunities for new players, including Brazil.

Double-digit growth

In the third quarter, Klabin’s total paper volume rose 10% year over year to 375,000 tonnes. Kraftliner alone grew 23%. Net revenue in the paper segment reached R$1.8 billion, up 11% from a year earlier.

Klabin’s packaging business also performed well. Shipments of corrugated board advanced 6.6% in square meters, reaching 456 million m² between July and September, driven by output from the Figueira project. Sales volume grew 5.9% year over year to 250,000 tonnes, with a 13% increase in pricing.

As a result, revenue from the packaging segment climbed 20% to R$1.6 billion. “The company has been using its flexibility to grow in segments that offer greater resilience,” Ms. Woge said. That’s reflected in the rising share of exporters, especially in fruit, protein, and tobacco, in Klabin’s customer base.

The company’s pulp division was the weak spot in the quarter, analysts said. Sales volume rose 25% to 401,000 tonnes, but revenue slipped 3% due to an 8% drop in short-fiber prices.

After months of declines, short-fiber prices in China have recently started to recover, though modestly. Ms. Woge said the company’s diversified portfolio—including long fiber and fluff pulp used in diapers and sanitary products—remains its strength during periods of unfavorable pricing.

*By Helena Benfica, Valor — São Paulo

Source Valor International

https://valorinternational.globo.com/

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Telefónica lists Brazil as one of its priority markets in five-year plan

Spanish group pledges to expand fiber network and boost B2B revenue

11/05/2025 

 

Telefónica’s Brazilian operations are set to play a key role in the Spanish multinational’s new strategic plan, which targets €3 billion in efficiency gains by 2030. The savings goal includes both capital expenditures and operating costs.

As part of its five-year roadmap, Telefónica named Brazil, Spain, the United Kingdom, and Germany as priority markets and outlined specific targets for each country.

“We will grow faster than expected,” Telefónica CEO Marc Murtra said at a meeting with market analysts. In Brazil, the company expects key financial metrics to grow above inflation, said Chief Operating Officer Emilio Gayo.

Mr. Gayo highlighted several efficiency opportunities in Brazil, including the sale of legacy copper networks from the country’s former fixed-line telephone concession, digitalization of services, and the use of new technologies such as artificial intelligence to build and manage networks. Telefônica Brasil, which operates under the Vivo brand, expects to raise R$3 billion from the copper network sale by 2028, as announced in May.

The plan also calls for expanding the convergence rate of its fixed broadband customer base in Brazil, targeting 74% penetration by 2028, six percentage points above the current 68%. In telecom, convergence refers not only to bundling mobile and fixed-line services, but also to offering non-telecom digital services.

Telefónica also aims to grow its business-to-business (B2B) operations in Brazil, increasing the share of digital services in B2B revenue from 38% to 42% by 2028.

The company committed to expanding its fiber-optic network in Brazil, which reached 30.5 million households as of September. It also plans to reduce annual customer churn by 2.5 percentage points, though the current churn rate was not disclosed.

Minority stake sale not on the table

In June, a Spanish news outlet reported that Telefónica was considering selling a 20% stake in Vivo to reduce its debt, which stood at €28.2 billion at the end of September. The report triggered widespread speculation in Brazil.

Asked about the potential sale, Mr. Murtra said the company has other capital allocation options beyond those included in the strategic plan, which focuses on operational simplification to improve efficiency.

“The organic capital allocation strategy is what we’ve outlined,” he said. “It’s true there are other instruments beyond what we mentioned, but in our ‘business as usual’ scenario, we are sticking to the plan.”

Sources told Valor there are no plans to sell a stake in Vivo just to raise cash for the parent company. However, Telefônica Brasil might use its shares as currency in a future merger or acquisition, though no such deal is currently being negotiated.

Brazil stands out

Telefónica’s outlook for Brazil contrasts with its plans elsewhere in Latin America. The company confirmed on Tuesday (4) that it intends to exit all Spanish-speaking markets in the region, including Mexico, Chile, and Venezuela, though no timeline was given. The sale of its Colombian operation is already well underway, Mr. Murtra said.

While the strategic plan does not rely on mergers and acquisitions, Mr. Murtra said consolidation remains an option, especially in Europe, where 38 mobile operators are active.

“There should be European operators with scale comparable to their U.S. and Chinese counterparts,” he said.

Profit rises, dividend cut hits stock

In the third quarter, Telefónica reported net income of €276 million, up from just €3 million a year earlier. Adjusted EBITDA rose 1.2% organically to €3.07 billion, while revenue fell 1.5% to €8.96 billion.

Analysts estimate that consolidation in Telefónica’s core markets—Brazil, Spain, the UK, and Germany—could generate €18 billion to €22 billion in synergies. Those gains could be shared among buyers, sellers, consumers, investors, and innovation projects.

Despite the upbeat projections, Telefónica shares fell 13% on the Madrid stock exchange, following the announcement that dividends would be cut in half in 2026. The company plans to pay €0.15 per share next year, down from €0.30 in 2025.

“We believe in the company’s fundamentals, and that’s what we focused on in the plan,” Mr. Murtra said, adding that the board of directors and core shareholders backed the strategy, including the dividend adjustment.

The reporter traveled at the invitation of Telefônica Brasil.

*By Rodrigo Carro — Madrid

Source: Valor International

https://valorinternational.globo.com/

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Taxation of High Incomes – Impacts on Foreign Capital – Draft Law No. 1087/25. 

Taxation of High Incomes – Impacts on Foreign Capital – Draft Law No. 1087/25. 

By Edmo Colnaghi Neves, Ph.D.

 

 

 

 

Draft Law No. 1087/25, already approved by the Chamber of Deputies and currently under consideration in the Federal Senate, if likewise approved by the latter, will substantially alter the taxation of both high- and low-income brackets in Brazil.

Draft Law has three main objectives:

  1. To establish an income tax exemption for individuals earning up to BRL 5,000.00 per month and to reduce the personal income tax rate (IRPF) for those earning between BRL 5,000.00 and BRL 7,000.00 per month;
  2. To impose a 10% tax rate on individuals earning more than BRL 1,200,000.00 per year, with progressive rates ranging from 0% to 10% for annual income between BRL 600,000.00 and BRL 1,200,000.00, and to require withholding at source for those earning more than BRL 50,000.00 in any given month; and
  3. To levy a 10% tax on profits and dividends remitted abroad.

There are several general and specific aspects to consider for each item; however, the focus here will be on item 2, commonly referred to as the taxation of high incomes.

In addition to the rates mentioned above, it is important to note that the tax base will consist of the sum of all amounts received during the calendar year, including those subject to definitive or exclusive taxation, as well as exempt income or income subject to a zero or reduced rate. Certain capital gains, amounts received by way of donation, advancement of inheritance, or inheritance itself, and certain amounts exclusively taxed at source under Articles 12 and 12-A of Law No. 7,713/88 may be deductible.

If the taxpayer has been subject to the 10% withholding tax in any given month during the calendar year, due to exceeding the monthly threshold of BRL 50,000.00, that amount may be offset against the total tax due in the annual income tax return. Should the withholdings exceed the total annual liability, the taxpayer will be entitled to a refund, as currently occurs.

A key issue concerns accumulated profits up to December 2025, given that the law may come into force as of January 2026. As the Draft Law is still under Senate review, it remains subject to amendments and modifications.

The Draft Law currently provides that profits whose distribution is resolved and properly documented by the shareholders’ decision before the end of 2025 may be paid out over the following three fiscal years—up to 2028—without being subject to taxation. However, this time frame could be challenged if it remains in the final text.

Some proposed amendments go further, suggesting that such profits should be exempt from taxation regardless of when they are paid or whether there is a formal resolution of distribution in 2025 by the shareholders of the paying company. Nonetheless, such proposals are unlikely to pass, as their approval would require the Draft Law to return to the Chamber of Deputies, leaving insufficient time for approval before year-end.

Under Brazilian constitutional tax principles, particularly the principle of anteriority, any law increasing taxes must be enacted in one fiscal year to take effect only in the following fiscal year, except in cases expressly provided for by the Constitution.

While awaiting the Senate’s deliberation and any potential changes, it is advisable for shareholders of companies with accumulated profits to expedite the determination and distribution of such profits, to formally approve and document such decisions in corporate records, and to make the corresponding payments. This is to mitigate exposure to the forthcoming increase in tax burden.

Finally, in light of the constitutional principle of legality, it must be emphasized that the new rules will only become enforceable once the Draft Law is duly approved by both legislative houses, sanctioned by the President of the Republic, and enacted into law.

November 2025

 

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Brazil’s Central Bank tightens capital rules for fintechs

Regulator targets 500 firms and cracks down on shadow accounts used by criminals

 

 

 

11/04/2025 

Brazil’s Central Bank announced a new round of tighter regulations for fintechs on Monday (3), raising capital requirements and cracking down on so-called “shadow accounts” amid rapid growth that has exposed vulnerabilities in the country’s financial and payments systems. The changes are expected to affect up to 500 institutions.

The regulator introduced two key measures. The first increases minimum capital and net worth requirements for regulated institutions, now based on the type of financial activity performed rather than on the institutional classification, whether payment or financial institution. The second targets the termination of irregular “shadow accounts” (known in Portuguese as contas-bolsão).

The move comes after a wave of cyberattacks on Pix, Brazil’s instant payment system, and after police investigations revealed that some fintechs had been used by organized crime groups, including in the so-called Hidden Carbon operation.

Bank and fintech representatives largely welcomed the measures.

Ailton de Aquino, the Central Bank’s head of supervision, said the change “levels the playing field in the national financial system.” He called the move a “clear” signal that innovation and security must go hand in hand. He acknowledged that non-banking institutions would be the most affected.

Capital requirements for payment institutions will increase from the current range of R$1 million to R$9 million to between R$9.2 million and R$32.8 million. For banks, the range will rise from R$7 million–R$77 million to R$56 million–R$96 million, depending on the activities performed. Each additional activity requires additional capital.

The Central Bank estimates that about 500 institutions will need to bolster their capital. Mr. Aquino said these institutions currently face R$5.2 billion in capital requirements, a figure that could rise to R$9.1 billion by January 1, 2028, when the transition period ends.

“I don’t believe a payment institution with an initial capital of R$1 million can meet the demands of technology, auditing, and sound structure,” Mr. Aquino said. He attributed the changes both to the natural evolution of regulation and to recent events. “In recent months, we’ve witnessed unpleasant situations in the national financial system. This is part of an evolutionary process, but also a response.”

He also recalled a recent need to ban institutions from using coworking spaces as their official contact points with the Central Bank. “We had to pass a very curious rule recently: an institution can’t have a coworking space as its contact point with the Central Bank. We reached the absurd point of trying to supervise a payment institution headquartered in a coworking space.”

Mr. Aquino gave the press briefing alongside Gilneu Vivan, the Central Bank’s director of regulation, and Izabela Correa, director of consumer affairs and conduct supervision.

New methodology

The new methodology for calculating minimum capital includes an amount for initial operating costs and, for companies heavily reliant on technology infrastructure, an additional amount to reflect that. Requirements will vary depending on whether the institution performs operational, investment, or funding activities, including issuing credit, receiving deposits, or offering custody services.

An extra R$30 million in capital will be required for institutions that use the word “bank” or similar terms in their branding, in any language, including companies such as Nubank.

Mr. Vivan said the new rules increase investors’ “skin in the game,” encouraging stronger compliance with regulations and internal controls. Institutions will be able to either increase their capital or scale back their activities to reduce their capital requirements.

Those unable to comply, Mr. Aquino said, will need to undergo an “orderly exit,” corporate restructuring, or be absorbed by other firms. He stressed, however, that the rule’s goal is not to shrink the number of institutions under Central Bank supervision but to create fairer competition.

A transition period is in place for current operators and those with pending applications to launch or expand services. Until June 30, 2026, capital and net worth requirements will remain unchanged. After that, the minimums will rise gradually every six months, with full implementation by December 31, 2027.

Crackdown on shadow accounts

The Central Bank also introduced new rules targeting “shadow accounts” that mask financial transactions. Starting December 1, institutions must terminate these accounts if they are used to process payments, receipts, or offsets on behalf of third parties with the intent to obscure or substitute financial obligations. Institutions will be responsible for identifying such irregular use.

Shadow accounts consolidate operations from multiple clients into a single account, commonly used in marketplaces and currency exchange. But the model has been exploited by criminal organizations. In this setup, a fintech holds an account at a bank and creates sub-accounts for end users, making it difficult to trace the money’s origin and destination. This practice has appeared repeatedly in police investigations.

“Obviously lawful services, such as eFX [electronic foreign exchange transfers], are not being targeted,” Ms. Correa said.

In recent months, the Central Bank has rolled out several measures to close security loopholes. It limited TED and Pix transfers by unauthorized payment institutions and shortened the window for unregulated fintechs to operate without a license, from 2029 to May 2026. It is also drafting new rules for banking-as-a-service platforms.

Mr. Aquino said that while higher capital requirements alone may not prevent criminal groups from operating, the bar is now significantly higher for peer-to-peer lending companies (SEPs), direct credit companies (SCPs), and payment institutions, all of which are common structures for fintechs.

*By Gabriel Shinohara and Ruan Amorim — Brasília

Source: Valor International

https://valorinternational.globo.com/

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