War drives rise in construction material costs in Brazil

FGV estimates conflict could add nearly 4 percentage points to sector index, pushing it close to 10% in 2026

 

The war in the Middle East involving the United States, Israel, and Iran is already pushing up construction costs in Brazil. That could raise the National Construction Cost Index (INCC) by 3.89 percentage points in 2026, bringing the indicator to 9.72% this year, according to Ibre-FGV.

Initially, the scale of the impact depended on the duration of the conflict and the intensity of its effects on global supply chains. In practice, however, the shock has been strong enough to make cost pass-through unavoidable, with increases already appearing in the sector, the study notes. The analysis was conducted by economists Ana Maria Castelo, André Braz, and Matheus Dias.

Prices for materials, transportation, and petrochemical inputs are rising. The survey, which consulted industrial input manufacturers for construction, identified widespread price adjustments between February and March, taking effect in April, with further increases expected in May.

According to the economists, the war is also shifting the main cost driver in construction. “Until recently, cost dynamics were largely explained by labor, but the current scenario puts materials back at the center of sector inflation, increasing the risk of INCC index acceleration in the short and medium term,” they said.

The increase could also affect government housing programs such as My Home, My Life and Casa Brasil, said economist Ana Maria Castelo. The reason is the rise in unforeseen costs in projects with fixed contracts and pricing, which could create losses for construction companies.

In the non-metallic minerals group, which includes cement- and concrete-based products, the impact is estimated at around 1.34 percentage points on the index. With limited substitution options—especially in infrastructure projects—cost pass-through is more likely, reducing companies’ ability to absorb increases. The sector is also heavily dependent on diesel and petroleum products used as additives and coke in production and transportation.

Plastic materials and PVC products are also among the most sensitive, given their petrochemical base. Inputs such as polyethylene and PVC resins are directly linked to oil and gas supply chains, increasing exposure to international volatility.

Even before the conflict, these products had already posted significant price increases, such as PVC pipes, which rose 16.29% over the 12 months through February. With the war, price adjustments could reach 35%, particularly for pipes and fittings. The impact on the INCC could reach up to 1.11 percentage points.

Paints and chemical products have an estimated potential impact of 0.31 percentage points on the INCC. As these materials are used in the final stages of construction, the effect tends to be lagged, affecting projects already underway. The increases are driven by higher costs of petrochemical inputs such as solvents and resins, as well as rising logistics costs. Projected adjustments are around 10%.

In metals, the potential impact is estimated at 0.96 percentage points. Steel rebar and wire are the main drivers, with projected price increases of 13%. These products account for 5.30% of the index.

According to the study, this segment behaves differently from others, as prices are more closely tied to China’s industrial dynamics and global demand. In this case, the conflict acts more as an “amplifying factor” rather than the primary cause.

In the finishing segment, ceramic tiles are expected to see price increases of 12%, with an estimated impact of 0.17 percentage points on the INCC. Ceramic production relies on natural gas in kilns, making the sector sensitive to energy shocks.

Additionally, some inputs used in enamels and pigments depend on global supply chains affected by recent instability. Even with a smaller direct impact, price increases tend to spread throughout the value chain due to the widespread use of these materials.

The São Paulo state construction industry association (Sinduscon-SP) is already observing rising material costs, according to its president, Yorki Estefan. He noted that the increase was reflected in the April INCC, released Monday (27), which rose 1.04% after a 0.36% increase in March.

Estefan said the impact is likely to be stronger on inputs with greater exposure to international markets. For construction companies, the immediate effect is higher project costs and additional pressure on margins, especially in long-term contracts. Depending on how long the scenario persists, companies may revise timelines, delay project launches, and become more selective in investments.

“In the case of the My Home My Life housing program, the impact is likely to be more pronounced. Because it operates with tighter margins and predefined parameters, rising costs may affect the economic viability of new projects and slow production. That could require operational adjustments and possibly program refinements to preserve delivery capacity,” Estefan said.

*By Grace Vasconcelos — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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Household debt hits record high, Central Bank says

Brazilians are also committing bigger share of their income with servicing debt

 

 

 

Household debt hits record high, Central Bank says
Household debt hits record high, Central Bank says — Photo: Marcello Casal Jr./Agência Brasil

Amid discussions within the federal government about initiatives for renegotiating individual debts, both income commitment and household debt have reached record levels, according to Brazil’s Central Bank. The monetary authority released the statistics for February.

Regarding income commitment, which considers the average amount for debt payments in a month relative to household income, the indicator reached 29.7%, surpassing the previous record of 29.5% set in January. This marks the highest level since the series began in 2005. The indicator has been on an upward trend since early 2024. In February of that year, income commitment was at 26.6% and increased to 27.8% in the same month of 2025.

The indicators of income commitment and population debt have drawn the government’s attention, which is preparing a program focused on debt renegotiation. According to Finance Minister Dario Durigan, the program is expected to be launched this week by President Lula.

Household debt also continued to rise, reaching a record 49.9% in February. This indicator considers the total debt of individuals divided by their annual income. In January, it was at 49.8% of income.

Jucelia Lisboa, an economist and partner at Siegen Consultoria, notes that income growth has not been sufficient to absorb the rising cost of living and financial services. Additionally, high interest rates are straining household budgets. Lisboa also points out that the expansion of credit is more concentrated among families and consumer-oriented lines. “This movement supports economic activity in the short term but increases families’ sensitivity to income and interest rate shocks, making debt more persistent in the absence of structural improvements in repayment capacity,” she says.

The Central Bank’s credit statistics more broadly showed that the average bank interest rate continued to rise. The rate reached 33.1% per year in March, up from 32.9% the previous month. The increase was concentrated in directed credit modalities, impacted by the rise of the Long-Term Rate (TLP) from the Brazilian Development Bank (BNDES), according to Fernando Rocha, the Central Bank’s head of statistics. The TLP has a variable component calculated by inflation, and Brazil’s 12-month official inflation (IPCA) rose to 4.14% in March from 3.81% in February.

“This [TLP increase] directly translated into higher interest rates for directed credit. The spreads [difference between lending rates and funding rates] for directed credit remained stable,” said Rocha. “If the interest rate grew by 0.7 percentage points and the spread varied zero, it means the funding cost also grew by 0.7 points.”

The nominal growth rate of the credit balance over 12 months, which had been declining, saw an upward change from 9.6% to 9.7% between February and March. Rocha says it is necessary to wait for data from the coming months to determine whether the movement has been interrupted or if the stability was temporary.

In a statement, ASA economist Leonardo Costa highlighted the nearly stable pace. Regarding debt and income commitment, Costa stated that there are still no signs of a scenario reversal. “This situation remains the primary vulnerability factor in the credit cycle in the medium term,” he says.

*By Gabriel Shinohara and Alex Ribeiro — Brasília and São Paulo

Source: Valor International

https://valorinternational.globo.com/

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China tightens grip on Brazil’s car market, triples exports

Shipments hit $2.16bn in Q1, lifting Brazil to third-largest market; imports surge ahead of higher duties and on strong demand for Chinese EVs

 

 

Between January and March 2026, China exported $2.16 billion worth of vehicles to Brazil, nearly triple the $763.8 million from the same period in 2025. This total includes internal combustion engine cars, which, although still less dominant, doubled in value, indicating that Chinese interest in the Brazilian market extends beyond electrified vehicles. Additionally, the total value of cars exported by China to Brazil in the first quarter of this year exceeded the $1.17 billion seen in the first quarter of 2024, which had been a previous record for that period.

With this performance, Brazil jumped from seventh to the third-largest destination for vehicles between the first quarters of 2025 and 2026, behind only Russia and the United Kingdom. In electrified vehicles—which include fully electric and hybrid models—Brazil rose from fifth to third place, behind Belgium and the United Kingdom. In the ranking of internal combustion cars, Brazil also gained prominence, moving up from 16th to seventh place.

The data comes from Chinese customs and considers shipments made in the first quarter. Some of the vehicles are still in transit and have not yet arrived in Brazil. Shipments of automobiles typically take between 40 and 60 days from China to customs clearance in Brazil.

Higher import tariffs, a favorable exchange rate, and a wave of model launches are among the factors behind the faster pace of Chinese vehicle arrivals in Brazil, according to experts. They also note that the growing presence of Chinese cars on Brazilian streets reflects the consolidation of brands in a geopolitical context marked by rising protectionism, global uncertainty, and China’s difficulty in boosting domestic demand—factors that have contributed to closer trade ties between Brazil and China.

Data from Brazil’s Secretariat of Foreign Trade (Secex/MDIC), which registers what has already cleared customs in Brazil, shows part of the impact of Chinese cars. In the first quarter, Brazilian imports of vehicles from China reached $1.5 billion, up 552.5% from the same period of 2025. Chinese manufacturers supplied 65.6% of all cars imported by Brazil. Argentina ranked second, with 11.3% and $253.2 million, down 25.5%, also from January to March.

According to Tulio Cariello, director of content and research at the Brazil-China Business Council (CEBC), the trend reflects an anticipation of the final increase set by the Brazilian government in its current schedule of higher import taxes on electric and hybrid vehicles. Tariffs, he noted, are expected to reach 35% in July this year, up from the current 28% for plug-in hybrids and 25% for electric vehicles.

Reports released by the automotive industry, noted André Valério, an economist at Inter, show that vehicle imports accelerated in 2021, but there was a sharp inflection in mid-2023, when the debate over the current tariff hike agenda for electrified vehicles intensified. The schedule was set in 2023 and has been applied since January 2024, with gradual increases in import tariffs. Rates started at 10% and will reach a ceiling of 35% in July. Before that, imports of electric and hybrid vehicles were tariff-free. Valério noted that, beyond this schedule, the increase in shipments from China to Brazil also reflects a more aggressive sales push, driven by the automotive industry cycle, with the launch of 2026/2027 models.

The increase in the volume of imports of made-in-China cars also reflects, in parallel, rising demand for the type of vehicle offered by Chinese manufacturers, said Cariello, of the CEBC. “Many people want to buy electric cars, which today are synonymous with Chinese cars. People see Chinese cars on the streets and recognize them as high-tech products.” Cariello noted that China was by far the main supplier of electric cars to Brazil, accounting for 97% of imports from January to March. In the case of plug-in hybrids, the country also led by a wide margin, with 89% of imports.

According to the Brazilian Electric Vehicle Association (ABVE), 74.1% of electrified vehicle sales in Brazil in 2025 were from Chinese manufacturers. BYD led the market with a 50.4% share. Total electrified vehicle sales reached 223,900 units last year, up 26% from 2024.

There is a positive perception of Chinese products, said Cariello, which also applies to combustion-engine cars. “Chinese manufacturers are targeting the electric vehicle market, but this benefits China in other segments in Brazil as well.”

Data from Anfavea, which represents Brazil’s automotive industry, show that from January to March this year, vehicle registrations totaled 625,200 units, up 13.3% from the same period of 2025. Imports, which totaled 119,100 units, rose 5.6%. Made-in-China vehicles grew at a faster pace. Registrations reached 54,300 units, up 68.9%. When releasing first-quarter data, Anfavea president Igor Calvet recalled that in August last year, China surpassed Argentina as Brazil’s top external supplier of vehicles, and in March, China marked eight consecutive months as Brazil’s largest vehicle exporter.

“We have significantly reduced purchases of vehicles from Argentina, which used to be our main source of imports. Some consumers have preferred electric cars, and China is highly competitive and the main global supplier,” said Valério, of Inter. “They offer a very strong package: a technologically advanced car at a competitive price, along with the promise of lower fuel costs. The old image of Chinese cars—cheap but with problems in spare parts—has collapsed.”

Data from the Foreign Trade Indicator (Icomex), released by the Brazilian Institute of Economics at Getulio Vargas Foundation (FGV Ibre), show that the volume of Brazilian imports of durable consumer goods from China rose by 204.8% from January to March this year compared with the same period in 2025. In March alone, the increase reached 330.7%. Average prices, however, moved in the opposite direction, falling 9.6% in the first quarter compared to the same period of 2025. According to Secex data, automobiles accounted for 71% of Brazil’s durable consumer goods imports from China in the first quarter of 2026. In total imports, the share of Chinese goods was 8.2%.

Chinese data contrast with those from Argentina. The volume of Brazilian imports of durable consumer goods from Argentina fell 25.8% in the first quarter, while average prices remained virtually stable, up 0.3% compared to the same period of 2025. “Tariffs imposed by Brazil on vehicle imports were not enough to deter Chinese cars, because China has strong economies of scale and their prices ultimately offset the impact,” said Lia Valls, a professor at UERJ and researcher at FGV Ibre.

A more favorable exchange rate for imports also helped create a more supportive environment for foreign purchases this year, Valls said. In the first quarter of 2025, the exchange rate per U.S. dollar averaged between R$5.80 and R$5.90. In the same period this year, it ranged between R$5.20 and R$5.30.

For Welber Barral, a partner at BMJ, Chinese government data also show that trade diversion occurred in some cases. He highlighted Mexico, which often serves as a gateway to the U.S. market. From January to March 2025, Chinese vehicle exports to Mexico totaled $1.4 billion, making it the third-largest destination at the time. That position was taken by Brazil, and Mexico dropped to 12th place. Chinese vehicle exports to Mexico fell by nearly half in the first quarter of this year, to $750.8 million.

For other destinations, China continued to boost vehicle exports this year. To Belgium, the top destination for Chinese electrified vehicles, exports totaled $2.1 billion from January to March 2026, a 47.6% increase compared to the same period in 2025. To the United Kingdom, ranked second, exports reached $2.2 billion, marking a 104.3% rise.

Valls, of FGV Ibre, also pointed to the geopolitical context, including trade rivalry between the United States and China, intensified under U.S. President Donald Trump. She also noted a broader environment of protectionist policies across multiple countries, while China maintains high levels of vehicle production. “This output needs to be absorbed by other countries, as China is struggling to boost domestic consumption.”

Automobiles, Valls added, help China maintain its position as the largest source of Brazil’s total imports. According to Secex, 26.3% of all Brazilian imports in the first quarter of this year came from China. At the same time, she noted, trade ties between Brazil and China have been strengthening, with an increasing share of Brazilian exports going to China. This trend has intensified amid Trump’s tariff policy and the war in the Middle East, with oil shipments to China increasing.

According to Cariello of the CEBC, the current flow of Chinese vehicles to Brazil is likely to remain strong in the coming months, as companies take advantage of the window of opportunity created by still-relatively low import tariffs. In the longer term, however, imports are expected to decline as Chinese automakers expand production in Brazil. At least five have confirmed local production. In addition to GWM and BYD, which have their own plants, Geely and Leapmotor have partnerships with Renault and Stellantis, respectively. GAC has announced it will begin producing cars in Brazil in 2027.

* By Marta Watanabe and Álvaro Fagundes — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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Experts concerned about plan to mitigate fuel price hikes

Due to its dependence on proceedings in Congress, there are still doubts about the extent of measure, experts say

The supplementary bill (PLP) that allows the federal government to use extra oil revenues to offset tax reductions on fuel could effectively prevent larger price hikes during periods of high volatility, experts in the sector say. However, since it depends on the National Congress, there are still doubts about the measure’s extent.

If approved, the PLP grants the government flexibility by permitting the offset of potential revenue losses—due to tax reductions—with increased revenue resulting from oil price shocks. The Fiscal Responsibility Law (LRF) requires tax cuts to be compensated by increases in other taxes. Since the beginning of the war, Brent crude oil has risen from a range of $65 to fluctuating between $95 and over $100 per barrel.

However, economists view the measure with reservations, considering it negative for the fiscal scenario and with uncertain impacts on inflation.

According to the PLP, revenue waivers can be applied to diesel, biodiesel, gasoline, and ethanol. Until now, the government has implemented measures to prevent price increases in diesel, biodiesel, and aviation kerosene (QAV). However, gasoline and ethanol have yet to have PIS/Cofins cut to zero.

“We always view favorably measures that can be taken to lower product prices,” said James Thorp Neto, president of the National Federation of Fuel and Lubricant Trade (Fecombustíveis).

Among the federal government’s revenue sources in the oil and gas sector are royalties, special participation (on large fields), dividends, sales of oil from production-sharing in the pre-salt, and signature bonuses in area auctions.

In the case of royalties, the National Agency of Petroleum, Natural Gas and Biofuels (ANP) estimates revenue of R$89.61 billion in 2026, considering a Brent barrel price of $95.64. Of this total, the federal government is expected to retain R$36.07 billion.

This year, the ANP is expected to conduct an auction for the concession of 495 onshore and offshore oil and gas blocks. The highest bid for the signature bonus wins.

Another revenue source is the sale of pre-salt oil. Between 2018 and 2025, the federal government raised R$43.75 billion, according to Pré-Sal Petróleo (PPSA), which manages production-sharing contracts. The state-owned company estimates revenue of R$24.14 billion in 2026 from pre-salt oil sales from past and upcoming auctions this year.

PPSA is expected to auction 106.5 million barrels from six pre-salt areas in July. The expectation is that most of the load will be delivered in 2027, except for the Bacalhau field, which may occur in August this year—payments are made upon oil delivery.

According to an industry source, if the government’s proposal is approved, it will have more effects downstream but is not expected to affect oil and fuel producers. The industry’s main concern, the source says, is the inclusion of the oil export tax in this equation. The tax is under judicial discussion between foreign oil companies and the government.

“There’s no need to include an additional tax [the export tax]. Revenue from royalties and special participation is sufficient to offset tax exemptions. The export tax has a clear revenue-raising objective, which should not happen.”

Former ANP director and consultant David Zylberstajn believes the uncertainty regarding compensation lies in the National Congress’s receptivity to the measure. “In my opinion, the big question mark is what kind of amendments or discussions might arise,” he said.

He emphasizes that diesel is used in agribusiness, freight, and passenger transport. Meanwhile, there are alternatives to gasoline that can reduce price pressures for the end consumer, which is not the case with diesel, Zylberstajn noted.

Evaristo Pinheiro, president of Refina Brasil, an association of private refineries, highlighted that the measures do not directly impact refineries, but the entity has been urging the government to reduce to zero PIS/Cofins for crude oil used in refining, as it did with diesel. According to him, when oil products have taxes cut to zero and crude oil does not, there is an accumulation of tax credits.

“If I can’t pass on a higher price, I’m forced to reduce production,” said Pinheiro. According to him, private refineries accumulate R$50 million per month in tax credits on diesel and jet fuel (QAV). The amount could exceed R$230 million per month if gasoline is exempt from PIS/Cofins.

*By Fábio Couto and Kariny Leal — Rio de Janeiro

Source: Valor International

https://valorinternational.globo.com/

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Brazilian families’ spare income falls to lowest since 2011

Higher debt costs squeeze disposable income even as strong labor market lifts wages, according to Tendências

 

 

 

Brazilian families have had less money left at the end of the month to spend on consumption beyond basic items and the payment of taxes and debt. That may help explain voters’ discomfort with the economic outlook and the worsening approval ratings for the federal government, despite strong employment and labor income in the country. The issue has also moved onto the radar of presidential campaigns.

Household disposable income after spending on essential items, taxes, and debt service is at its lowest level since 2011, when the series compiled by Tendências Consultoria begins.

In February, the amount “left over” from households’ broader income mass after covering those expenses was 21%, the consultancy said. At the start of 2024, it was 23.6%. That is a very significant deterioration in a short period, said Alessandra Ribeiro, partner and director of macroeconomics and sector analysis. The indicator peaked in March 2011, at 27.2%, and again in June 2020, at 27%.

The indicator starts with households’ broader income mass, which includes wages as well as other sources such as pensions, social benefits, rent, and dividends. From that total, Tendências deducts inflation on essential items in housing, including rent and fees, fuels and energy such as cooking gas and electricity bills; transportation, including public transport and vehicle fuel; health and personal care, including pharmaceutical and optical products and health services; communications; education; and food consumed at home. The calculation considers the changes and weights of the IPCA, Brazil’s benchmark inflation index.

It also deducts interest and principal payments on debt, based on the average of credit lines tracked by the Central Bank. But Tendências makes adjustments, including classifying credit-card installment purchases as credit. Finally, data from the Federal Revenue Service are used to deduct income tax and social security contributions. “It is an indicator of what is left for other types of consumption,” Ribeiro said.

The sharp decline in disposable income, especially since 2025, has been driven by higher debt-service costs, she said. “We see a very significant increase in how much credit payments are eating into income, while food, which has a very relevant weight, alleviated inflation a lot in 2025,” she said.

In 2025, the price of food consumed at home rose 1.43%, while headline inflation was 4.26%. In the 12 months through March 2026, food consumed at home rose 0.53%, compared with a 4.14% increase in the IPCA.

Higher rates

The backdrop for the heavier debt burden in household budgets is interest rates, Ribeiro said. “It is a scenario of high interest rates for a long time,” she said. “Throughout 2025, we saw a clear deterioration in the quality of household credit portfolios, with families turning more to emergency credit lines such as revolving credit cards and overdrafts. When people move into those lines, they pay higher interest rates.”

That is compounded by tighter credit supply, as banks have also become more cautious amid rising delinquency. “With this combination, even a strong labor market has not been enough to offset this financial burden.”

Household debt was close to half, 49.7%, of Gross National Disposable Income in January this year, noted Marcelo Gazzano, an economist at Bradesco. The figure is low compared with other countries, he said, since household credit in Brazil as a share of GDP is about 10 percentage points below the average for emerging economies, based on data from the Bank for International Settlements (BIS). Still, Brazilian household debt is almost twice the level seen in 2007, he noted.

Bradesco estimates that, all else being equal, a 1% increase in the stock of household credit also raises the share of income committed to debt payments by 1%.

Over the past two years, household debt has increased by 2 percentage points, with half of that growth explained by the expansion of non-payroll-deductible personal credit, Gazzano said.

Vehicle financing also increased and now accounts for almost 6% of household income. Payroll-deductible loans for private-sector workers, boosted in 2025, represented 1.2% of income in January 2026, Gazzano said.

He also noted that the Central Bank’s Credit Cost Indicator reached 37.5% a year in February, the highest rate since 2013. That rate is about 4.5 percentage points higher than at the end of 2024, Gazzano said.

Political campaigns

Ultimately, Tendências’ disposable-income indicator is a measure of well-being that helps explain other developments, such as the worsening evaluation of the government despite a dynamic labor market and a strong increase in income mass, Ribeiro said. “We can understand where this discomfort is coming from.”

Part of the movement is also related to the large-scale entry of more low-income families into the banking system, driven by the pandemic and by innovations such as Pix, Brazil’s instant-payment system, and fintechs.

“We are still thinking about how to measure this type of effect, which obviously has a positive side. But our assessment is that the problem of high debt is indeed being amplified by this rapid inclusion of households without a foundation in financial education,” she said.

Household debt and the perception that purchasing power has fallen over the past year have taken on a central role in shaping the pre-presidential campaign strategies of President Luiz Inácio Lula da Silva, of the Workers’ Party, and Senator Flávio Bolsonaro, of the Liberal Party of Rio de Janeiro. Flávio–son of former President Jair Bolsonaro–has been using the higher cost of living to appeal to undecided voters.

The government is preparing a new program to refinance debts at lower costs, a kind of “Desenrola 2.0,” which could bring some short-term relief, Ribeiro said. In her view, the initiative makes sense in a context of high delinquency and given the availability of resources in the Operations Guarantee Fund (FGO), although it needs greater alignment with banks than the first version did so that renegotiation mechanisms are truly effective.

“But it is a completely short-term solution. It will not resolve the dynamics over time when we think about the inclusion of low-income people in the banking system unless it comes with a more structural financial-education agenda,” Ribeiro said. “The risk is having to do another program again soon,” she said.

Fiscal concerns

In structural terms, Brazil also needs to resolve its systematic problem of high interest rates, especially to navigate shocks such as the war in the Middle East with more room to maneuver, Ribeiro noted. “We now face the risk that interest rates will stay higher than we had imagined, given the effects of the conflict. This situation for families should remain tight for some time.”

Brazil’s structural problem of high interest rates, in turn, is linked to the fiscal issue. Ribeiro said. In her view, it is important that, starting in 2027, reforms are advanced to improve the dynamics of mandatory spending, while the country continues to close loopholes that lead to revenue losses, such as tax expenditures. “The efficiency of many of those lines is questionable,” Ribeiro said.

If Brazil can send some signal from next year onward that debt dynamics will be stable through 2030, it will already be possible to reduce the risk premium charged to the country, which would have a benign effect on financial variables and the base rate Selic, she said.

Bradesco estimates that a 100-basis-point decline in the Selic reduces the Credit Cost Indicator by 50 bp and the amount spent on debt by 1% over a six-month period, Gazzano said.

*By Anaïs Fernandes — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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Central Bank set to cut Selic by 25bp amid war fears

Most market participants expect Brazil’s Monetary Policy Committee to lower base rate to 14.5%, while signaling caution on inflation risks

 

 

With the Selic base rate deep in contractionary territory, but against a backdrop of high uncertainty and inflationary pressure from the war in the Middle East, the Central Bank’s Monetary Policy Committee (COPOM) is expected to repeat its latest decision and cut the benchmark interest rate by another 25 basis points, to 14.5%, at the meeting that ends Wednesday (29).

That is the expectation of the vast majority of the 122 market participants, including banks, asset managers, and consultancies, surveyed by Valor less than a week before the committee’s next decision.

In all, 114 firms expect the Selic to end this month at 14.5%, while five expect rates to remain at the current level and only two believe a larger, 50-basis-point cut would be more appropriate.

With no signs that the war involving the United States, Israel, Iran, and Lebanon will end soon, oil prices have remained around $100 a barrel for most of the period since COPOM’s last meeting, on March 18.

As a result, the market’s inflation outlook has worsened, and the Central Bank’s Focus survey now points to the IPCA, Brazil’s benchmark inflation index, above the upper limit of the target range in 2026 and, for next year, inflation well above the 3% pursued by the monetary authority.

Even so, the near-unanimous expectation is that COPOM still has room to “calibrate” the degree of monetary tightening, as the committee puts it, since the current Selic level is significantly weighing on economic activity.

Speeding up cuts

Morgan Stanley’s chief Brazil economist, Ana Madeira, maintains a more dovish view than the market consensus. She expects the Central Bank to cut the Selic by 25 basis points this week, but says it could speed up the pace in June and take the benchmark rate to 12% by the end of the year.

That view was formed after observing that, despite the volatility that followed the outbreak of the Middle East conflict, the Central Bank continued to signal that it intended to keep cutting rates and planned to calibrate rates that, by the end of the cycle, would remain restrictive.

“This expectation is based, in part, on some improvement in the external scenario, especially in oil prices. But, of course, if there is no easing on the geopolitical front and oil remains under pressure, we acknowledge it will be difficult for the Central Bank to have a solid enough argument to explain an acceleration in the pace of cuts,” she said.

For Madeira, however, the slowdown in the economy continues to point to the need to calibrate the degree of restrictiveness in monetary policy.

“An acceleration to 50 basis points depends on the international scenario, but the 25-basis-point pace can continue, especially when we look at the domestic backdrop,” Madeira said, even though she sees the inflation outlook as a concern.

Morgan Stanley raised its IPCA forecast for this year to 4.5% from 3.9% and kept its 2027 estimate at 3.6%.

As for communication, Madeira believes Wednesday’s decision is likely to resemble the statement issued in March in tone. Some changes, however, are expected, particularly in the balance of risks. She expects the balance to become asymmetric, with upside risks to inflation.

“But in terms of guidance, I believe the Central Bank will continue to suggest that calibration should continue ahead, without committing to any pace of cuts.”

Key communication

Amid the uncertainty created by the war, COPOM’s communication will be crucial to understanding its next steps, said Fabiano Soares dos Santos, investment director at Funpresp, Brazil’s pension fund for federal civil servants.

“We know market volatility has increased a lot and that, in March, at the COPOM meeting, the conflict in the Middle East was still very recent and there was still no measure of the impacts. Looking at it now, the Central Bank still does not have the necessary requirements to change monetary policy, and the market still believes in the downward trend for the Selic, even though there is more uncertainty,” Soares said. He expects a 25-basis-point cut this week and a Selic of 12.5% at the end of 2026.

Luis Cezario, chief economist at Asset 1, does not expect significant changes in COPOM’s communication. Even on the balance of risks, while he sees some upside asymmetry in the inflation outlook today, he said it is unclear whether the committee will have enough consensus to change its assessment from “symmetric.”

In any case, Cezario is aligned with the market consensus in seeing a 25-basis-point Selic cut as the most likely decision, without a clear indication of what COPOM will do next. “My impression is that the tone will remain similar to the previous statement: it will signal that there is room to keep cutting, but avoid giving clear guidance on the pace,” he said.

He highlighted remarks by COPOM members suggesting there is some “cushion” in interest rates after the tightening process that took the Selic to 15% last year.

“It seems to us that, to signal any move toward stopping the cycle, there would need to be a very sharp deterioration in the scenario,” Cezario said. “They have a budget for cuts, smaller than before, but there is still some room,” added the economist, who expects the Selic to end this year at 12.5%.

Slower path

With a more conservative view, Daniel Xavier, chief economist at Banco ABC Brasil, expects COPOM to keep cutting the Selic by 25 basis points until the end of 2026, which would take the benchmark rate to 13.25%, slightly above the market’s median forecast of 13%.

“It will deliver the 25-basis-point [cut], reaffirm that it is watching the conflict and its effects, while reinforcing that it is coming from a long period of restrictive rates. It will be the continuation of the cycle in a cautious and serene way,” Xavier said, repeating terms used by COPOM itself in the statement after its March decision.

The economist expects COPOM to keep the balance of risks symmetric, because he believes it would be “contradictory” to cut rates while flagging upside risks to inflation. He also expects the inflation forecast for the relevant monetary-policy horizon to be reduced to 3.1% from 3.3%.

Xavier said the shift in the horizon from the third to the fourth quarter of 2027, the recent appreciation of the real, and a higher Selic projected in the Focus survey will be enough to offset the impact of higher oil prices on the Central Bank’s model forecast.

Asset 1’s calculation points to a different result, Cezario said. “Our forecast is between 3.3% and 3.4%. Since there will probably be a further worsening in inflation expectations on Monday [27], it seems more likely to us that the projection will rise to 3.4%,” he said.

Gino Olivares, chief economist at Azimut Brasil Wealth Management, challenges the idea that the Selic has a cushion that allows the Central Bank to keep cutting in light of the change in the inflation outlook after the outbreak of the war.

“What I see now is that the plane is not landing, but going around. At this point, there is no way to know how high the plane will climb in that go-around. So neither I nor the Central Bank know how much of the room that existed to lower interest rates remained after this move,” he said.

Olivares acknowledges, however, that continuing the rate-cutting cycle at a 25-basis-point pace or pausing while waiting for more information are strategies with similar effects, since the current level of monetary-policy restriction is high.

The economist draws attention to the fact that inflation is likely to keep rising over the next three months. And while current inflation rises, expectations are unlikely to fall. “We will live with inflation under pressure, and it will only ease with numbers well below expectations, which should not happen anytime soon.”

Potential pause

For COPOM, the path of least resistance, Olivares said, should be to keep cutting rates, but with a message that the possibility of a pause has become real. “The chance of stopping is real. It is definitely not zero. Perhaps that is the most important message Copom COPOM to convey, and the hardest one to put into words,” he noted.

For Société Générale economists, that should in fact be the baseline scenario. Given uncertainty in the Middle East, rising inflation expectations, and mixed signals from the domestic economy, COPOM should keep the Selic at 14.75% on Wednesday, the French bank argued in a report.

“Risks remain tilted toward lower rates in the short term and higher rates in the medium term. In the short term, the Central Bank may feel compelled to take advantage of still-moderate inflation levels, especially considering that real rates would remain significantly restrictive even with a few cuts. Beyond the short term, however, with inflation expectations for this year already above the target ceiling, any additional deviation, especially in 2027, could restrict the easing path,” the bank’s economists wrote.

*By Gabriel Caldeira, Victor Rezende and Gabriel Roca — São Paulo

Source: Valoar International

https://valorinternational.globo.com/

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STJ: Publicar balanço não é requisito para arquivar atos de limitadas

Decisão da 4ª turma da Corte da Cidadania se baseou na lei 11.638/07, que não prevê tal obrigação.

22 de abril de 2026
A 4ª turma do STJ entendeu que juntas comerciais não podem exigir a publicação prévia de balanços e demonstrações financeiras como requisito para o arquivamento de atos societários de sociedades limitadas de grande porte.

O colegiado analisou recurso do MPF contra decisão do TRF da 3ª região, que havia afastado exigência imposta pela Jucesp – Junta Comercial de São Paulo.

No caso, uma empresa buscou garantir o registro de atas de reuniões de sócios sem a necessidade de divulgar previamente suas informações financeiras em Diário Oficial e jornal de grande circulação.

(Imagem: Freepik)

4ª turma do STJ vedou publicação de registro de balanço como requisito para arquivar atos de limitadas de grande porte.(Imagem: Freepik)

 

Limite da lei

Relator do recurso, ministro Antonio Carlos Ferreira destacou que a lei 11.638/07 determina que sociedades limitadas de grande porte sigam regras das sociedades anônimas apenas quanto à escrituração, elaboração de demonstrações financeiras e auditoria independente.

Segundo o ministro, a ausência de menção à obrigação de publicação não é acidental. Para ele, o legislador optou por não impor essa exigência, e não cabe à administração suprir essa lacuna por interpretação ampliativa.

O relator também ressaltou que a divulgação pública de dados contábeis pode expor informações estratégicas das empresas, o que reforça a necessidade de previsão legal expressa para tal obrigação.

Nesse contexto, afirmou que atos administrativos não podem criar exigências não previstas em lei, sob pena de violação ao princípio da legalidade e à liberdade de iniciativa.

Para o ministro, a imposição feita pela junta comercial representou extrapolação do poder regulamentar.

Com esse entendimento, a 4ª turma manteve a decisão que afastou a exigência de publicação, permitindo o arquivamento dos atos societários sem a comprovação prévia da divulgação dos balanços.

Processo: REsp 2.002.734

Fonte: https://www.migalhas.com.br/quentes/454232/stj-publicar-balanco-nao-e-requisito-para-arquivar-atos-de-limitadas

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U.S. deal for Brazil rare earth mine signals strategic supply push

Acquisition of Serra Verde highlights global scramble to secure critical minerals beyond China

 

 

 

Serra Verde, in Minaçu (Goiás), is the only one in Brazil with an operating mine — Foto: Divulgação/Serra Verde
Serra Verde, in Minaçu (Goiás), is the only one in Brazil with an operating mine — Photo: Divulgação/Serra Verde

The acquisition of the only rare earth mining company in commercial operation in Brazil by a U.S. firm has raised concerns in the country and underscores Washington’s push to build an independent supply chain for these elements. Rare earth minerals are critical for the energy transition and defense industries, yet global supply remains heavily dependent on China.

USA Rare Earth announced on Monday (20) that it will pay $300 million in cash and issue about 126.8 million shares to acquire Serra Verde, which operates in Minaçu, Goiás. The transaction, valued at $2.8 billion, is expected to close in the third quarter, the U.S. company said. Serra Verde’s current owners—Denham Capital, Energy and Minerals Group, and Vision Blue—will become the largest shareholders in the combined entity, holding a 34% stake

The U.S. company, which has a mineral deposit in Texas but no operating mines, has already secured a commitment of up to $1.6 billion in financial support from the U.S. government.

Washington had already been involved in Serra Verde before the acquisition, having arranged $565 million (R$2.9 billion) in financing for the miner through the U.S. International Development Finance Corporation (DFC).

The deal highlights growing interest in Brazil’s rare earth reserves—the largest outside China—amid what analysts describe as a “silent war” between the U.S. and China for control over strategic supply chains, said Elaine Santos, a researcher at Portugal’s National Laboratory of Energy and Geology (LNEG).

“This is not just a corporate acquisition. It is also a strategic move to secure supply chains. The U.S. has a clear plan and is implementing it to regain control over chains it outsourced in recent decades,” she said.

According to Santos, the transaction could attract capital to other projects by positioning Brazil as an investment destination. “But the country is effectively handing over what may be its only producer of heavy rare earths outside Asia to a U.S. company,” she added.

Combined with financing commitments, planned investments, and agreements signed by other rare earth projects still in pre-operational stages with U.S. and international partners, the deal suggests that international cooperation is advancing independently of formal policies or agreements led by Brazil. “In practice, developments are already moving ahead differently,” she said.

Sources involved in pre-operational projects told Valor that the acquisition could trigger reactions from the Brazilian government and strengthen calls for the creation of Terrabras, a proposed state-owned company focused on the rare earth supply chain. They oppose the proposal, arguing it could worsen Brazil’s attractiveness to investors.

“Committing 100% of production to the U.S. for 15 years without bringing investment is exactly what Lula does not want,” said one source, referring to Serra Verde’s supply agreement with a special-purpose vehicle backed by U.S. government agencies and private investors. The source, however, defended the mining company’s decision. “If no other path was viable, it is a transaction like any other—there is no reason to criticize it.”

For the Critical Minerals Association (AMC), the U.S. strategy to secure supply has been “pragmatic” in overcoming the absence of bilateral agreements. “They are showing that if they cannot achieve it through government-level agreements, they will pursue it through state-backed initiatives, as seen in Goiás and in direct negotiations with companies,” said Marisa César, chair of the association.

(Cibelle Bouças contributed reporting in Belo Horizonte)

*By Michael Esquer — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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Former BRB chief tied to alleged fraud benefiting Banco Master

Lawsuit cites irregular capital increases, links to distressed asset deals under investigation

 

 

 

Messages sent by Paulo Henrique Costa, former president of Banco de Brasília (BRB), indicate he may have acted improperly to benefit Daniel Vorcaro’s Banco Master by allowing capital increases that enabled the purchase of loan portfolios from the bank. The conclusion is part of a lawsuit filed by BRB on February 23 against Banco Master, Vorcaro, João Carlos Mansur, of Reag, and investment funds.

The filing points to signs of fraud, including “corporate restructuring, rapid shifts in shareholdings, and risk of asset dissipation by third parties directly or indirectly involved in Operation Compliance Zero.” It also states that BRB acquired R$26 billion in credit portfolios from Banco Master and Will Bank between July 2024 and October 2025.

The lawsuit alleges “serious irregularities in these transactions,” including approximately R$13 billion in distressed securities originated by Tirreno. It seeks to freeze BRB shares held by defendants linked to Banco Master.

Messages attributed to Costa suggest he personally selected three funds linked to Master and Reag to participate in capital injections into BRB. “It will be split into three vehicles. Please proceed with a new [subscription] of R$250 million,” one message reads.

The exchange refers to BRB’s capital increase carried out in May 2024, when the bank raised R$290 million from private investors connected to funds within the Master/Reag ecosystem, under Costa’s direct oversight.

According to the lawsuit, these actions enabled investors tied to Banco Master or mentioned in investigations to hold approximately 23.5% of BRB’s share capital by the end of 2025.

“Through capital increases carried out irregularly—featuring participation by parties that were not shareholders at the record date and involving triangulated share transactions—particularly to facilitate the acquisition of Banco Master’s credit portfolios, approximately 23.5% of BRB shares were acquired by individuals and entities with direct or indirect ties to the Master/Reag ecosystem,” the filing states.

“The funds in question ultimately have beneficiaries linked to the Master/Reag ecosystem, which justifies freezing these holdings to enable potential compensation to BRB for damages caused by the alleged fraud,” it adds.

The lawsuit further argues that funds linked to Banco Master should not have participated directly in the capital increase because they were not part of BRB’s shareholder base at the relevant record date. “Under the rules governing private capital increases, only shareholders as of May 17, 2024—the record date—were entitled to exercise preemptive rights and participate in subsequent rounds,” the filing states.

Costa was arrested last week during the fourth phase of Operation Compliance Zero. According to the Federal Police, there is evidence that he received bribes to facilitate fraudulent transactions involving Banco Master.

Investigators allege he was to receive six properties valued at R$146 million. These payments were allegedly halted after Vorcaro was improperly informed about confidential investigations involving Banco Master. Even so, authorities traced payments to Costa exceeding R$74 million.

Brazil’s Federal Supreme Court (STF) Second Panel began reviewing on Wednesday a decision by Justice André Mendonça ordering Costa’s arrest. During the same phase of Operation Compliance Zero, lawyer Daniel Monteiro—who acted on behalf of Banco Master—was also detained.

Valor contacted Costa’s legal defense, but no response was provided by the time of publication.

  • By Tiago Angelo, Valor — Brasília
  • Source: Valor International
  • https://valorinternational.globo.com/
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Companies delay local bond deals as demand weakens

High rates, war and a growing number of corporate restructurings are making investors more cautious, leading firms to shelve fixed-income offerings

 

 

 

Brazilian companies are postponing local bond deals, including financial bills and debentures, as investors grow more risk-averse. Concerns that interest rates will remain high for longer, combined with global inflation pressures linked to the war in Iran and a fresh wave of corporate restructurings, have heightened caution.

As a result, companies have chosen to shelve planned issuances for now due to weak demand, people familiar with the matter said.

At home, rising corporate leverage has become a growing concern. Investors fear that more companies could join the list of distressed borrowers, which has expanded in recent weeks, prompting closer scrutiny across the market.

More recently, delays in the release of financial statements by sanitation company Aegea further dented sentiment. Investors are increasingly stepping back from private credit or waiting for better market conditions before committing new capital.

The risk-off mood has also affected financial bills issuance. RCI Brasil, the local financing arm of Renault Group, postponed a fundraising citing “current market conditions,” while automaker Stellantis delayed closing its own deal. The impact has extended to direct-lending funds, known in Brazil as FIDCs.

According to asset managers and banking executives, part of the capital is being redirected toward safer instruments, such as certificates of deposit issued by large banks and backed by the Credit Guarantee Fund.

Other investors are simply holding cash, waiting for clearer visibility before reallocating funds.

One senior fixed-income banker said spreads in private credit deals had been below what he described as a “natural level,” reflecting strong demand at a time when funds were still deploying earlier inflows.

In recent weeks, however, many transactions have triggered so-called “market flex” clauses, which allow banks to adjust terms such as pricing or maturities in response to significant changes in market conditions. That was the case with deals by mobility infrastructure company Motiva and Minas Gerais power utility Cemig, sources familiar with the transactions said. Cemig ultimately raised R$1.15 billion, roughly half of the initially planned amount.

“Activating this type of clause is not common. It gives banks the right to adjust terms, such as tenor or pricing, in response to extreme events,” said Gustavo Rugani, a partner in capital markets at TozziniFreire.

A banking executive said the use of such clauses reflects the fact that many deals brought to market this month were structured earlier this year, when sentiment was more optimistic and expectations pointed to sharper cuts in the Selic base rate.

Unsold bonds

Given the current backdrop, some companies have opted to wait for improved conditions and withdrawn offerings altogether, another market participant said. “For some, it now makes more sense to rely on bank financing,” the person said.

A further deterrent has been the fact that many recent deals—such as a R$1.56 billion issuance by fuel distributor Vibra—ended up being largely taken onto banks’ balance sheets. In Brazil, underwriters typically provide firm underwriting, meaning they absorb any unsold bonds.

“Banks ended up holding more securities than they wanted and now have less room and appetite, which also helps explain the slowdown in issuance,” another banking executive said.

According to this source, the reopening of dollar-denominated issuance for Brazilian companies has also led larger issuers to consider tapping international markets instead of raising funds locally.

Market mood

Pedro Breviglieri, a credit manager at Reach, said the environment remains highly fluid, making it difficult to determine whether the recent widening in spreads will persist. He noted that an end to the war in Iran could help clarify the outlook.

One issue being closely watched is whether the slowdown in primary issuance could lead to a shortage of assets for fund managers to allocate. “If that happens, we could see a shift toward the secondary market, which would also affect spread dynamics,” he said.

Breviglieri said the current environment differs from 2023, when Brazil’s private credit market was last shaken. At that time, unexpected events such as the accounting scandal at retailer Americanas undermined investor confidence. Now, stress appears more concentrated among companies struggling to deleverage in a high-rate outlook.

Fabio Jacob, head of local debt at Scotiabank, said the situation is far from comparable to 2023 “because there is no concern about systemic risk.” Companies that can afford to wait are likely to delay issuance until conditions improve, he said. “It takes time to unlock the market. Since March, many bonds have remained on banks’ balance sheets, and we need to wait until that inventory is gradually distributed.”

Structural demand

Despite the current challenges, the outlook for Brazil’s private credit market remains broadly positive, according to Luis Sales, head of products at Banco Fator.

“The market remains strong and its structural outlook has not changed,” he said. “What we are seeing is more of a postponement of issuance decisions amid both domestic and external noise. But given leverage levels, companies will still need funding to roll over debt and sustain operations.”

Rugani also noted that refinancing needs should soon bring issuers back to the market. “Companies still need funding and need to refinance more expensive debt,” he said. “Even expectations of a Selic rate at 12% by the end of 2026 were already encouraging liability management, but the need to raise funds remains.”

Thiago Junqueira, a partner at law firm Pinheiro Neto, said the market reflects a period of increased investor scrutiny. He noted that caution persists, as further debt restructuring cases are expected to emerge.

For now, market participants say there is little visibility on when conditions will improve. One executive said any recovery is likely to begin at the company level, with firms strengthening balance sheets and reducing leverage.

The companies mentioned declined to comment.

*By Fernanda Guimarães and Rita Azevedo — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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