NEWSLETTER

July 2026

 

07/06/2026

 

ALCOA TO BUY SOUTH32’S ALUMINA AND BAUXITE ASSETS FOR $4.1BN

Deal spans Australia, South Africa, Brazil, including stakes in MRN, Alumar, with synergies estimated at $900m

 

Alcoa announced on Tuesday (30) a final agreement to acquire South32’s interests in bauxite, alumina, and aluminum assets for approximately $4.1 billion in a cash-and-stock transaction.

 

The deal covers operations in Australia, South Africa, and Brazil—including stakes in Mineração Rio do Norte (MRN) and the Alumar industrial complex—as well as a contingent payment of up to $750 million tied to future alumina and aluminum prices.

 

Alcoa will acquire South32’s interests in the Boddington bauxite mine and Worsley alumina refinery in Western Australia; the Hillside aluminum smelter and Bayside asset in South Africa; and the Mineração Rio do Norte (MRN) bauxite mine and the Alumar complex—comprising an alumina refinery and aluminum smelter—in Brazil. The Mozal operation in Mozambique is not included in the transaction.

 

Operating in Maranhão state since 1980, Alumar is an industrial complex that includes an alumina refinery, aluminum smelter, port, and environmental reserve. The alumina refinery is owned by a consortium comprising Alcoa (54%), South32 (36%), and Rio Tinto (10%). The aluminum smelter is owned by Alcoa (60%) and South32 (40%).

 

MRN, Brazil’s largest bauxite producer, is jointly owned by Glencore (44%), South32 (33%), and Rio Tinto (22%).

 

According to Alcoa, the acquisition is expected to generate approximately $900 million in synergies and immediately improve key financial metrics, including earnings per share and free cash flow.

 

Alcoa will pay $3.1 billion in cash and issue approximately 17 million new common shares to South32, valued at about $1 billion, bringing the total transaction value to $4.1 billion. The new shares will represent roughly 6% of Alcoa’s outstanding share capital following issuance.

 

The company has secured financing through a $3.1 billion bridge commitment from Goldman Sachs and plans to replace it with cash on hand and long-term debt before closing.

 

According to Alcoa, the acquisition will add a portfolio of high-quality, low-cost, globally diversified mining, refining, and smelting assets, further strengthening its integrated “mine-to-metal” platform.

 

“This is the type of opportunity Alcoa is prepared to execute,” Alcoa CEO William F. Oplinger said in a statement. “These high-quality, globally relevant assets are an excellent fit with our portfolio and align with our strengths as a leading upstream aluminum producer. With our proven operating model and global capabilities, we are well positioned to enhance performance, unlock value, and support the long-term success of these assets within Alcoa.”

 

The transaction is expected to close in the first half of 2027, subject to approval by South32 shareholders, regulatory clearances, and other customary closing requirements.

 

Source: Valor International

https://valorinternational.globo.com/

 

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07/06/2026

 

POLICE SUSPECT MINING ENTREPRENEUR USED REAG FUNDS TO HIDE ASSETS

Investigation says Lucas Kallas may have used fund structures to launder money from alleged mining fraud

 

Brazil’s Federal Police suspect that mining entrepreneur Lucas Kallas, who has been indicted for environmental crimes and unauthorized mining, may also have used Reag’s investment fund structure to hide assets and launder money from his alleged fraud in the sector.

 

It is the first time the Federal Police have raised suspicions involving the use of funds managed by asset manager Reag in connection with the mining industry. According to information obtained by Valor, the investigation is expected to move forward on that front.

 

Reag was liquidated by Brazil’s Central Bank in January this year after the Federal Police said it was allegedly being used to launder money and hide assets belonging to criminal organizations and Daniel Vorcaro, who was the controlling shareholder of Banco Master.

 

The suspicion was raised in the Federal Police’s final report on Operation Parcours, which became public over the weekend and indicted Kallas and 16 other people for allegedly taking part in a scheme that illegally exploited a mine in a protected heritage area of Belo Horizonte.

 

According to investigators, after Kallas entered the business, a plan originally intended to restore the area was improperly used to expand mining activity without authorization, causing losses of R$832 million.

 

References to Reag

 

The Federal Police came across references to an investment fund at two different points in the investigation. In the first, investigators identified messages mentioning Reag after obtaining access to the e-mail account of the entrepreneur’s father. The inbox contained a message from an executive at Cedro Mineração, a company owned by Kallas, asking an asset manager to register the entrepreneur’s sister in a Reag fund.

 

Investigators were struck by the fact that the sister was not included in the e-mail exchange and that most of the assets declared in her registration form came from a company whose CEO is the same Cedro executive who had sent the e-mail.

 

According to the Federal Police, Kallas’s sister declared assets of R$204 million in the registration form, of which R$200 million referred to a stake in Monte Líbano Participações, whose CEO is a Cedro executive. The form also indicated that more than R$10 million would be invested. “The form also indicated that Francine [Kallas, the entrepreneur’s sister] would be willing to invest more than R$10 million, with the possibility of allocating up to 50% of that amount to Reag itself,” the Federal Police said in the report.

 

Mining asset dispute

 

The Federal Police also took testimony from an engineer–whose name was not disclosed– at Flapa, a company in the mining sector that operated at a mine belonging to Kallas’s group and that is at the center of Operation Parcours: the Granja Corumi mine.

 

In her testimony, she said Flapa was in court disputing two other mineral exploration areas with Kallas’s group and that one of those areas, known as Serra do Lessa, in the municipality of Itabirito, Minas Gerais, had been partially acquired by the Motezuma fund, managed by Reag.

 

For investigators, these elements indicate the need to expand the probe into the use of Reag’s fund structure by Kallas’s business group and his relatives. In the Parcours report, the Federal Police itself acknowledged that the registration of Kallas’s sister in the Reag fund does not allow it to state, “in isolation, that resources from the Granja Corumi mine were directed to Reag.”

 

“However, it reinforces the need to deepen the line of investigation into a possible parallel asset structure, use of a straw person, concealment of the ultimate beneficiary and money laundering within the economic group linked to Lucas Prado Kallas, especially given the interest in mining assets,” the report says.

 

What the parties say

 

In a statement, Lucas Kallas’s press office said it has full confidence that his innocence will be demonstrated, “because the indictment rehashes old facts that had already been investigated and shelved by the courts.” It also said Cedro has a shareholder structure that is known and declared to all authorities.

 

“Investment in funds is an ordinary practice in the financial system, using private funds declared to all oversight bodies. In the case of Flapa, there is a commercial dispute between the parties that was taken to court and in which Cedro prevailed at all levels, including higher courts,” the statement said.

 

Reag said Lucas Kallas “was never a Reag client,” as can be verified on the website of Brazil’s Securities and Exchange Commission (CVM). It also said the Motezuma fund was “administered by Planner and managed by Latache,” the same asset manager to which the entrepreneur’s sister’s registration form was sent.

 

Reag did not say whether Kallas’s father or sister held stakes in Reag funds. The other people mentioned could not be reached.

 

Source: Valor International

https://valorinternational.globo.com/

 

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07/07/2026

 

BRAZIL URGES U.S. TO DROP PROPOSED 12.5% TARIFF

Lula administration says punitive trade measures would cause unnecessary economic damage and warns against unilateral actions

 

President Luiz Inácio Lula da Silva’s administration filed on Monday (6) a response to the findings of an investigation conducted by the Office of the United States Trade Representative (USTR) under Section 301.

 

In the document, the Workers’ Party government asks the U.S. to drop its proposal to impose an additional 12.5% tariff on imports of several Brazilian products, arguing that the measure would cause unnecessary economic damage and that Brazil should not be targeted by any tariff of a “punitive nature.”

 

The 13-page document is signed by Foreign Minister Mauro Vieira. It says that refraining from imposing the tariff would preserve the spirit of cooperation that has characterized U.S. and Brazilian efforts on the matter.

 

Throughout the document, the Brazilian government rebuts the USTR’s accusations and says the agency’s findings cannot be “arbitrary.” The U.S. justification for imposing the 12.5% tariff on Brazil is that the country, along with 59 others, failed to ban or monitor imports of goods produced with child or forced labor.

 

According to Vieira, tariffs on Brazilian products would not advance the goal of eradicating forced labor, would not make Brazil’s existing measures more effective, and would not encourage “additional reforms.” He also says the issues raised in the investigation would be better addressed through international cooperation and engagement rather than punitive trade measures.

 

Terrorism designation

 

In a separate effort to respond to U.S. accusations, Brazil’s Foreign Ministry sent a letter to the Lower House saying there is a possibility that the U.S. government could use military force in Brazil if the Comando Vermelho (CV) and Primeiro Comando da Capital (PCC) criminal groups are classified as foreign terrorist organizations.

 

The letter was sent on July 1 in response to a request for information from Congressman Evair Melo (Republicans Party). In it, Itamaraty, as Brazil’s Foreign Ministry is known, describes the U.S. move as “unilateral,” says the country was not formally notified of Washington’s intention, and warns that the measure could create an opening for the use of military force.

 

“The unilateral designation in question could be invoked as justification for extraterritorial actions against Brazilian institutions, particularly in the financial, migration, and criminal spheres. There is also a risk of U.S. military force being used against national territory,” says the text signed by Vieira.

 

The Brazilian government says it has repeatedly stated that such a designation would bring no concrete benefits to the fight against organized crime. Itamaraty says the measure could have significant consequences both economically and for national sovereignty.

 

The letter argues that the designation could be used by U.S. authorities to apply unilateral and extraterritorial administrative and judicial measures against Brazilian individuals, companies, or organizations. The Foreign Ministry also stresses that Brazil and the United States already have international cooperation mechanisms considered effective in fighting transnational criminal organizations.

 

Melo, who filed the request for information, said he considered Itamaraty’s answers “insufficient.” According to the congressman, Vieira did not say whether his assessments of the potential impacts were based on technical opinions, diplomatic notes, specialized studies, or other official documents.

 

Source: Valor International

https://valorinternational.globo.com/

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07/07/2026

 

EL NIÑO RAISES INFLATION RISKS, MORGAN STANLEY SAYS

Bank estimates a 0.84-percentage-point impact on inflation in its baseline scenario but warns the effect could double to 1.68 percentage points

 

Morgan Stanley economists are increasingly concerned about the potential impact of El Niño on Brazil’s economy, particularly on inflation. The U.S. bank’s baseline scenario assumes a moderate climate pattern but already points to significant effects on the country’s consumer price index. A stronger El Niño, however, could amplify those pressures and make it more difficult for Brazil’s Central Bank to follow its usual strategy of looking through weather-related inflation shocks.

 

Under Morgan Stanley’s baseline scenario, El Niño would add a cumulative 0.84 percentage point to Brazil’s official consumer price index (IPCA), with 0.34 percentage point in 2026 and 0.50 percentage point in 2027. Economists Thiago Machado and Ana Madeira expect the climate pattern to peak in the fourth quarter of this year.

 

Based on that scenario, the bank forecasts inflation at 5% at the end of this year and 4% in 2027, assuming food inflation of 7.2% in 2026 and 5.2% next year.

 

“In a strong El Niño scenario, more severe droughts and floods could significantly reduce agricultural productivity, increase transportation costs, and trigger sharp rises in food prices—particularly for coffee, sugar, grains, and perishable products—potentially adding 1.26 percentage points to the IPCA,” the Morgan Stanley economists wrote.

 

The bank also outlined a third scenario involving a very strong El Niño. Under those conditions, a sharp acceleration in food prices could add as much as 1.68 percentage points to headline inflation, “well above the range historically observed during strong El Niño episodes,” the economists said.

 

The bank’s assessment underscores heightened concern about the inflation outlook and its implications for monetary policy. Even so, Machado and Madeira believe the bar for further increases in the Selic policy interest rate remains high, even under a strong El Niño scenario.

 

“Past episodes suggest the Central Bank does not respond mechanically to El Niño-driven food inflation, and the current disinflation in oil prices should provide some short-term relief for inflation,” the Morgan Stanley economists said.

 

They cautioned, however, that the current environment already favors a more hawkish monetary policy stance because of inflation risks stemming from unanchored inflation expectations, resilient economic activity supported by fiscal measures, and expectations of higher global interest rates.

 

That combination of factors, they argued, “reduces the room for the Central Bank to simply look through an El Niño episode, especially if it proves to be strong or extreme.”

 

As a result, Morgan Stanley sees a risk that the monetary authority may be unable to resume its monetary easing cycle by December.

 

Source: Valor International

https://valorinternational.globo.com/

 

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07/13/2026

 

BRAZIL TRANSPORT GROUP WARNS OF R$12BN HIT FROM WORKWEEK REFORM

Industry association says proposed changes to 6×1 work schedule would raise costs, worsen labor shortages, increase freight, transit fares

 

The National Confederation of Transport (CNT) estimates that a proposal to amend the Constitution (PEC) to abolish Brazil’s six-days-on, one-day-off (6×1) work schedule would have a direct annual cost of nearly R$12 billion for the transportation sector, driven by higher operating expenses across all modes. In an interview with Valor, CNT President Vander Costa warned that the proposal would also worsen labor shortages at a time when the industry is already struggling to recruit workers, while encouraging informality.

 

The proposal could also affect urban public transportation beyond higher operating costs, with repercussions for services provided to commuters. According to Costa, companies in the sector are assessing the potential impacts of the change and evaluating possible responses. He called on the Senate to hold a broad debate before voting on the measure.

 

As an alternative, the CNT argues that working schedules should be determined through collective bargaining rather than a constitutional amendment. “We do not believe working hours should be locked into the Constitution,” Costa said. He added that consumers would ultimately bear the measure’s costs through higher public transit fares and freight charges.

 

At the same time, the CNT is monitoring other legislation moving through Congress, including the Freight Measure (MP do Frete), a provisional presidential decree that would tighten rules and penalties for failing to comply with Brazil’s minimum freight rate. The measure, which expires on Thursday (16), was approved by the Chamber of Deputies with amendments that the confederation considers difficult to implement, including the creation of a minimum wage for long-haul truck drivers.

 

Asked about the timeline for the Senate vote and the possibility of a truckers’ strike, Costa downplayed the risk. “Only those who are not in the industry fear a strike,” he said.

 

Below are key excerpts from the interview:

 

6×1 work schedule

 

“We estimate an annual impact of nearly R$12 billion, but what concerns us most is not the financial cost, because that will eventually be passed on through prices and generate inflation. The biggest concern is the labor shortage. Today, transportation employs 2.5 million workers, and several segments are already facing shortages. We are running simulations to determine what can be done, while continuing to work in the Senate to ensure the debate is conducted more transparently. We hope the final decision reflects what is best for society as a whole, not for a single group.”

 

Urban transportation

 

“The smallest impact would be higher costs. If operators need to hire more drivers or pay overtime, municipalities will face higher expenses, diverting resources from other priorities into public transportation. One alternative some operators are already evaluating is reducing the number of trips, especially on weekends. What would happen then? Workers on their days off would end up waiting longer for buses. Another option is increasing bus capacity with bi-articulated vehicles, but that is a long-term solution.”

 

CNT’s proposal

 

“We believe progress should come through collective bargaining, which has worked well in Brazil. The Constitution sets a maximum workweek of 44 hours, while the national average is 38 hours. That shows sectors that can offer more time off are already doing so. But we cannot impose the same rule on transportation, where some operations require seven-day coverage.”

 

Transition period

 

“If the change has to happen, we support a longer transition period. It is much easier for companies to absorb higher labor costs if working hours are reduced gradually—for example, one hour per year rather than two hours every two months. If businesses have time to adapt, alternatives can be developed to prevent consumers from bearing the cost through inflation.”

 

Freight Measure

 

“The Lower House introduced changes that are almost impossible to implement, such as a minimum wage for long-haul drivers. That provision has nothing to do with the original measure. Another concern involves driver registration. To reduce cargo theft, the industry has invested heavily in risk management, and these companies often refuse cargo assignments for several reasons, including financial delinquency, since indebted drivers are considered more vulnerable to criminal recruitment. The revised text says drivers can only be rejected if they have a final criminal conviction. We believe that could increase cargo theft.”

 

Risk of a strike

 

“It is very unlikely the industry will react that way. Only people outside the sector fear a strike. Even if isolated protests occur, as long as the police guarantee both the right to demonstrate and the public’s freedom of movement, there is no realistic prospect of a strike.”

 

Fuel subsidies

 

“With renewed attacks [in the Middle East], everything could change. It may be better to wait. Worse than expensive diesel is having no diesel at all. I see the government making a strong effort to minimize the impact on pump prices, but fiscal responsibility must also be preserved. To improve the situation in the long run, Brazil needs to expand its refining capacity so it is no longer dependent on imports.”

 

Interest rates

 

“Interest rates are high in Brazil because government spending remains elevated. Once we begin generating sustained fiscal surpluses, rates will come down. High interest rates may be even more damaging than high diesel prices. For our sector, they reduce investment in fleet renewal. Lowering the Selic rate is essential to reduce financing costs.”

 

Proposals for presidential candidates

 

“We intend to present proposals to encourage public transportation and expand investment in transport infrastructure. We are particularly concerned about improving intermodal transportation. We support more investment, but with fiscal responsibility.”

 

Extreme weather events

 

“We have invested in areas affected by climate-related disruptions, but it is still far from enough. Most companies remain focused on fleet renewal and on studying alternative fuels.”

 

El Niño

 

“Whenever there are heavy rains, there is a risk that Brazilian highways will suffer damage that disrupts transportation, requiring alternative routes. But our greatest concern today is the possibility of river transportation being interrupted because waterways become unnavigable.”

 

Organized crime

 

“When it comes to cargo theft, which has often been used as a way to launder money, we have invested heavily in preventive security. Once a crime occurs, however, it becomes a matter for law enforcement. Risk management is essential. Earlier this year, Congress approved a law allowing authorities to suspend the corporate taxpayer registration (CNPJ) of companies found in possession of stolen goods, and we want to see that measure effectively enforced. The goal is to make it clear that buying stolen cargo is not good business.”

 

Source: Valor International

https://valorinternational.globo.com/

 

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07/14/2026

 

BRAZIL BECOMES SHELL’S LARGEST OIL-PRODUCING COUNTRY

After 28 years with Shell, CEO Cristiano Pinto da Costa will leave to lead expansion of Abu Dhabi-based XRG

 

Four years after taking over as CEO of Shell Brasil, Cristiano Pinto da Costa is leaving the company, having doubled its oil asset portfolio since he assumed the role in 2022. At the time, Shell held interests in about 30 oil blocks in Brazil; today, it operates in nearly 70. Those assets produce around 500,000 barrels of oil per day, making Shell the country’s second-largest oil producer, behind only Petrobras. In 2025, the company invested R$12.5 billion in Brazil.

 

“Shell has never invested as much in Brazil as it did in 2025. The country has become the group’s largest oil-producing operation worldwide,” Costa said. Among the key investments made during his tenure was the development of the Orca project (formerly Gato do Mato) in the Santos Basin pre-salt region. Shell also acquired acreage in licensing rounds covering the southern portion of the Santos Basin and the Pelotas Basin, between the states of Rio Grande do Sul and Santa Catarina, in partnership with Petrobras.

 

After 28 years with Shell, Costa will leave the company on July 31 to lead the expansion of XRG, a company created in 2024 by Abu Dhabi’s state-owned oil company Adnoc. The focus, he said, will be on petrochemicals, low-carbon businesses, and natural gas, backed by investments of between $100 billion and $150 billion through 2030. XRG plans to diversify its investments beyond the Middle East.

 

Beginning August 1, Costa will be succeeded by Portuguese executive João Santos Rosa, who most recently led Shell’s operations in Italy. According to Costa, XRG’s offer came just as he was planning to return to an international role. The opportunity aligned with XRG’s growth strategy, which includes expanding across the Americas, from Canada to Argentina. “I spent nearly 20 years of my career outside Brazil, and although I was very happy to return, I felt it was time to go back to the international market and take on a global role.”

 

In his view, Brazil offers opportunities that could become part of XRG’s future projects. At a time when geopolitics has increasingly shaped global energy markets, Brazil has gained strategic importance alongside the U.S. and Canada. Since the outbreak of the war in Ukraine in 2022, the pace of the global energy transition has slowed as countries prioritized energy security.

 

Brazil has emerged as a key player both in oil and gas and in the energy transition, thanks to its vast oil reserves, “fantastic” hydropower resources, strong wind and solar generation potential, and abundant feedstock for biofuels, particularly ethanol produced from sugarcane and corn, Costa said.

 

He expects the growing adoption of electric vehicles in Brazil to allow ethanol currently used in passenger cars to be redirected over the coming decades toward transportation segments that are harder to decarbonize, such as heavy-duty vehicles, shipping, and aviation. Shell, he added, is already testing ethanol blends in offshore support vessels by mixing the biofuel with conventional marine fuel to reduce carbon emissions.

 

Beyond its strong biofuels potential, Brazil has also become a major global oil exporter, driven by the development of the pre-salt fields over the past 15 years. According to Costa, Brazilian crude does not need to pass through any “complicated” shipping routes to reach key markets such as China and Europe.

 

Another positive development, he said, was the resumption of annual oil licensing rounds starting in 2021. “Brazil can become a major destination in the new global reallocation of investment capital if we get competitiveness, environmental licensing, and regulatory, legal, and fiscal stability right,” he said.

 

On that front, Costa argued that the government’s recent decision to extend the oil export tax effectively reopens existing contracts and increases the tax burden on an industry that already allocates two out of every three barrels produced to taxes, special participation payments, and royalties. That, he said, could leave Brazil at a disadvantage relative to competing oil frontiers such as Guyana, Argentina, and Namibia. In other producing countries, he noted, the tax burden typically rises when oil prices increase and falls when prices decline.

 

“Exploration and production concession models vary around the world. One reason Brazil has been attractive compared with other jurisdictions is that its model is independent of oil prices. You decide to take the risk. If prices rise, you earn more; if they fall, you bear the losses yourself,” he explained.

 

Costa continued, “It turns out that countries are choosing one contractual model, but then are adjusting it throughout the life of the contract depending on short-term needs. That also creates legal uncertainty—it changes the terms of the contract.”

 

According to Costa, his successor will inherit an organization whose commitment to Brazil is recognized within the Shell Group as stronger than that of most other countries. He said João Santos Rosa’s move to Italy was planned with an eye toward his eventual succession in Brazil. Although Italy is a smaller operation, he said, the two countries share similarities that should ease the transition. “I hope he will be as happy leading Shell Brasil as I was.”

 

Source: Valor International

https://valorinternational.globo.com/

 

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07/14/2026

 

BRAZIL’S OIL INDUSTRY WEIGHS FRESH LEGAL CHALLENGE TO EXPORT TAX

Producers argue government’s decision to extend levy reinforces concerns that it is aimed at raising revenue rather than addressing fuel market disruptions

 

Brazil’s oil industry is considering a fresh legal challenge after the government renewed its controversial export tax on crude, according to people familiar with the matter. Producers argue the extension undercuts Brasília’s claim that the levy was introduced to cushion the domestic impact of the Middle East conflict, instead reinforcing the view that it is primarily a revenue-raising measure.

 

According to the sources, extending the tax through an administrative act gave it a regulatory character and weakened the government’s argument that it needed additional revenue to offset fuel subsidies. Data from the Ministry of Finance show the tax generated R$1.05 billion in revenue between March and May. June figures have not yet been released.

 

Last week, the government issued a decree under which the Foreign Trade Chamber (Camex), part of the Ministry of Development, Industry, and Trade (MDIC), extended the tax for another two months, just before the provisional presidential decree (MP) 1,340/2026 was due to expire. The measure had imposed a 12% levy on gross revenue from crude oil exports. Because Congress failed to convert the provisional decree into law, it lapsed. Without a new decision, the tax would have ceased to apply as of Friday (10).

 

When the government first issued the decree in March, several companies filed lawsuits challenging the tax and expected it to expire without congressional approval. Those cases remain pending. With the extension now in place, additional lawsuits are expected.

 

According to the sources, about a week before MP 1,340 was set to expire, there were indications the government intended to keep the export tax through a legal instrument viewed as weaker than a provisional presidential decree. “If this were the appropriate legal instrument [to maintain the tax], why didn’t they use it from the outset instead of issuing a provisional decree, which requires subsequent approval by Congress?” one source questioned.

 

Industry representatives also point to another factor supporting the view that the government’s main objective is to increase tax revenue from exports. Brazil’s refining capacity is operating close to its limit, while domestic fuel demand still requires imports. Because crude oil production far exceeds refining capacity, exporting the surplus is unavoidable, the sources said. In their view, this undermines the government’s claim that the measure is necessary to prevent domestic fuel shortages.

 

The legal fragility of the extension has also heightened concerns over regulatory instability. “The decision deepens concerns over the use of the Export Tax and raises important questions about legal certainty, regulatory predictability, and respect for due legislative process,” the Brazilian Association of Independent Oil and Gas Producers (Abpip) said in a statement.

 

Francisco “Chicão” Bulhões, founder and president of the Brazilian Institute for the Regulatory Environment and Freedom (Barla) and former Rio de Janeiro secretary for economic development, said taxing crude exports through administrative acts not only increases legal uncertainty but also makes corporate planning more difficult and the investment environment less predictable.

 

In his view, the tax will not reduce fuel prices at the pump and may have consequences beyond the government’s fiscal position. “When tax measures become instruments for raising short-term revenue, it hurts the competitiveness of the Brazilian economy,” Bulhões said.

 

Alexandre Chequer, global head of energy, oil and gas at Tauil & Chequer Advogados in association with Mayer Brown, said companies with projects already underway—or those evaluating assets to enter Brazil—have postponed investment plans because of the tax. He noted that the measure was adopted only months before a presidential election and argued that even if companies ultimately succeed in overturning the extension in court, the damage has already been done.

 

“These are highly capital-intensive investments. Companies invest billions to develop an oil field, and suddenly a 12% export cost is imposed. The damage this causes to the country in the short, medium, and long term is enormous,” Chequer said.

 

Source: Valor International

https://valorinternational.globo.com/

 

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07/14/2026

 

BRAZIL MANUFACTURERS’ CONFIDENCE FALLS TO LOWEST SINCE PANDEMIC

Industrial sentiment deteriorates further as concerns over global tensions and potential U.S. tariffs weigh on expectations

 

Brazilian manufacturers grew even more pessimistic this month as current business conditions and expectations for the next six months continued to deteriorate. According to the National Confederation of Industry (CNI), its Industrial Entrepreneur Confidence Index fell from 46.7 points in June to 44.4 in July, the lowest reading since June 2020, during the Covid-19 pandemic.

 

The index has remained below the 50-point threshold—which separates optimism from pessimism—for 19 consecutive months. According to the CNI, that is the second-longest stretch of pessimism on record, surpassed only by the 2015–16 recession.

 

“When pessimism persists for such a long period, it tends to translate into fewer jobs, lower production and even the cancellation of productive investment,” Marcelo Azevedo, the CNI’s economic analysis manager, said.

 

The Current Conditions Index fell 0.7 point to 41.6 in July, moving even further below the neutral 50-point mark. Manufacturers said both business conditions and the broader economy are worse than they were six months ago.

 

Meanwhile, the Expectations Index dropped 3.1 points to 45.8, its steepest decline since November 2022, when it fell 10.8 points. The latest reading indicates weakening confidence in companies’ own prospects and growing pessimism about the economy.

 

“The deterioration in expectations is likely linked to growing uncertainty over the external environment, including the escalation of the conflict in the Middle East earlier this month and the possible return of U.S. tariffs on Brazilian products,” Azevedo said.

 

Source: Valor International

https://valorinternational.globo.com/

 

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07/17/2026

 

U.S. TARIFFS HIT $11BN IN EXPORTS, DEEPEN BRAZIL TRADE SLUMP

About 3,000 products face additional levies of up to 37.5% as bilateral flows have already fallen 13% this year

 

New U.S. tariffs will leave Brazil facing some of the toughest restrictions on access to the American market, affecting about 3,000 products and more than $11 billion in industrial and agricultural exports, said the American Chamber of Commerce in Brazil, known as Amcham Brasil.

 

The U.S. surcharge on Brazilian exports could now reach 37.5%, the chamber estimates.

 

Amcham also warned that the tariff increase could deepen the contraction in bilateral trade, which has already fallen 13% this year, while weighing on investment flows between the two countries.

 

The new 25% tariff takes effect next Wednesday (22), and stems from an investigation conducted under Section 301 of the U.S. Trade Act. The provision allows Washington to impose sanctions on countries it considers to be acting against U.S. interests.

 

In Brazil’s case, the U.S. government claims that Pix, the country’s instant-payment system, harms American payment companies and that Brazilian authorities tolerate corruption. Washington has also criticized Supreme Court rulings involving U.S. technology companies.

 

Sector impact

 

Economists and foreign-trade specialists do not expect the latest tariffs to have a significant impact on Brazil’s economy as a whole. The consequences for individual industries, however, could be substantial, forcing companies to adapt and diversify their markets.

 

Experts have also urged the Brazilian government to respond cautiously because of the dispute’s political dimensions.

 

Manufacturers, whose exports to the U.S. were already declining sharply, are bracing for an even more difficult environment. Concern is particularly acute among industries whose products had previously been exempt but will now face tariffs, including dissolving pulp.

 

Paper, wood panels, medium-density fiberboard, particleboard and laminate flooring will also be affected.

 

Several major industries escaped the new levies, largely after their U.S. customers persuaded the administration that tariffs would be damaging. Exemptions were granted for pig iron and agricultural products including coffee, orange juice, beef, honey and seafood.

 

The U.S. government’s decision reflects the importance of those Brazilian goods to domestic supplies. Tariffs could have increased costs and added to inflationary pressure for American consumers.

 

Government response

 

Vice President Geraldo Alckmin said Brazil would invoke its Reciprocity Law “at the appropriate time” and provide support to the affected industries.

 

During the Section 301 investigation, the U.S. government sought the complete opening of Brazil’s chemicals market, Industry, Trade and Services Minister Márcio Elias Rosa said. Washington also requested the elimination of tariffs on industrial goods and access to Brazil’s automotive market.

 

The U.S. additionally sought an agreement restricting investments in critical minerals and rare earths by “non-market-oriented actors” and “foreign entities.”

 

“We obviously and clearly rejected any demand that could put at risk or violate the national interest, as is the case with Pix, or that could cause serious damage or losses to Brazilian industry,” Elias Rosa said.

 

The Brazilian government presented its “negotiable and non-negotiable” positions at every meeting with U.S. officials, the minister added.

 

Alckmin and Elias Rosa spoke at a press conference also attended by Foreign Minister Mauro Vieira, Finance Minister Dario Durigan, Environment Minister João Paulo Capobianco, Central Bank Chair Gabriel Galipolo and National Justice Secretary Maria Rosa Loula.

 

Diplomatic clash

 

Vieira pushed back against remarks by U.S. Secretary of State Marco Rubio targeting President Luiz Inácio Lula da Silva.

 

Rubio blamed the tariffs on the Brazilian government’s conduct toward the United States. In a post on X, he said Lula had “put his own ego ahead of making a deal for the welfare of the Brazilian people, and these tariffs are the price for that.”

 

Vieira said Rubio had attacked “the head of state of a friendly country in a crude and arrogant manner.”

 

He argued that what troubled the U.S. government was Brazil’s refusal “to bow” to “excessive ambitions and unreasonable demands” during the Section 301 investigation.

 

By publicly endorsing President Donald Trump’s decision, Rubio signaled that the White House intends to pursue a maximum-pressure strategy. The aim is to force the Brazilian government to make concessions on fiscal, environmental, digital and intellectual-property issues before the U.S. market is reopened more broadly to Brazilian exports.

 

Election politics

 

The U.S. decision has also become ammunition for Brazil’s leading presidential hopefuls.

 

President Lula’s Workers’ Party stepped up its attacks on Senator Flávio Bolsonaro of Rio de Janeiro, the Liberal Party’s likely presidential candidate. Party members used the term “TariFlávio” on social media in an effort to associate the new tariffs with the Bolsonaro family.

 

Flávio Bolsonaro, meanwhile, sought to portray the announcement as the result of inaction by the Brazilian government. He called Lula the “Brazilian Biden,” referring to former U.S. President Joe Biden.

 

Other prospective candidates, including Romeu Zema of the New Party, Ronaldo Caiado of the Social Democratic Party and Renan Santos of the Mission Party, sought to blame both Lula and Flávio Bolsonaro for the dispute.

 

Source: Valor International

https://valorinternational.globo.com/

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07/17/2026

 

CHINESE QUOTA COULD SLASH BRAZILIAN BEEF EXPORTS BY R$4.5BN

Trade group Abiec projects 900,000 tonnes this year, 748,000 tonnes below 2025’s quota-free total

 

Brazil’s meatpacking industry expects to export roughly 900,000 tonnes of beef to China in 2026, down 748,000 tonnes from last year’s record, according to Roberto Perosa, president of the Brazilian Association of Meat Exporting Industries (Abiec).

 

That volume represents barely half of the 1.68 million tonnes of fresh beef China purchased in 2025, and the shortfall could cost Brazilian meatpackers as much as $4.5 billion in revenue. Companies have already moved to cut costs and scale back production.

 

The decline stems from China’s new safeguard measure, which caps Brazilian beef imports at 1.1 million tonnes for 2026. Because Beijing counts cargoes shipped in 2025 but cleared through customs this year, Brazil’s actual 2026 exports will fall short of the authorized ceiling. Through June, 794,600 tonnes had already reached Chinese ports.

 

Abiec now puts the revenue hit at $4.5 billion, based on the 748,000 tonnes of lost volume valued at the average price of shipments to China between January and June—$6,100 per tonne. At the start of the year, the industry had projected a smaller decline of 600,000 tonnes and $3 billion in lost revenue, using 2025’s average price of $5,000 per tonne—an estimate that did not yet account for the carryover of 2025 cargoes toward this year’s quota.

 

Brazilian processors have already halted production of certain cuts and suspended shipments to China starting in July, on the assumption that the quota has been exhausted. Chinese authorities have not yet confirmed the official figures.

 

Industry expectations are that slaughter lines dedicated to the Chinese market will resume in the fourth quarter, allowing exports to restart in mid-November. Given the roughly 40-day sea voyage, those cargoes would arrive in China in 2027, counting toward next year’s quota and avoiding the additional tariff.

 

“Everyone knows how exposed we are to the Chinese market. We’re learning to live with this new reality,” Perosa said at a press conference Thursday (16). “It’s a significant drop [to 900,000 tonnes]. It will show up in our numbers, weigh on the trade balance and reduce Brazil’s overall export volumes. We expect sales to other markets to pick up, but not enough to offset what we’re losing in China.”

 

Sales to China surged in the first half of the year as exporters rushed to ship under the 12% tariff before the quota closed, seeking to avoid a steeper 55% surcharge. The resulting competition for supply pushed prices higher, though it remains unclear whether that pace and those price levels could have held through the second half of the year.

 

Perosa said the industry will need to work to keep the drop in export volumes from deepening further. Overall, Abiec expects exports to end 2026 down 10% from 2025, when Brazil shipped 3.5 million tonnes. “We’re working to hold that line, but the challenges are real,” he said.

 

The fallout is already visible across the sector. Perosa said all Abiec member companies—which account for 98% of Brazil’s beef exports—have taken steps to adapt to the halt in sales to their top customer, including collective furloughs, layoffs, shortened shifts, reduced slaughter volumes and other measures. Many are currently operating at a loss.

 

“We’re having to make more adjustments on the production side than on distribution, but it varies by company. All of them are struggling, from the largest down to the medium-sized and small players,” he said. Perosa added that the squeeze could accelerate industry consolidation, with larger players moving to acquire smaller ones.

 

Beyond the exhausted China quota, Perosa said there is a “strong possibility” that exports to the European Union will be suspended starting in September, as Brazil has yet to provide sufficient technical evidence that cattle destined for the EU market are raised without antimicrobials—a setback that would further dent exporters’ revenue.

 

“It’s a high-value market that takes cuts with no outlet in Asia, and it’s an important part of our product mix. Exports there help ease pressure on domestic price formation,” Perosa said, adding that access to the European market also bolsters the “reputation” of Brazilian beef. “When the EU takes a position, it affects every other market,” he noted.

 

With both China and the EU curtailing demand, global appetite for Brazilian beef is set to shrink. Reduced competition for the product is expected to weigh on export prices, though Abiec has yet to finalize a forecast. Between January and June, Brazil exported 1.7 million tonnes of beef—up 15.5%—generating $9.8 billion in revenue, a 36.2% increase over the first half of 2025. Average prices climbed nearly 18%, to $5,700 per tonne.

 

Perosa said the drag on export revenue will eventually filter through to the domestic market, potentially pushing up beef prices for Brazilian consumers over the medium term.

 

“Prices in the domestic market may ease at first, but costs haven’t come down. Production is likely to fall, and as supply tightens, prices will rise again—that’s the rebound effect we’re seeing,” he said.

 

“If we kept producing the same volume as last year under current market conditions, prices would collapse. But with nowhere for that production to go, there’s no reason for the industry to keep producing at that level for export.”

 

Source: Valoar International

https://valorinternational.globo.com/

 

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07/24/2026

 

U.S. ADDS 12.5% TARIFF ON BRAZILIAN GOODS OVER LABOR PRACTICES

New levy may push tariffs on many exports to 37.5%, while about 2,000 products remain exempt

 

In another protectionist move, the United States announced Thursday (23) an additional 12.5% tariff on Brazilian goods, arguing that the country has failed to address forced-labor practices in its supply chains. The measure applies to a total of 60 countries and takes effect this Friday.

 

For Brazilian products already subject to the 25% tariff imposed under the Section 301 investigation, the new 12.5% levy will come on top of the existing duty. The 25% tariff was announced by the Office of the U.S. Trade Representative (USTR) on July 15 and took effect on July 22.

 

The Brazilian government expects the two rates to be cumulative, bringing the total tariff to 37.5%. Amcham Brasil, the American Chamber of Commerce in Brazil, estimates that a large share of Brazilian products will be subject to the combined rate.

 

Sector impact

 

Development, Industry, Trade and Services Minister Márcio Elias Rosa said at a press conference after the announcement that several Brazilian industries would face the combined tariffs. They include footwear, machinery and equipment, parts and components, apparel and non-pharmaceutical chemicals.

 

About 2,000 products exported to the U.S., including beef, coffee, orange juice and fruit, remain exempt from both tariffs. A complete list of goods subject to the two levies, however, has yet to be released.

 

Washington based its decision on the claim that Brazil purchases goods from countries that fail to uphold adequate labor standards. Those products can therefore enter Brazil at lower prices, creating what the U.S. government considers unfair competition with American producers.

 

Five products were cited in Brazil’s case: aluminum, cotton, electronics, lithium batteries and tobacco.

 

Brazil and 53 other countries will face the 12.5% rate. Canada, Ecuador, the European Union, Indonesia, Mexico and Pakistan were assigned a lower 10% tariff. The U.S. government said the lower rate applies to countries that have taken steps to combat forced labor.

 

The USTR said a broad range of products would be exempt globally, including oil and gas, fertilizers, some food products and goods already covered by Section 232 national-security tariffs, such as automobiles, steel, aluminum and copper.

 

Products that comply with the United States-Mexico-Canada Agreement will also be exempt because of the highly integrated North American supply chain and the significant level of U.S. content in those goods.

 

Brazilian response

 

President Luiz Inácio Lula da Silva’s government criticized the new 12.5% tariff, accusing the U.S. of manipulating the issue without a legal basis “to sustain its protectionist trade policy.”

 

“The Brazilian government rejects the U.S. government’s decision to impose 12.5% tariffs on Brazilian products as a result of the Section 301 investigation concerning import prohibitions related to forced labor,” the presidential communications office, Secom, said in a statement released Thursday night.

 

“In the absence of a domestic legal basis to support its protectionist trade policy, the USTR chose to manipulate an issue that is fundamental to human rights and to the struggle of workers around the world in order to accuse 59 countries and the European Union of unfair practices,” the statement added.

 

Lula’s government also renewed its criticism of the tariffs as “completely arbitrary and unjustified.” It said it would immediately begin the procedures needed to activate mechanisms under Brazil’s Reciprocity Law, approved by Congress, and would bring the dispute before the World Trade Organization’s international dispute-settlement mechanism.

 

Negotiation strategy

 

Despite the government’s public stance, officials view the prospect of invoking the Reciprocity Law as remote. The Lula administration is still assessing the potential consequences of using the legislation. For now, Lula has instructed the government to remain at the negotiating table with the U.S.

 

Finance Minister Dario Durigan also rejected the additional tariff on Brazil. He said that despite the U.S. measures and the conflict in the Middle East, Brazil’s economic situation remains under control.

 

With an eye on this year’s elections, General Secretariat Minister Guilherme Boulos adopted a sharper political tone. He said the election would pit Lula against Bolsonaro’s political movement and Trump’s “colonialist ambitions.”

 

Boulos said the U.S. president was seeking Brazil’s surrender through the tariffs. “The Brazilian people’s response to those who want to subjugate us and to their ever-ready traitors will come at the ballot box,” he wrote on social media.

 

 

Source: Valor International

https://valorinternational.globo.com/

 

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07/24/2026

 

FISCAL WATCHDOG FLAGS RISK FROM STATE-OWNED COMPANIES’ FINANCIAL SITUATION

Possible issues include Treasury contributions, debt payments, increased subsidies to dependent companies, and reduced dividends, IFI says

 

The deteriorating financial condition of some federally owned state-owned companies is heightening fiscal risks for the federal government, according to the Independent Fiscal Institution (IFI), the public finances watchdog linked to the Senate. Those risks include possible capital injections from the National Treasury, higher subsidies for Treasury-dependent state-owned companies, and payments on loans the companies took out under federal guarantees but failed to honor. There is also a risk of lower dividends being paid out to the federal government.

 

The warning appears in the July Fiscal Monitoring Report (RAF), released Thursday (23). The chapter on state-owned companies was written by director Alexandre Andrade and staff member Gustavo Queiroz. Among the companies showing financial deterioration are Correios, Emgepron, and Infraero.

 

Correios, for instance, posted negative operating cash flow of R$692 million in 2025, following a R$2.4 billion deficit the year before. Infraero recorded negative operating cash flow of R$375.4 million, a R$207.9 million deterioration from 2024. The indicator matters because it measures a company’s ability to generate resources through its core business.

 

Operating margin shows further signs of weakness. Correios closed 2025 with a negative operating margin of 42.9%, its worst level since the indicator began deteriorating in 2022. Emgepron also stayed in negative territory, at negative 24.8%, followed by Infraero at negative 10.5%.

 

Operating margin reflects a company’s ability to service its financial debt and invest in its own growth. A negative margin leaves a state-owned company with limited capacity to fund its investment plans or even sustain operations, raising the likelihood of eroding shareholders’ equity or needing capital injections from the National Treasury.

 

The report also flags companies that lean more heavily on financial income than on operating revenue, like Emgepron, ABGF, Infraero, Codern, and Emgea, all show a high ratio of financial income to net revenue, a warning sign for the federal government.

 

According to the IFI, this pattern can point to a shortage of investment projects, low operating efficiency, or reliance on funds from earlier federal capital injections.

 

The report also shows the primary balance of federal state-owned companies steadily deteriorating. After posting a surplus equal to 0.06% of gross domestic product (GDP) in 2022, the group ran deficits of 0.02% of GDP in 2023, 0.07% in 2024, and 0.04% in 2025. On a rolling 12-month basis through May of this year, the deficit reached 0.07% of GDP.

 

Treasury dependence

 

In the institution’s assessment, the worsening fiscal and financial conditions at some companies raise the risk that Treasury-dependent state-owned companies will need supplementary budget allocations or capital injections, adding pressure to the federal government’s primary spending.

 

For companies that are not Treasury-dependent, the main risk lies in weaker cash generation and lower dividend payments to the federal government, along with the possible need for future recapitalizations.

 

Another risk identified is that state-owned companies may fail to repay loans backed by federal guarantees. In such cases, the National Treasury has to cover the debt, adding further pressure on public finances.

 

The IFI notes that the deterioration among state-owned companies is neither uniform nor driven by a single cause but says the data reveal patterns that warrant government attention.

 

Among Treasury-dependent state-owned companies, an analysis of shareholders’ equity, operating cash flow, and the cash adequacy indicator identifies another group with concerning financial conditions: Codevasf, CBTU, Embrapa, HCPA, and EBSERH.

 

“For these companies, it’s important to stress that the issue isn’t solvency in the traditional sense, since their existence depends on Treasury subsidies rather than their own cash generation. The real risk lies in the persistent mismatch between spending and transfers, which tends to translate into pressure for supplementary budget allocations or extraordinary capital injections, competing for fiscal space with other public policies,” the IFI explained.

 

 

 

Among state-owned companies that are not Treasury-dependent, operating margin, exposure to financial income, and earnings-quality indicators point to where the biggest problems lie. Correios, Emgepron, and Infraero show that, even without directly burdening the federal budget, these companies may see their ability to pay dividends impaired or need capital injections—such as the one the federal government plans to provide Correios in 2027.

 

Source: Valor International

https://valorinternational.globo.com/

 

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07/24/2026

 

BRAZIL EXTENDS GASOLINE SUBSIDY AS OIL PRICES CLIMB

Government will keep a R$0.44-per-liter gasoline subsidy in place for another 30 days following renewed tensions in the Middle East

 

Finance Minister Dario Durigan confirmed that Brazil’s government has decided to extend the R$0.44-per-liter gasoline subsidy. The measure was introduced on May 25 but was originally scheduled to remain in effect for only two months, meaning it would expire on Saturday (25).

 

“We will not let the Brazilian people pay more for fuel. We will continue providing this support,” Durigan said when asked about the measure during an interview with BandNews on Thursday (23) evening.

 

In a statement, the Finance Ministry said the ordinance extending the gasoline subsidy was signed by the minister on Thursday and will be published in Friday’s (24) edition of Brazil’s Official Federal Gazette. The subsidy will remain at R$0.44 per liter for another 30 days, effective from July 26.

 

The extension was prompted by the recent surge in Brent crude prices on international markets. The economic team had initially planned to phase out the gasoline subsidy in July after the United States and Iran reached an agreement aimed at ending the conflict in the Middle East. The announcement had driven Brent prices down to around $70 per barrel, close to pre-war levels.

 

The agreement, however, was not implemented, and tensions in the Middle East escalated again. At Thursday’s close, Brent crude rose 7.04% to $100.69 per barrel. As a result, the government decided to maintain the gasoline subsidy for another 30 days.

 

A separate subsidy of R$1.12 per liter for diesel also remains in effect. The Finance Ministry said that measure was extended for an additional 60 days on July 16.

 

Source: Valoar International

https://valorinternational.globo.com/

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07/24/2026

 

PRIVATE CONSUMPTION DRIVES BRAZIL’S POST-PANDEMIC GROWTH, IMF SAYS

The Fund points to a strong labor market, income gains and credit as key factors behind household spending exceeding forecasts

 

The recovery in private consumption has been the main force sustaining Brazil’s economic expansion since the pandemic, the International Monetary Fund said in a report on the country released Thursday (23).

 

With the labor market remaining strong, incomes rising sharply and credit expanding at a robust pace, private consumption has repeatedly exceeded projections made by the Fund staff at the start of each year since 2021.

 

Private consumption accounts for roughly 60% of Brazil’s GDP on the demand side. In the first quarter of this year, household spending rose 1% from the previous quarter, again supported by a tight labor market, credit growth and income-transfer programs, all factors highlighted by the IMF.

 

Consumption strength

 

The report said private consumption has played a larger role in the recovery than other components of demand, including investment. Although investment has also expanded, it remains below its pre-pandemic trajectory.

 

Net exports, meanwhile, have contributed more to real GDP than before the pandemic, supported by strong exports, particularly hydrocarbons. Imports, however, remain below their pre-pandemic path, which the IMF said partly reflects the incomplete recovery in investment.

 

The Fund also pointed to continued fiscal support as another factor behind Brazil’s rebound from the pandemic, noting that government consumption has repeatedly exceeded expectations.

 

In addition, “total primary public spending, including transfers, exceeded forecasts, reflecting higher spending by states and municipalities, partly financed by transfers from the federal government,” the IMF said.

 

Fiscal support

 

The Fund said higher government spending was partly offset by stronger public revenue, driven by both economic growth and tax-policy measures.

 

“Overall, staff assess that fiscal support since the pandemic, through its immediate and lagged effects, added around 2% to the level of real GDP by 2025. This support contributed to output exceeding potential, implying a procyclical impulse,” the report said.

 

The IMF also said the growing number of exceptions to Brazil’s fiscal rules has weakened the path for the primary balance that would otherwise be consistent with meeting the targets.

 

Explaining the fiscal framework that replaced the spending cap in 2023, the Fund noted that Congress approved increases in government spending in 2025 that can be excluded when assessing compliance with primary-balance targets. The permitted deductions could reach as much as 0.7% of GDP by 2027.

 

“Some of the permitted deductions are not related to unexpected events,” the report said.

 

The IMF said the increase in deductions has pushed the trajectory of primary balances further away from the targets established under the fiscal framework and raised the projected path of long-term public debt.By

 

Source: Valor International

https://valorinternational.globo.com/

 

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07/27/2026

 

BROADER FISCAL GAUGE SHOWS STIMULUS RISING TO 4.52% OF GDP

Indicator combining government credit and unpaid budget obligations more than doubled in the second quarter, driven mainly by financial disbursements

 

The fiscal impulse delivered by Brazil’s federal government through credit and the so-called float from unpaid budget obligations reached 4.52% of gross domestic product in the second quarter, or roughly R$150 billion.

 

The estimate comes from economist Alexandre Manoel, of consultancy Global Intelligence and Analytics. In the first quarter, his Expanded Fiscal Expansion Monitor, known by its Portuguese acronym Mefa, stood at 2.19% of GDP. The indicator more than doubled in the following three months, driven mainly by credit operations.

 

Mefa combines credit, other Treasury financial disbursements used to carry out public policies and the float from so-called restos a pagar, or spending authorized under previous budgets but not yet paid.

 

Manoel plans to publish the indicator quarterly. His goal is to provide a broader picture of the stimulus the federal government is transmitting to the economy. The higher the Mefa reading, the stronger the impulse.

 

Economists say measures adopted by the government during this election year have made it harder to ensure fiscal sustainability and for the Central Bank to bring inflation under control. Programs captured by the indicator include Move Brasil, a vehicle-financing initiative, and the expansion of public funds.

 

Broader measure

 

Manoel argues that the traditional fiscal yardstick, the primary balance — the difference between government revenue and non-financial spending — captures only part of what the government is doing to boost aggregate demand.

 

That has become especially relevant, he said, after the government created several credit lines to implement public policies while operating under tight budget constraints.

 

In his view, Mefa’s main contribution is not the indicator itself, but the proposal for a new analytical framework in which fiscal policy is assessed along two dimensions at the same time: fiscal sustainability, measured by the primary balance, and its macroeconomic impulse.

 

“The primary balance tells you how the public accounts are doing. Mefa tells you what kind of impulse the government is transmitting to the economy,” Manoel told Valor. “The result is relevant because it reveals a sharp acceleration in fiscal expansion through channels that are not fully captured by the primary balance.”

 

In the second quarter, the Mefa impulse was driven by financial spending, which reached 3.29% of GDP. That pushed the indicator to its highest level in a decade.

 

Compared with the second quarter of 2022, the primary balance deteriorated by 1.82 percentage points of GDP, while Mefa increased by 5.27 percentage points.

 

“The fiscal expansion is much larger,” Manoel said. “That helps us understand why GDP is still growing at 2% despite high interest rates and why the NTN-B [inflation-linked Treasury bond] is yielding more than 8% in real terms, yet the market does not want it.”

 

With economic activity remaining resilient, investors expect higher inflation and therefore tighter monetary policy, which affects the yield curve. The Selic benchmark interest rate currently stands at 14.25%.

 

Market visibility

 

“It is an important indicator because not everyone in the market has the ability to dig into the details of the public accounts,” said Marcos Mendes, an associate researcher at Insper. “So when someone provides that service by creating an indicator that is easy to track, it helps democratize the information.”

 

Mendes himself occasionally tracks budget resources released through financial channels for lending purposes. His figures also point to strong growth: from 0.64% of GDP in 2022 to 1.45% this year.

 

He highlighted developments that often receive little attention from analysts. The government, for instance, has been changing legislation governing some public funds so that their current cash flow can be used for lending.

 

That is the case with the National Civil Aviation Fund, known as Fnac, and the Social Fund, whose scope was expanded to include the Minha Casa, Minha Vida housing program. As a result, Mendes said, it is misleading to view these credit lines as temporary measures financed solely by accumulated fund surpluses.

 

Wider fiscal lens

 

“We need to broaden the analysis of the public sector well beyond the basic framework that has been used for a long time — the primary balance and government bond debt,” said Bráulio Borges, an associate researcher at the Brazilian Institute of Economics at Getulio Vargas Foundation, known as FGV Ibre.

 

As previously reported by Valor, Borges and Manoel Pires, also of FGV Ibre, have proposed an even broader measure that would incorporate the federal government’s net worth into assessments of fiscal sustainability.

 

“It means stopping looking only at the primary balance and government bond debt and starting to look at all government assets and liabilities, including actuarial liabilities such as Social Security,” Borges said.

 

Mefa, which has been under discussion for about five months, has also sparked a public debate between Manoel and Borges on FGV Ibre’s blog.

 

Interest-rate debate

 

Manoel argues that unpaid budget obligations, credit operations, weaker fiscal-policy controls and higher primary spending have added 2 percentage points to Brazil’s structural interest rate — the rate consistent with the economy growing at its maximum sustainable pace without accelerating inflation.

 

He also says Mefa indicates that Brazil’s fiscal position is now worse than in 2022, the final year of Jair Bolsonaro’s presidency.

 

Borges, however, points to higher interest rates in the United States as another factor behind Brazil’s increase.

 

“Since 2022, international interest rates have also risen by two percentage points,” he said. “International rates are, in a way, the floor for what Brazil has to pay.”

 

To assess perceptions of Brazil’s public finances, Borges looks at the spread between long-term Brazilian and U.S. interest rates as a gauge of how bondholders are pricing risk. By that measure, he said, the current assessment is similar to 2022.

 

Despite their differences, Borges also believes the government’s current strategy of implementing public policy through credit is misguided.

 

“If the idea is for fiscal policy to help stabilize the economic cycle, it should be contractionary and work in coordination with monetary policy, but that is not happening,” he said. “Part of the reason is that there is a political and electoral cycle in the middle. Unfortunately — and we see this in many countries around the world — governments turn on every possible tap during elections, in part because it is becoming increasingly difficult for incumbents to win reelection.”

 

The result, Borges said, is a higher interest rate, which in turn worsens the outlook for debt sustainability.

 

Valor contacted the Finance Ministry for comment but did not receive a response.

 

Source: Valor International

https://valorinternational.globo.com/

 

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07/27/2026

 

BRAZIL REJECTS EU STANCE ON ANTIMICROBIAL CONTROLS

Agriculture Ministry demands reinstatement as approved animal-product exporter

 

Brazil’s Ministry of Agriculture has hardened its tone toward the European Union, calling it “unacceptable” for the bloc to require advance proof that Brazil controls antimicrobial use throughout the entire lives of animals whose meat will be exported to EU countries. In a statement , the ministry demanded that Brazil be reinstated on the list of countries authorized to export animal products to the bloc.

 

Meat-industry sources interpreted the statement as the government arguing that reinstatement should occur regardless of whether Brazil has products that comply with the rules by September, when the restriction takes effect. The position also reinforced the view that the ministry will not ban antimicrobial use nationwide, as poultry and beef processors had requested.

 

The Agriculture Ministry recently adopted full-life-cycle monitoring of antimicrobial use across different production chains. In the beef industry, for example, certifying cattle as free from substances prohibited by the EU could take at least two years. In poultry production, the process is faster, at approximately 40 days.

 

“Brazil supports maintaining this system and considers it unacceptable to require advance proof that measures have been fully implemented when their execution occurs progressively over the course of production cycles,” the ministry added in the statement.

 

The Agriculture Ministry also noted that “international relations on sanitary matters are structured around a fundamental principle: trust and transparency between the competent authorities.” It added that international recognition of official sanitary-control systems “is based on a country’s demonstrated capacity to establish rules, enforce compliance, adopt corrective measures—when necessary—and credibly certify products that meet the requirements and measures agreed bilaterally.”

 

In addition to defending Brazil’s control system, the ministry said it remains engaged in technical discussions with the EU concerning the sanitary requirements governing antimicrobial use in animal production.

 

According to the government, Brazil has not asked the bloc to relax its sanitary rules to preserve animal-product exports and remains fully committed to meeting the requirements established by importing markets.

 

Two meat-industry sources said the message to European authorities is that Brazil will not accept having the credibility of its sanitary system called into question during the dispute.

 

In its statement, the Agriculture Ministry argued that “the system’s credibility lies precisely in the competent authority’s ability to prevent the certification of products that do not yet meet the applicable requirements.”

 

The ministry, headed by André de Paula, also emphasized that the government assurances provided by Brazil “concern the reliability of the official inspection and certification system, while the availability of eligible products results from implementing those assurances throughout the respective production cycles. These are distinct and complementary aspects of the process of complying with sanitary requirements.”

 

The ministry said documents sent to the European Union detail official inspection mechanisms and control guarantees for the beef, poultry, egg, honey, and fishery-product supply chains. According to the ministry, Brazil’s system ensures “verification of implementation, inspection, traceability, monitoring, and certification of compliance with the sanitary requirements established by the EU.”

 

In May, the European Commission announced that Brazil would be removed from the list of countries authorized to export animal products to the bloc beginning September 3, citing failures to prove that antimicrobials were not being used in Brazilian production chains.

 

The meatpacking industry called for a nationwide ban on antimicrobials to signal to the EU that Brazil would ensure supplies of meat and related products made without the substances. Producers, however, said a ban could increase feed and medication costs.

 

Source: Valor International

https://valorinternational.globo.com/

 

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07/28/2026

 

MILEI’S ATTACKS STRAIN BRAZIL-ARGENTINA RELATIONS

Brazilian government sees remarks as unprecedented in 203 years of diplomatic ties but is still assessing long-term impact

 

President Luiz Inácio Lula da Silva’s government believes the attacks made by Argentine President Javier Milei on Saturday (25) have damaged relations between the two countries and marked an unprecedented episode in their 203 years of diplomatic ties.

 

Even so, the government is still assessing the possible long-term consequences. On Monday, President Lula mocked Milei by asking, “Who is this guy?” Finance Minister Dario Durigan, meanwhile, called the Argentine president a “clown.”

 

Speaking at a Liberal Party convention in São Paulo on Saturday, where Senator Flávio Bolsonaro was launched as the party’s presumptive presidential candidate, Milei called Lula a “thief” and a “former inmate.” He also attacked Supreme Court Justice Alexandre de Moraes, describing him as “bald trash.”

 

The remarks were prompted by a court decision barring Milei from visiting former President Jair Bolsonaro, who is under house arrest in Brasília after being convicted of attempting a coup.

 

“I wanted to visit my friend Jair Bolsonaro and they did not let me, but the former inmate came here to greet the inmate, right?” Milei said in São Paulo, referring to Lula and former Argentine President Cristina Kirchner. “No one stopped him from doing anything. Yet I was not allowed to visit my friend, who is also being unjustly imprisoned.”

 

Political differences

 

The comments prompted an immediate reaction from the Brazilian government.

 

Over the weekend, Foreign Minister Mauro Vieira summoned Argentina’s ambassador to Brazil, Daniel Raimondi, to formally convey the government’s repudiation of Milei’s statements.

 

On Monday, Vieira met Brazil’s ambassador to Buenos Aires, Julio Bitelli, for an initial assessment of relations between Brazil and Argentina. The meeting lasted about 40 minutes.

 

The two are expected to meet again after Vieira returns from Lima, where he will represent President Lula at the inauguration of Peru’s president-elect Keiko Fujimori this Tuesday (28), sources said.

 

Even before the event in São Paulo, the Brazilian government had been monitoring the possibility of further attacks from Milei and preparing for different scenarios.

 

Officials had expected that, if the Argentine president limited his criticism to Lula and voiced support for Flávio Bolsonaro, Brazil would avoid escalating its response. The government had even considered not responding at all.

 

Behind the scenes, officials argued that political differences are part of a democratic environment and do not necessarily affect relations between countries.

 

Since Milei took office in 2023, he and Lula have failed to establish a direct dialogue, but cooperation between the two nations has continued.

 

Cautious approach

 

The guidance within the Planalto Palace, the federal government’s seat, had been to exercise caution in responding to Milei’s provocations.

 

Lula’s advisers believe the Argentine president has little influence over Brazil’s electoral debate and view his appearances at political events in the country as an attempt to give the domestic race greater international prominence.

 

That assessment would change, however, if Milei attacked Brazilian institutions, criticized the electoral system or made accusations against other branches of government.

 

In that case, the administration intended to assess the reach of his comments before calibrating a stronger response. That is what ultimately happened.

 

Sovereignty message

 

After Milei’s remarks, Minister Vieira met President Lula at the presidential residence on Sunday night to discuss the issue.

 

The government is still avoiding predictions about the episode’s broader impact on bilateral relations. Its position is that institutional responses should come only when Milei attacks Brazil’s national sovereignty or democratic institutions.

 

From an electoral perspective, however, Milei’s criticism may help reinforce the central theme of Lula’s 2026 presidential campaign: the defense of national sovereignty.

 

Officials believe the current international environment, shaped by U.S. President Donald Trump’s tariff measures and Milei’s latest attacks, strengthens that message.

 

Lula’s allies see an opportunity to contrast a government that portrays itself as defending national interests with opponents they say are aligned with foreign pressure.

 

Coordinated pushback

 

Despite the emphasis on caution, Lula and several members of his administration mounted a coordinated response to Milei on Monday.

 

“Who is this guy?” Lula said when asked about the Argentine president before a meeting with South Korean President Lee Jae-myung at the Foreign Ministry.

 

Durigan also argued that Brazil’s economy is in a stronger position than Argentina’s, citing sovereign risk, public debt and inflation, before calling Milei a “clown.”

 

In an interview with Rádio Jornal de Pernambuco, the finance minister said Brazil should not be drawn into claims that its economy was heading toward an “apocalyptic” scenario.

 

“The clown who is president of Argentina came to Brazil and talked about Brazil when Argentina’s country risk is much higher, its public debt is much higher and its inflation is much higher,” Durigan said.

 

Later in the day, Milei responded with a series of social media posts.

 

“Lula is a former inmate and, when he came to Argentina, he visited his convicted ally. He is the founder of the São Paulo Forum [a group that brings together left-wing parties and movements from across Latin America] and keeps Bolsonaro ineligible,” read one of the posts he shared, referring to Kirchner.

 

Source: Valor International

https://valorinternational.globo.com/

 

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