Tax overhaul clouds outlook for infrastructure concessions

Companies warn delayed compensation rules could strain cash flow and disrupt operations from sanitation to highways

Sabesp wastewater treatment plant in São Paulo — Foto: Divulgação
Sabesp wastewater treatment plant in São Paulo — Photo: Divulgação

Brazil’s infrastructure market sees a high risk of delays in adapting to the tax reform, which begins to take effect in 2027. Companies are already preparing a wave of requests to rebalance contracts, but there are concerns that delays could hurt concessionaires’ cash flow and, in some cases, make operations unviable in segments that currently do not even issue invoices.

Concerns about the tax changes are not limited to infrastructure. But unlike other sectors, concessionaires are not free to adjust prices and pass on cost increases, said tax lawyer Jorge Lopes, a partner at Pinheiro Neto Advogados. “It is a sector of long-term contracts. Other sectors have more freedom to react quickly to impacts,” he said.

Sanitation companies are in the most dramatic situation, according to companies and tax lawyers. The sector, which does not pay municipal and state taxes, was left out of the exemption list in the reform. Abcon, the association representing private sanitation companies, estimates that the average impact on tariffs could reach 18%, considering that the tax rate would rise from the current level of as much as 9.25% to 26.5%, according to preliminary calculations.

The law recognizes that infrastructure concessionaires have the right to compensation for tax increases, through tariff increases, for example. However, calculating and applying that compensation is often difficult and slow.

In sanitation, companies have not even reached the stage of discussing contract rebalancing because they are still in an earlier, more bureaucratic phase: understanding how invoices will be issued for taxes from which they are currently exempt, said Abcon president, Christianne Dias.

“There is a working group with the Federal Revenue Service, but the rule is not ready. There is a lot of anxiety among members. In January 2027, companies will start facing fines, and no one knows yet what the system will look like,” she said.

Worse than the fines, there is a risk that companies’ operations could be halted without this system, said André Menon, a tax partner at law firm Machado Meyer. “Because of the validation rules, which are the minimum information required for a tax document to be issued, the taxpayer cannot even operate. The company would not be able to bill for water, for example.”

Asked about the issue, the Federal Revenue Service said there are “no more uncertainties,” since the manuals on water and sanitation invoices were published in April. Abcon, however, said it is still waiting for a guide with the clarifications companies need to develop their systems, and that the outlook remains unclear.

Once that stage is cleared, sanitation companies will still have to deal with contract rebalancing, another issue that is more complex in the sector because of the large number of regulatory agencies. “There are 110 agencies, so standardizing the methodology is very difficult,” Dias said.

Abcon believes the solution will be to negotiate a reference rule with ANA, the National Water and Sanitation Agency, which sets the parameters that local agencies must follow. So far, however, talks with the federal agency have not advanced. Outside that framework, rebalancing itself can only be granted by the local authority. “The risk is that the sector will grind to a halt and investment will be frozen,” Dias said. ANA declined to comment.

Preventive rebalancing

For highways, talks with the largest agencies, ANTT, the National Land Transportation Agency, and Artesp, the São Paulo State Transportation Agency, are already underway, but regulators have not yet put forward a concrete proposal.

“The main concern is to give momentum to the issue with a view to concluding it still in 2026, so that 2027 begins with the [contract rebalancing calculation] methodology in place and concessionaires do not face a cash-flow mismatch,” said Marco Aurélio Barcelos, president of the Brazilian Association of Highway Concessionaires (ABCR).

He said it is difficult to quantify the average impact of the reform because it varies greatly from case to case. In more recent contracts, where there are still more works to be carried out, the effect is smaller, since taxes can be offset with credits generated by investments. More mature projects, where works have already been delivered, are more affected.

ABCR’s proposal is to work with annual precautionary rebalancing, anticipating the effects, instead of waiting for the impacts to occur and only then filing rebalancing requests, as usually happens. “The idea is to project the impacts of the reform for 2027 at the end of 2026 and already carry out a rebalancing. At the end of the year, we will have the actual information on the impact and, with that, make the adjustment.”

ABCR argues that this should be done every year, always with advance compensation for the following year, along with an assessment of the previous year, supported by independent verifiers.

Sector agencies still do not have a proposal, but there are signs that the precautionary rebalancing model could be adopted in the case of the tax reform.

ANTT Director General Guilherme Sampaio said in a statement that the possibility of precautionary and evidence-based rebalancing is being considered. “At this moment, however, there is still no definitive methodology approved by ANTT,” he said. Sampaio noted that he understands companies’ concerns and stressed that ANTT should address the issue “as quickly as possible, without compromising technical consistency and legal certainty.”

Artesp said it is preparing a methodology “based on objective technical criteria, taking into account the specific characteristics of each concession.”

Risk matrix

The National Civil Aviation Agency (Anac), which regulates airports, said it has a working group with companies to discuss the methodology for calculating the impacts. The National Waterway Transportation Agency (Antaq), which oversees ports, said that “any requests must demonstrate the causal link, the materiality of the impact and its adherence to the risk matrix.”

The Federal Revenue Service noted that the law gives regulatory agencies 90 days to respond to rebalancing requests, with a one-time extension of another 90 days.

Despite concerns over the start of implementation, Pinheiro Neto’s Lopes said the reform will be phased in.

In 2027, Contribution on Goods and Services (CBS) will take effect, replacing federal taxes. Starting in 2029, the transition to Tax on Goods and Services (IBS), which will replace state and municipal taxes, will begin. A testing phase is already starting this year.

Lopes also said segments such as energy and telecommunications, which already face high tax rates, should feel less of an impact.

The infrastructure segment that will benefit the most is public transportation, which will be exempt.

Even in that sector, however, there are doubts. For example, in the case of subway operators, it is not clear what treatment will apply to subcontracting in operations and maintenance, which is common, Machado Meyer’s Menon said.

*By Taís Hirata — São Paulo

Source: Valor Internatiuonal

https://valorinternational.globo.com/

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Foreign investors cut Brazil exposure, cooling stock rally

Outflows from Brazilian stocks reach R$11.4bn in May as oil, global rates and tech rotation reshape risk appetite

 

 

Over the past 30 days, non-resident investors have put money into Brazil’s stock exchange in only two sessions, and the amounts were almost symbolic. In May alone, withdrawals total R$11.4 billion, in a possible sign that the rally in Brazilian stocks has come to an end.

The shift in foreign investors’ mood had already been flagged by Intraday at the start of the week, but it has intensified since then. It is no coincidence that the benchmark Ibovespa stock index has moved away from its record level of 199,000 points and fell below 180,000 points on Thursday (21).

From the start of the year through the peak reached on April 14, Brazil’s equity market saw inflows of R$69 billion from foreign investors, according to B3 data. That was almost three times the amount that entered the market in all of 2025, when inflows totaled R$25.4 billion.

Since April 15, however, investors have withdrawn R$23.9 billion, a little more than one-third of the volume that had entered the stock market in 2026. During that period, there were inflows in only two sessions: April 20, when R$32 million entered the market, and May 8, when net inflows totaled R$118.8 million.

“The mood has turned more negative,” Bank of America strategists David Beker and Paula Andrea Soto said after a round of meetings with investors in London and Paris in recent days.

“Concerns about the external backdrop, combined with recent political developments in the region, are prompting investors to take a more cautious stance. A few weeks ago, clients were waiting for the war to end before increasing exposure to Latin America. Now, the main question is whether exposure to the region will need to be reduced further,” said the BofA team in a note to clients.

War and oil reshape the outlook

In mid-April, foreign investors were extremely optimistic about Brazil, as Intraday reported several times, especially during the spring meetings of the International Monetary Fund.

The country was seen as a relative beneficiary of the war backdrop because it is a net oil exporter, is rich in natural resources and is geographically distant from the conflict. In addition, with the highest real interest rates in the world, the approaching cycle of Selic base-rate cuts was seen as another attraction for domestic stocks.

Since then, however, the market mood has changed decisively. The absence of a quick resolution to the war in the Persian Gulf has imposed a high floor for oil prices, which have struggled to trade below $100 on a sustained basis.

As a result, the impact on inflation is being felt around the world. Fearing second-round effects, many developed markets are already starting to price in interest-rate hikes by central banks, while the rotation into technology stocks does not favor Brazil.

“Although there is still no clarity on how long the war will last, clients believe the damage has already been done,” the BofA strategists said. “The investors we met highlighted concern about higher global rates and their potential impact on currencies and flows to Latin America,” Beker and Soto said.

They also noted that there is additional pressure on central banks in the region and that, even if Brazil’s monetary easing continues, “the magnitude of the cuts is unlikely to provide meaningful relief to the corporate sector.”

In addition, quarterly earnings from technology and artificial-intelligence-related companies were exponential and historically exceptional, contributing to the reversal of the flows seen at the start of the year. That comes on top of the approaching elections and recent local political developments, which have increased investors’ perception of risk and brought a new wave of volatility to local markets.

Brazil rally comes under threat

Against the new global market backdrop, discussions are growing over whether the rally in Brazilian stocks still has enough strength to continue. According to Andre Suaid, head of Latin America equities at Marex, “the party seems to be going on pause.”

“The rally in technology and artificial-intelligence-related stocks continued to accelerate, further concentrating global capital flows in U.S. equities. Expectations of persistent inflationary pressures and higher-for-longer interest rates also weighed broadly on emerging markets, tightening financial conditions and limiting investors’ appetite for risk outside the U.S. The rally in Brazil’s stock market is, in fact, at risk,” he said.

Ricardo Maluf, head of the equity trading desk at Warren Investimentos, said an important part of the flow that went into Latin American stock markets this year had a more tactical component. It was supported by diversification away from the dollar, concerns over artificial-intelligence capex, election-related trades and a defensive move tied to the geopolitical backdrop, “not least because our market has a heavy weighting in banks and commodities and works relatively as a ‘safe haven’ in this environment.”

In Maluf’s view, the reversal of that movement comes as geopolitical conflicts lose some marginal intensity and investors refocus on global fundamentals, especially earnings expectations linked to technology companies, which have returned to their radar. “That ends up attracting flows back to the U.S. and Asia,” he said.

External factors

According to J.P. Morgan’s equities team, led by Emy Shayo Cherman, Brazil’s recent political events do not offer an entry opportunity, even though EWZ, the main Brazilian equity exchange-traded fund on Wall Street, is down 4% since the start of the war after having risen 8% even during the conflict.

“The main reasons behind the decline in Brazilian markets are more external than internal. We believe investors would need the reopening of the Strait of Hormuz, lower oil prices and a decline in Treasury yields to start buying again. For foreign investors, downside risk is greater, considering that the real seems asymmetrical toward appreciation,” Emy Shayo Cherman and Cinthya Mizuguchi said.

J.P. Morgan’s team monitored episodes in recent years when outflows from Brazil exceeded R$10 billion in a 15-day rolling window. “We found 12 episodes of withdrawals of this magnitude or larger, two of which occurred at the start of the pandemic.

“The outflows during Covid were the longest-lasting and posted the largest withdrawal volumes. All other episodes were much shorter, with a duration similar to the current one. So, if history is any guide, the outflow may be nearing an end.”

The executives cautioned, however, that other episodes had not occurred immediately after capital inflows as large as this year’s. “Considering the extraordinary flow observed through April 15, the volume of withdrawals may also end up being larger than the historical pattern.”

* By Gabriel Roca, Bruna Furlani and Maria Fernanda Salinet, Valor — São Paulo

Source:Valor International

https://valorinternational.globo.com/

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Larger Brazil coffee crop fails to ease price uncertainty

Analysts say stronger production is still insufficient to relieve tight global supply and demand conditions

 

 

Brazil’s coffee crop is expected to grow this year, but not enough to ease tight global supply and demand conditions. That was the assessment of industry participants gathered Wednesday (20) at the International Coffee Seminar in Santos, São Paulo.

“We are living through a highly uncertain scenario in which it is impossible to map out any outlook. And this is happening amid climate change and a geopolitical crisis,” said Celso Vegro, a researcher at the Instituto de Economia Agrícola de São Paulo (IEA), on the sidelines of the event.

Companhia Nacional de Abastecimento (Conab) is set to update its estimates for Brazil’s coffee production on Thursday. In its previous forecast, the agency projected a harvest of 66.1 million bags, up 17.1% from 2025.

Private consultancies are pointing to even higher production, potentially surpassing 70 million bags. Expectations of a robust crop are seen as a factor weighing on prices in international commodity exchanges.

On the New York exchange, the July arabica coffee contract closed down 0.68% on Wednesday at $2.6830 per pound. Over the past week, the contract fell 4.42%, according to Valor Data. Over one month, prices declined 6.74%.

In the view of Carlos Augusto Rodrigues de Melo, president of Cooxupé, “Brazil needs to produce 70 million bags, otherwise we will lose market share.” “We expect a good crop both in quality and quantity,” he added in an interview during the International Coffee Seminar.

Melo said current prices remain at good levels, although highly volatile. According to him, there is little coffee available in the market, leaving room for speculation.

Within the coffee industry, the watchword is caution, said Pavel Cardoso, president of ABIC, the Brazilian Coffee Industry Association. He said companies have passed part of the recent price declines on to retailers, but volatility is creating “tension” between buyers and sellers.

“If companies build long inventory positions and prices fall, margins are hurt. If they keep inventories short and prices rise, they are left uncovered. And there is also concern over El Niño. The 2026 crop is potentially the first opportunity to rebuild inventories,” he said.

Vinicius Estrela, from the Brazilian Specialty Coffee Association (BSCA), reinforced those concerns. “Coffee is a long-term crop, and we are having to make short-term decisions with higher costs and uncertainty over commercialization.”

Despite expectations of larger supply in Brazil, Eduardo Carvalhaes, from Escritório Carvalhaes, said he still sees little room, at least for now, for a significant drop in prices.

“In the minds of major buyers, coffee prices will keep falling because the crop will be large. Yet even after all this decline, prices are still at $2.70 [in New York]. [But] the balance between production and consumption is fragile and there are no inventories,” he said on the sidelines of the event.

For IEA’s Vegro, the arrival of the new crop on the market may put pressure on prices, but only in the short term. “Consumption has grown so much, while supply has been constrained, that larger supply now does not offset this imbalance. And logistics costs will eat into part of profitability,” the researcher added.

Last year, coffee exporters incurred an additional R$66.1 million in costs due to inefficiencies at ports, according to calculations by the Conselho dos Exportadores de Café do Brasil (Cecafé). For Eduardo Heron, technical director at Cecafé, concerns for this year are increasing.

“In the second half, with a large volume to ship and the same infrastructure, losses could be even greater,” Heron said. He added that the war in the Middle East and the closure of the Strait of Hormuz are risk factors for the entire supply chain, as they create disruptions to foreign trade.

*By Raphael Salomão, Globo Rural — Santos

Source: Valor International

https://valorinternational.globo.com/

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More than half of Brazil’s households near insolvency

NielsenIQ survey shows Northeast hardest hit by debt, pointing to risk of wider inequality

 

 

Nearly 75% of Brazilian households are uncomfortable with their financial situation, and just over half, or 54%, are close to becoming insolvent while still trying to pay all their bills.

Within this group of families worried about their own financial condition, one-fifth of households are already in debt or behind on bills. Of those, nearly 25% live in cities in the Northeast, an electoral stronghold of President Luiz Inácio Lula da Silva.

At the other end of the spectrum, one-quarter of households say they are financially comfortable. The largest share of these homes is in Southern Brazil, at 23%, and in Minas Gerais, Espírito Santo and the interior of Rio de Janeiro, at 20%, areas where purchasing power is higher than the national average.

Only one in every 100 Brazilian households says it is very comfortable with its bills.

The data were collected in 2025 by research firm NielsenIQ (NIQ) for its Homescan survey, obtained by Valor. The survey is one of the most traditional in the segment and gathers regular data from 8,200 households in Brazil. Globally, it covers 250,000 households in 25 countries, allowing NIQ to map families’ purchasing behavior.

“Regarding the regions, the highlight is the greater representation of the Northeast among the most affected households. This makes sense when we look at the region’s volume consumption performance, which has been contracting more than the national average over the past 15 months,” said Gabriel Fagundes, NIQ’s director of industry insights, based on the company’s surveys.

Fábio Bentes, chief economist at CNC, the national confederation of commerce and services, said the Northeast stands out because it includes lower-income areas, which are penalized in a context of worsening macroeconomic conditions, pressured by rising debt and delinquency since 2025 and, now, by the recent return of food inflation.

Average monthly income among workers in the North (R$2,238) and Northeast (R$2,015) is below the national average (R$2,851), according to preliminary data from the 2022 Census released in October by the Brazilian Institute of Geography and Statistics (IBGE).

A Valor survey based on IBGE’s Monthly Retail Survey shows that, in the 12 months through March, five of the 10 states with the weakest sales growth by volume were in the North and Northeast: Piauí, Tocantins, Amazonas, Roraima and Pará.

“This oil shock caused by the conflict in the Middle East hits the lower-income population directly. Some of these consumers believe that if they don’t drive, they are protected from higher fuel prices, but they don’t know that 80% of the food they consume is transported by truck on highways,” Bentes said. Fuel prices are rising even after recent government subsidy measures.

Between March and May, S10 diesel posted the biggest increase, up 17.1%, followed by diesel (15.1%), regular gasoline (5.7%), premium gasoline (5.2%), compressed natural gas (5.1%) and cooking gas cylinders (4.3%), according to data from ANP, Brazil’s oil, natural gas and biofuels regulator.

Regional gaps widen

A closer look at the figures shows that an important divide is emerging between geographic regions, which tends to raise social inequality levels. There is also a widening gap in rates within individual states.

In São Paulo state, for example, considering all households in poor financial condition, the share of indebted households in the interior is almost double, at about 18%, the level seen in Greater São Paulo, at 9.3%, a significant gap within the same geographic area.

In the Northeast, however, the gap is of a different kind: of the 20.5% of households with financial problems in Brazil identified by NIQ in 2025, 24.3% are in the region. At the same time, among households in a comfortable situation, 14.3% are in the Northeastern states.

That means a substantial difference of 10 percentage points between the shares, the largest gap among regions in the survey.

Marcelo Pimentel, a former executive at Walmart, drugstore chain Drogaria São Paulo and food retailer GPA, said Brazil is experiencing consumption polarization. “Brazil has been a country that grows at different speeds even within the same geographic regions and, in this scenario, the country does not become poorer in a homogeneous way, but in a fragmented way, with the super-rich still having a lot of money because of these high interest rates, while the lower middle class is being heavily penalized,” he said.

In the case of Minas Gerais, Espírito Santo and the interior of Rio de Janeiro, which form a single geographic area in the study, there is also a relevant difference between the indicators, but in the opposite direction from the Northeast.

These three areas account for less than 14% of the overall group of highly leveraged or financially struggling households. Their share among households with a comfortable economic life, however, is just over 20%.

Minas Gerais, which is part of this more positive data set, is Brazil’s second-largest voting bloc. Rio de Janeiro, another highlight in this group, is the third-largest.

São Paulo city and Greater São Paulo also have a larger share of people in a comfortable financial situation, at 10.6% of the total, than indebted households, at 9.3%.

Inflation as top concern

The NIQ material also shows that inflation has returned as consumers’ biggest concern, ahead of crime and security. In third place was having “enough money to pay bills and live well.” Broadly speaking, surveys on the issues with the biggest impact on the presidential election have placed these topics in the overall ranking, with their positions varying.

An April Genial/Quaest poll put violence as Brazil’s main problem, with corruption in second place, cited by 19% of respondents, followed by social problems, at 16%, and health, at 14%. Inflation had not yet been mentioned.

Leandro Consentino, a political scientist and professor at Insper, said corruption should gain ground in electoral surveys because of new findings in the Master case involving senator and presidential hopeful Flávio Bolsonaro. The economic agenda should also remain prominent because of the deterioration in the macro environment. “Even with the government’s action through [debt renegotiation program] Desenrola 2.0 and fuel subsidies, the war hit people’s living conditions, and the one who suffers is whoever holds the pen, whether at the federal or state government level,” he said.

A few weeks ago, Belmiro Gomes, chief executive of Assaí, Brazil’s second-largest cash-and-carry chain, with R$85 billion in annual sales, told analysts on a conference call that “a price change is already visible in some product categories.”

Until April, inflationary pressure was being felt in a more controlled way. “These are products that are more affected because of the conflict that is unfolding. We should see stronger impacts now, in May and June, since in April most operators in the sector still had older inventories,” the executive said.

“Unfortunately, when there is cost pressure, we have to pass on the costs we had.” According to Gomes, given the level of household debt and the current interest rate of 14.5%, inflation will put even more pressure on low-income consumers.

Similarly, Tulio de Queiroz, chief financial officer at Mateus, a retail and cash-and-carry chain with R$40 billion in annual revenue, said the market has “little price elasticity,” meaning it is not accepting price adjustments, which makes management more difficult for retailers.

“At a time when it is difficult to bring in volumes, it is essential to work on expenses precisely because of the pressure from operational deleveraging [when expenses may grow more than revenue],” Queiroz told an analyst last week. “Thinking that because I lower prices I will sell more, often you don’t sell more and you make your top line [revenue] worse. So this is a very, very difficult trade-off,” he said.

Pimentel, the former CEO of GPA, owner of the Pão de Açúcar supermarket chain, said this environment creates a negative outlook for companies, which end up postponing investments to protect cash for long periods because of high interest rates, something that tends to affect future planning.

Lower-income consumers under pressure

According to NIQ’s study, lower-income consumers, earning up to two minimum wages, spend more than 60% of their income on food and hygiene items. In the middle-income bracket, household expenses are under growing pressure: home bills now absorb more than 50% of spending among families earning between three and five minimum wages.

Secondary spending, including leisure, eating out, internet and phone services, and clothing, fell by 0.2 and 0.4 percentage point as a share of household budgets in 2025 compared with 2024. Other debt, health expenses and household bills rose by the same range, between 0.2 and 0.4 percentage point.

At the start of the month, with an eye on the worsening situation among the lower-income population, the government launched the second edition of Desenrola Brasil, a debt renegotiation program offering discounts of up to 90%. But progress was still modest one week after it began.

Investment bank BTG Pactual released a 12-page study on the 11th to assess the potential impact of the new program on consumption and household deleveraging. R$1 billion was renegotiated in seven days, with 200,000 settlement requests for an amount eligible for the program estimated at R$62 billion to R$77 billion, based on calculations by BTG Pactual and investment platform XP. Credit bureau Serasa data from March show 82 million indebted people.

BTG Pactual analysts Tiago Berriel and Bruno Martins said an issue dates back three years, to “Desenrola 1”, which reduced leverage among the groups that benefited but did not generate a new round of credit at lower interest rates for these groups, putting more pressure on these families.

“The improvement in balance sheets appears to have been captured more by banks and/or redirected to lower-risk groups, while the direct beneficiaries started carrying the renegotiated installments,” the analysts said.

This helps explain why the program may not have generated a perceptible improvement in well-being in the short term, they said: clearing one’s name does not automatically mean increasing disposable income or effective access to cheaper credit, and the effects are now being seen in the interest rates charged.

*By Adriana Mattos — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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Federal Police reject Master owner plea deal proposal

Investigators say Daniel Vorcaro failed to provide new evidence that would justify benefits such as release from jail

 

 

 

Brazil’s Federal Police rejected on Wednesday (20) the plea bargain proposal submitted by former banker Daniel Vorcaro, owner of Banco Master. Valor learned that investigators believe the probes are already advanced and that he did not provide new evidence that would justify granting benefits, such as release from jail.

A police chief familiar with the negotiations said the decision shows the Federal Police is acting on technical grounds. “If there is content, under the terms of the law, we move forward; if there isn’t, we reject it,” he said.

The same person said the rejection also shows that the Federal Police “does not force anyone to cooperate, does not impose conditions that are not in the law, and does not suggest names to be ‘handed over.’”

Frustration with proposal

Investigators had already been signaling dissatisfaction since the so-called annexes were submitted to the Federal Police and the Prosecutor General’s Office, which is also reviewing the proposal.

One sign of that frustration came on Monday (18), when the former banker was transferred to a smaller cell at the Federal Police headquarters in Brasília. Vorcaro had left the Papuda Penitentiary Complex in mid-March, after it was agreed that he would begin talks aimed at reaching a plea deal.

On Monday, however, Vorcaro left a 12-square-meter room with air conditioning, a minibar, and a private bathroom, and was moved to one of the cells used for pretrial detainees, a smaller and simpler space than the one he had occupied before, which had been adapted to receive former President Jair Bolsonaro.

Vorcaro was placed in preventive detention during the third phase of Operation Compliance Zero, launched on March 4. He later changed his defense team and began negotiating a plea deal. Criminal lawyer José Luís Oliveira Lima was brought in to handle the talks. Contacted by Valor on Wednesday, he did not comment.

Since the start of the investigations, the Federal Police’s position was that a plea deal would be viable only if the former banker provided relevant information implicating people “higher up” who were also involved in the multibillion-real frauds.

Investigators concluded that this did not happen. Recently, for example, the Federal Police launched an operation targeting Senator Ciro Nogueira (Progressive Party, Piauí). He, however, was not mentioned in the annexes submitted by Vorcaro.

According to the investigation, the president of the Progressive Party received a kind of monthly allowance from the banker at the time to represent his interests in Congress, an allegation Nogueira denies.

In that context, the lawmaker allegedly introduced an amendment to a bill to raise the guarantee limit of the Credit Guarantee Fund (FGC) to R$1 million per depositor, from R$250,000.

*By Isadora Peron — Brasília

Source: Valor International

https://valorinternational.globo.com/

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Elea shareholders buy Cellera Farma, target Brazil expansion

Argentine pharmaceutical group acquires 90% stake in Brazilian company; Omilton Visconde Junior retains a 10% stake and remains CEO

 

 

 

Shareholders of Elea, one of Argentina’s largest pharmaceutical companies, finalized this week the acquisition of Cellera Farma, Brazil’s youngest domestically controlled drugmaker, marking their entry into the Brazilian market and the start of an expansion plan aimed at rapid growth in the country over the coming years.

At the same time, the Brazilian pharmaceutical company, whose portfolio includes brands such as Tylex, a painkiller, and Pamelor, an antidepressant, announced a distribution and commercialization agreement for two Sanofi drugs in the domestic market, a deal expected to add R$650 million in annual revenue.

Under the four-year agreement with the French pharmaceutical company, which includes an option to acquire the products, Cellera will double in size and increase its annual revenue to R$1.3 billion.

Cellera was founded in 2017 by businessman Omilton Visconde Junior, a well-known entrepreneur in Brazil’s pharmaceutical industry, alongside private equity firm Victoria Capital Partners.

The stake held by Victoria Capital, 79.9%, along with a 10% interest owned by Visconde Junior’s brother, were sold to Elea’s shareholders. The Brazilian executive will retain a 10% stake and remain chief executive officer, a position he has held since the company’s founding.

The value of the transaction, which has already been approved by Brazil’s antitrust regulator CADE, was not disclosed due to a confidentiality agreement among the parties. Industry sources consulted by Valor estimated, however, that Cellera’s valuation may have reached $300 million when factoring in the Sanofi agreement.

At least two Elea executives, Mathias Sielecki, a shareholder and member of one of the families controlling the Argentine group, and Mariano Foglia, are relocating to Brazil and will join Cellera’s management team as part of efforts to accelerate the company’s growth in the country.

“Elea is a market leader in Argentina and operates in several international markets. Entering Brazil had been an ambition for many years. It is the largest market in the region, with highly competitive and capable companies. We believe that, with our products, we can expand Cellera’s portfolio and also bring a development-oriented approach,” Daniel Sielecki, director and shareholder of the Argentine pharmaceutical company, told Valor.

According to Sielecki, the company recognizes that Brazil’s pharmaceutical market is defined by intense competition, but Elea, which posts annual sales of between $700 million and $800 million, has already dealt with similar challenges. Beyond its investments in the pharmaceutical industry, both inside and outside Argentina, the Sielecki family also has businesses in sectors including oil and gas, petrochemicals and natural gas transportation through TGS.

In addition to the size of the Brazilian market, Sielecki said the continued involvement of Visconde Junior and his experience in the local pharmaceutical industry would be key to executing the company’s growth strategy.

“Our plan is to develop new products and introduce molecules that are not yet available in Brazil. We will assess the Brazilian market and determine exactly which technologies we want to bring here,” he said.

Visconde Junior said that initially, Cellera’s strategy focused on acquiring mature drugs that no longer received significant investment from their original pharmaceutical owners and slowing or stabilizing declining sales trends.

With the Sanofi agreement, however, the company faces a new challenge: Puran, a hormone replacement therapy drug, and Zinpass, used to control cholesterol, are still growing. Puran is the market leader in its segment, with a 50% market share, while Zinpass ranks second in its category, according to Cellera’s CEO.

“It is a different level of competition. Cellera doubled in size in 2019, when it completed major acquisitions, and now it is doubling again,” said Visconde Junior. “The agreement with Elea also creates the possibility of significantly expanding the portfolio and increasing our bargaining power for licensing deals in the most relevant markets,” he added. According to him, an additional R$500 million in revenue is already in the company’s medium-term business pipeline.

*By Stella Fontes — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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Lower House reviews versions of workweek proposal

Rapporteur prepares three drafts with transition periods of two, three and four years, as business-impact measures remain under discussion

 

 

 

The rapporteur for the proposed constitutional amendment that would end Brazil’s six-day workweek with one day off, lawmaker Leo Prates (Republicans Party, Bahia) has completed three versions of his report and will present them to Lower House Speaker Hugo Motta, of (Republicans Party, Paraíba).

Motta will have the final say on which version will be read this Wednesday (20) in the special committee reviewing the proposal.

The difference between the drafts is the transition period, considered the main impasse, and the scope of measures to mitigate the impact on businesses.

One version, backed by the Ministry of Labor and Employment, provides for a two-year transition. An intermediate version sets a three-year transition, while a third establishes a four-year period. In an interview with Valor, Prates said there are still a few points of disagreement with the government, but the main issue has been agreed on.

Prates said one report is “leaner” because the government asked for many points to be removed. Another text, he said, is “more or less.” The third version is “very extensive.” “But all of them have a limit of around 10 articles,” he explained.

Mitigation measures

Among the mitigation measures to be proposed in the report is a definition that only one of the two days off would officially be considered paid weekly rest for labor-law purposes. The second day would be treated legally as a “non-worked business day.”

In practice, Prates said, workers would still have two days off per week for rest. The difference would be technical and temporary, used to calculate labor costs. This would reduce, for example, the value of overtime and other charges linked to weekly rest, easing the economic impact of the change for employers during the adaptation phase.

“We are going to generate the least possible impact in the constitutional text. So, the idea is to remove the 44-hour limit, set 40 hours, two days off, one preferably on Sunday. Because I hope to cause the least possible impact on Brazil’s labor system,” he said.

He said the text will also expressly provide for no wage reduction. In addition, the report will include benefit cuts for companies that fail to comply with the rules of the constitutional amendment. Those that violate the requirements will lose the right to the transition rules provided for in the Transitional Constitutional Provisions Act, he said. “I do not want to establish a penalty. I want to cut the benefits I can grant.”

Prates said he suggested to the government that, after the amendment is approved in the Lower House, the executive branch withdraw constitutional urgency from the bill it presented while the Senate analyzes the proposal, since that mechanism blocks the legislative agenda. “We may need to [vote on] other things, including for the government,” he said.

Specific work regimes

Prates also said there is no agreed voting schedule for the constitutional amendment with Senate President Davi Alcolumbre, of the Brazil Union party of Amapá, and that it is important to wait for senators to deliberate on the proposal before discussing regulation of specific work regimes, which he argues should not be addressed in the Constitution.

“Essential activities must have specific rules in law. But this should not be dealt with in the Constitution. It should be addressed in a specific law. [It is not known] whether it will be the government’s bill, whether it will not be the bill, whether it will be in a separate bill. But I also do not think this discussion should take place now,” he said.

He also said a deadline of 120 to 180 days will be set for Congress to update legislation covering specific cases. “That does not mean the effects of the measure will apply only after that period. The effects should take place within a shorter period. But the laws and agreements need more time to be updated, because the process may take longer.”

The rapporteur indicated that the Lower House’s strategy is to first approve the constitutional text and only afterward define, in detail, regulation through the government’s bill. It is still too early to finalize the bill’s design, he said, because the Senate could change the content of the constitutional amendment.

In Prates’s view, it is not possible to move forward with infraconstitutional rules before knowing the senators’ position. “Neither President Hugo Motta controls the Senate, nor does President Davi control the Lower House,” he said. For that reason, he said he considers it necessary to wait for the Senate’s deliberations before consolidating the final regulation.

Monthly work-hour parameter

The congressman also said he has sought dialogue even with sectors that oppose the proposal or are more resistant to it. He cited conversations with Senator Rogério Marinho (Liberal Party, Rio Grande do Norte) and said points raised by the opposition, especially on mechanisms to make working hours more flexible, ended up gaining space in the committee’s discussions.

Asked about comments made Tuesday (19) by Senator Flávio Bolsonaro (Liberal Party, Rio de Janeiro) regarding the end of the six-day workweek, Prates said the party is free to express its position on the issue, but he does not believe the Liberal Party will vote against the text.

A presidential hopeful for the party, Flávio Bolsonaro said the caucus has reservations about the constitutional amendment and that the executive branch’s proposal tries to sell the public “an easy solution without solving the problem”.

Prates also said the government agreed to adopt a monthly parameter to define working hours, which he said gives more flexibility to workers and employers. “I presented this suggestion to the government and there was no veto,” he said. The congressman also said he will strengthen the use of collective bargaining agreements and defended updating each category’s specific legislation to regulate other work-schedule models.

“You are changing time and you are changing the work schedule. In theory, despite giving some flexibility by using the monthly parameter, you are changing [the schedule] because, in the end, the person will go from four days off a month to eight. Everything will be regulated either by law or by collective bargaining agreement. We are empowering collective bargaining to deal with these particularities that are not for us to handle.”

One proposal rejected

In all, 200 legislative suggestions were submitted for inclusion in the constitutional amendment. Prates said, however, that he accepted only four or five that did not undermine the proposal’s main points: the end of the six-day workweek, a reduction in weekly hours from 44 to 40, two days of rest, and no wage reduction.

The rapporteur said the government asked for the removal of one proposal intended to mitigate the economic effects during the transition period. The idea was that, during the defined transition period, hours worked between the 41st and 44th hours of the week would be paid only as “hours worked,” without the same cost as traditional overtime. Normal overtime rules would continue to apply from the 45th weekly hour.

Prates said that Labor Minister Luiz Marinho opposed the mechanism and that the suggestion was removed from the text after his resistance. “But the final word, again, will be President Hugo’s.”

*By Beatriz Roscoe and Ruan Amorim, Valor — Brasília

Source: Valor International

https://valorinternational.globo.com/

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Spending watchdog questions guarantee for loan to Brazil’s postal service company

Auditors see possible flaws in risk analysis behind R$12 billion financing

 

 

The technical staff of Brazil’s public spending watchdog (TCU) believes there may have been irregularities in the Treasury’s decision to guarantee a loan to the state-run postal company Correios and wants to determine the government’s responsibility for the operation that provided financial relief to the state-owned postal company.

According to information obtained by Valor, auditors believe there may have been flaws in assessing the company’s repayment capacity and a possible failure by the Treasury to effectively evaluate Correios’ financial condition before granting the federal guarantee.

The Treasury and Correios did not respond to requests for comment.

The federal guarantee was granted for a R$12 billion loan to Correios, provided by a group of five banks and approved last year after the government identified a major financial shortfall at the company. In December, the Finance Ministry approved the financing after reviewing the terms of the operation and the postal company’s restructuring plan, which was considered central to making the credit operation viable.

The federal guarantee proved crucial in the negotiations because it lowered borrowing costs. In operations of this kind, the guarantee functions essentially as insurance: if the state-owned company fails to make the payments, the Treasury assumes responsibility for the debt.

The transaction proceeded after the publication of a government ordinance allowing Finance Ministry officials to consider measures in Correios’ financial-rebalancing plan during the guarantee analysis, even though those measures had not yet been implemented.

TCU auditors noted that the procedure deviated from the standard process, which typically assesses the company’s current financial status during the analysis.

In the view of the TCU technical staff, the irregularity stems precisely from the Treasury’s interpretation of the ordinance published on Dec. 12, which established criteria for assessing the repayment capacity of self-sustaining federal state-owned companies.

According to the auditors, the rule may have been used to circumvent a more rigorous analysis of Correios’ financial condition, thereby diminishing the National Treasury Secretariat’s institutional role in mitigating fiscal risks and protecting federal interests.

The assessment was conducted as part of an audit examining the macroeconomic aspects of state-owned companies, overseen by TCU member Benjamin Zymler.

The TCU also argues that the Treasury’s review process appears to have been limited to formally verifying the existence of financial projections in Correios’s restructuring plan, without conducting a deeper examination of the feasibility of the proposed measures, the company’s solvency, or the deterioration in its cash flow.

Auditors also suggest that if Correios cannot repay the loan, the federal guarantee might have served not only to reduce borrowing costs but also to defer fiscal impacts that would otherwise directly impact government accounts and debt. Finally, auditors also considered the timeline used by the Treasury to approve the operation unusually short.

The guarantee was authorized on Dec. 18, 2025, just three business days after the Treasury received the final version of the restructuring plan and six business days after the federal government’s interministerial corporate-governance committee approved the proposal. The committee, known as CGPAR, oversees governance and federal shareholdings in state-run companies. According to the auditors, the time frame was incompatible with the transaction’s complexity and reinforced the perception that Correios’ repayment capacity had not been thoroughly analyzed.

Negotiations over the loan late last year dragged on for several weeks amid the deterioration of Correios’ financial situation. Initially, the state-run company sought R$20 billion in financing, which it considered necessary to fund its restructuring plan in 2025 and 2026. During the initial stages of the negotiations, some banks reportedly offered financing at rates equivalent to 136% of the CDI benchmark interbank rate, a level that the federal government rejected.

The Treasury’s ceiling for operations of this type is 120% of the CDI.

Correios therefore decided to split the fundraising into stages and managed to conclude the first round—totaling R$12 billion—at a cost of 115% of the CDI benchmark. Because the restructuring plan calls for a total of R$20 billion in loans, the company is expected to seek a new round of financing later this year.

However, instead of the R$8 billion initially expected to complete the amount, the next operation is now expected to total around R$7 billion, as previously reported by Valor. In 2025, Correios reported a net loss of R$8.5 billion. Today, the company’s monthly cash flow shows a deficit of approximately R$700 million.

*By Guilherme Pimenta and Giordanna Neves — Brasília

Source: Valor International

https://valorinternational.globo.com/

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Brazilian airlines cut flights as jet fuel prices double

Costs surge after Middle East war, forcing carriers to trim 93 daily flights in May so far and focus on more profitable routes

 

 

The surge in oil prices triggered by the war in the Middle East has led airlines in Brazil to draw up a survival plan for the coming months. Jet fuel, which has historically accounted for about 30% of their operating costs in the country, has doubled since February.

At the same time, the industry is concerned about the expiration, on May 31, of tax incentives for aviation kerosene, known in Brazil as QAV.

On April 2, data from the SIROS system of Brazil’s National Civil Aviation Agency (Anac) showed airlines expected to offer 2,193 flights a day in May in the Brazilian market. The same query on May 12, however, showed a projected daily supply of 93 fewer flights, a 4.3% drop.

With fewer takeoffs, Brazil lost about 14,000 seats a day this month. The data were compiled from Anac’s system by the Brazilian Airlines Association (Abear) at Valor’s request.

For May as a whole, the estimate before the crisis was for 67,980 flights, later reduced to 65,100. In May 2025, the figure was 66,300.

The cuts, however, vary by region. More profitable routes are being preserved, while less profitable segments are losing ground.

The survey shows that the most affected destination was Acre, which lost 14.7% of its expected flight supply for May. Amazonas followed, with a 13.6% decline, then Pernambuco, down 11.2%; Goiás, 9.8%; Pará, 9.3%; Paraíba, 6.3%; and Minas Gerais, 5.6%.

The figures also show that the situation is likely to worsen in June, with airlines’ supply projections pointing to a reduction of 121 flights a day.

Sharper impact ahead

The issue featured prominently in conversations between airline executives and analysts during first-quarter earnings presentations. Because the conflict began on February 28, its impact on first-quarter numbers was more limited. The stronger effect, executives said, is expected in the second and third quarters.

One of the ways Azul has sought to navigate the crisis has been to reorganize its network. On May 7, executives at the carrier said the company would cut its planned seat supply for May and June by 5% because of higher jet fuel prices.

Azul Chief Executive Abhi Shah said the airline has focused on fine-tuning capacity, raising fares and prioritizing more profitable routes. “We will make more cuts as necessary. We have been very proactive,” he said. Even so, he noted that Brazil’s airline industry has been less aggressive in cutting capacity than carriers in other parts of the world.

On fares, Shah said the sector has been conservative but has moved ahead with repricing in response to the crisis. Since the war began on February 28, he said, nine price-adjustment campaigns have been carried out, compared with three in the same period last year. “Today, we are seeing 30% growth in the average fare for future bookings,” Shah said.

Seat-growth guidance

Latam told the market on May 6 that it was canceling its 2026 seat-supply projections because of the oil crisis. The company had previously targeted an 8% to 10% increase in seats globally this year.

Latam Brasil Chief Executive Jerome Cadier said the airline has so far been making targeted adjustments to flights. For June, the company reduced its expected supply for the month by about 3%. “We have to look not only at the price of fuel [in the future], but also at demand elasticity.”

The company had previously projected average jet fuel prices of around $90 a barrel. It now assumes prices of about $170 a barrel for the second and third quarters and $150 for the fourth quarter.

Higher fuel prices added $40 million to Latam’s costs in March alone. For the second quarter, the company estimates fuel spending will be $700 million above what had been expected.

As a result, Latam now expects adjusted EBITDA to be $400 million lower than the range previously projected. Its current forecast is for EBITDA between $3.8 billion and $4.20 billion, compared with the previous range of $4.2 billion to $4.6 billion.

Gol is also monitoring the issue. People familiar with the matter said the airline reduced its planned seat supply by about 6% in May and June because of the rise in oil prices. The company was contacted but did not comment. Gol delisted from the Brazilian stock exchange and is no longer required to disclose its results.

Abra, the holding company that controls Gol and Avianca, has also been following the issue closely. At its latest press conference, in late March, executives pointed to a hedging strategy designed to help the group navigate the start of the crisis with more flexibility. The group hedged 50% of its fuel consumption between March and May and raised the hedge to 40% through the end of August.

Tax incentives

On May 1, state-controlled oil company Petrobras raised jet fuel prices by 18%. It was the third consecutive increase for the fuel. In March, the adjustment was 9.4%. In April, the increase was even steeper, at 54%. Outside Brazil, jet fuel rose to about $4 a gallon from $2.

The crisis in Brazil, however, is different from other markets, where companies face the risk of fuel shortages. Petrobras produces locally about 90% of the jet fuel used by domestic airlines.

Even so, Abear has voiced concern over the federal government’s decision not to extend the exemption from PIS/Cofins social taxes levied on aviation fuel.

On May 13, the government announced new measures to contain increases in diesel and gasoline prices, but jet fuel was left out. If the current scenario remains unchanged, the tax benefits granted to the airline industry will expire on May 31.

In a statement, Petrobras said it will continue to offer the market the option of paying part of the adjustment in six installments, with the first payment due in August 2026.

However, the mechanism has not proved effective. People with knowledge of the situation said the rates charged were considered high, at about 16% a year, above the Selic, Brazil’s benchmark interest rate, now at 14.5%.

On the other side, sources said distributors have not engaged with the installment plan. That is because they would be responsible for paying Petrobras in the event of a default by any airline. As a result, in many cases, distributors began requiring guarantees before allowing installment payments.

Petrobras did not comment on the industry’s difficulties in accessing the installment plan.

*By Cristian Favaro  — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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