New Senate lineup puts members of the court on alert as Flávio Bolsonaro and his allies vow to remove justices
From left to right: justices Alexandre de Moraes, Gilmar Mendes, Flávio Dino, André Mendonça, and Dias Toffoli — Photo: Antonio Augusto/STF
Supreme Court justices consulted by Valor are divided over whether the new Senate lineup elected in the first round will immediately translate into impeachment proceedings against members of the court. Views range from pessimism to the assessment that it is too early to say justices would lose their seats before a Senate seen as more hostile to the court.The PL will have 28 senators next year: 19 elected on Sunday (4), joining the nine already serving in the upper house. Lawmakers from other parties also support impeachment. A survey by O Globo indicates there will be at least 49 of the 54 votes needed next year.
One justice considers it certain that impeachment requests will advance in 2027 if presidential candidate Flávio Bolsonaro (Liberal Party, PL) is elected. “Of course it will pass. With Flávio in the presidency, there will be at least 60 votes,” the justice said.
The most pessimistic justices point to at least three members of the court who could come under Senate scrutiny as early as next year: Alexandre de Moraes, Dias Toffoli, and Flávio Dino. Justices and people close to them have even drawn up estimates. One, taking the deadlines for the defense into account, is that an impeachment could occur by mid-June.
Most justices, however, urge caution. They consider, for example, that if President Luiz Inácio Lula da Silva (Workers’ Party, PT) is reelected, initiatives against the Supreme Court could be curbed.
There is also an expectation that some PL lawmakers would be less radical and could oppose impeachment requests. Finally, one justice said he does not see it as so obvious that the proposals would advance in the Senate. He said some members of the centrist bloc have an interest in keeping on the court justices to whom they have greater access.
Senate shifts right
The Bolsonarist wave that set the tone of the election campaign boosted opposition candidates’ victories, producing a predominantly right-wing Senate and a shrinking centrist bloc.
The result affects relations among the branches of government, particularly the Supreme Court, which is facing a crisis stemming from the Master case. The scandal has shaken the court’s credibility and was an issue in Senate campaigns.
With 28 senators, the PL will have the largest caucus starting next year, about three times the size of the PT’s, with nine, and the Brazilian Democratic Movement’s (MDB), with eight. The shrinking of the Centrão bloc was evident in the Progressive Party (PP) and Republicans, each reduced to six members, and in the Social Democracy Party (PSD) and Brazil Union, with five lawmakers each.
Groceries have risen 60.8% since the pandemic, far outpacing overall inflation and helping explain voter unease
Fábio Romão: “Food has become more expensive, and short-term relief measures have done little to help” — Photo: Silvia Costanti/Valor
Brazilian grocery bills have risen far faster than overall inflation since the pandemic, helping explain why many consumers remain dissatisfied with the economy despite record employment and income levels. Food-at-home prices climbed 60.8% between April 2020 and August 2026, compared with a 42.7% increase in Brazil’s benchmark consumer price index over the same period.
Most of the increase occurred through mid-2022, amid disruptions and shifts in global supply chains. Between April 2020 and the end of 2022, food-at-home prices rose 42.4%, compared with a 21% increase in overall consumer prices. From January 2023 through August 2026, food-at-home prices rose 12.9%, while overall inflation was 17.9%. Fabio Romão, an economist at 4intelligence, made the calculations.
Workers’ average earnings rose 9.5% in real terms, after adjusting for inflation, between April 2020 and July 2026.
Experts say that this important component of household budgets has become more expensive than overall inflation, one of several factors that help explain Brazilians’ discomfort with the economy, even as macroeconomic indicators paint a more positive picture, with employment and income at record levels.
The negative perception reflects a combination of factors. One is economic growth from a depressed base following the 2015 and 2016 recession; income gains that remain insufficient to provide what many consider a decent standard of living; and job creation concentrated in lower-paying positions.
Other factors include a shrinking wage premium for workers who have completed high school or college and rising consumer aspirations in the age of social media.
The cost of living, purchasing power and the resulting economic unease—reflected in opinion polls and studied in academic research—have become prominent issues in this year’s presidential election. President Lula and Senator Flávio Bolsonaro, who will face each other in the runoff, have traded accusations and sought to appeal to voters’ concerns over the economy.
Ahead of the first round, Lula acknowledged the problem. “I know things still aren’t good enough. But I will make sure inflation remains under control. You will no longer pay the tax on low-cost overseas purchases, the minimum wage will continue to rise above inflation, and we will invest to create quality jobs with better wages,” he said.
“Grocery shopping today is much more expensive than it was before the pandemic. There has been a shift to a higher price level: eating has become more expensive, and short-term relief has done little to help. Food costs are part of the explanation for people’s dissatisfaction,” Romão said.
The economist’s calculations show that price increases were concentrated in the period immediately following the pandemic, both for overall inflation and food consumed at home. More recently, the war between Iran and the United States and the effects of El Niño have begun to weigh more heavily.
The higher cost of living is a global trend that has also fueled dissatisfaction in other countries, according to Laura Carvalho, an economics professor at the University of São Paulo and researcher at the Getulio Vargas Foundation’s Brazilian Institute of Economics (FGV Ibre).
The backdrop includes successive inflation shocks stemming from the pandemic, the start of the war in Ukraine in 2022 and, this year, the war in Iran. Surveys around the world point to the cost of living as the main reason for people’s negative perceptions of the economy, Carvalho said.
In the United States, the term “vibecession” was coined in 2022 to describe a similar disconnect between economic indicators and persistently negative public perceptions of the economy. The term combines “vibe” and “recession.”
“There is an additional issue: price increases are perceived as the government’s fault, regardless of where the shock comes from, while income gains are seen as the result of personal merit. That creates an asymmetry that lies at the heart of the economic malaise,” Laura Carvalho said.
An August Quaest presidential voting-intention poll—the most recent edition to include a section devoted exclusively to the economy—found that 33% of respondents believed their income had risen at about the same pace as the cost of living. Another 32% said they had not seen their income increase, while 23% believed the cost of living had risen more than their income.
Another factor in understanding dissatisfaction with the economy, researchers say, is a sense that incomes remain insufficient when measured against what people consider a decent standard of living and the ability to meet basic needs. Gross domestic product has grown in recent years as the economy recovered from the pandemic, but that followed six years of either contraction or weak growth from 2014 through 2019.
“There is this idea that income is insufficient. The question is to what extent income growth is actually translating into better living conditions and higher consumption levels, or whether it is still not enough,” said Vitor Hugo Neia, executive director of the Volkswagen Group Foundation.
A recent survey the foundation conducted with the Sustainable Cities Institute and Ipsos-Ipec in 10 Brazilian state capitals found that only 18% of respondents said their personal income had increased over the previous 12 months. Another 45% said it had remained stable, while 31% said it had declined. In addition, 61% took on extra work to supplement their income, and 41% cut back on meat consumption.
“More than income itself, what ultimately matters is purchasing power. When people say their salary doesn’t last until the end of the month, it isn’t only about prices. The income gains we’ve seen still haven’t brought a large share of Brazilians to what they consider a decent standard of living,” Carvalho said.
Among employed workers in Brazil, 32.2% earn no more than one minimum wage a month, according to second-quarter data from Brazil’s statistics agency IBGE. The share earning up to two minimum wages is nearly 70%, at 69.1%. That means only 30.9% of employed Brazilians earn more than R$3,242 a month.
Another factor cited by experts to explain the disconnect between public sentiment and Brazil’s economic indicators is a shift in expectations, influenced in part by social media.
“There has been an important change over the past 20 years in how people measure quality of life. In the past, people wanted a stable job and a family structured in a certain way, but that has changed,” said Igor Pantoja, institutional relations coordinator at the Sustainable Cities Institute.
“Today, a good quality of life is closely associated with consumption. There really is a mismatch between what the political system and institutions seek to provide and what people demand, often based on what they see on the internet and social media,” he said.
Carvalho also sees social media as amplifying consumer aspirations, although she considers its influence secondary to other explanations for the gap between perceptions and economic indicators.
“People’s aspirations aren’t the same as they were in the 2000s. It’s no longer about buying a refrigerator or flying on a plane for the first time. It is also natural that as a society develops, people begin to demand new things. And those demands are amplified by social media, where everyone shares their lives,” she said.
The survey by the Volkswagen Group Foundation, Sustainable Cities Institute and Ipsos-Ipec also provides a longer-term view of how people perceive changes in living standards, with a focus on social mobility.
Overall, 73% of respondents in the 10 state capitals said they had more education than their parents. Only 43%, however, said their income was higher than their parents’, while 51% believed they had better housing conditions.
“People recognize that they are more educated than their parents. But that educational mobility isn’t reflected to the same degree in income and housing mobility. It’s not that education isn’t important, but there is a sense that qualifications alone are not enough,” Neia said.
Follow-on deals expected to lead reopening as companies seek fresh capital after first-round election gains
Investment banks prepare companies to raise funds through stock offerings — Photo: Aloisio Maurício/Agência O Globo
The Ibovespa’s surge following the first round of Brazil’s election is prompting investment banks to step up preparations for a new wave of share offerings after a subdued year for the market. Market players began approaching clients last week and are now intensifying those conversations, encouraging companies to take advantage of higher share prices to raise capital, Valor has learned.
The benchmark Ibovespa stock index rose as much as 9.1% in the first hours of trading on Monday (Oct. 5) before closing 7.7% higher at 206,000 points. On Friday, ahead of the vote, the index had already gained 2.63% to 192,114 points. The latest jump brings its advance in 2026 to nearly 30%.
Banks are already making multiple presentations to potential clients about follow-on share offerings, which allow companies already listed on the exchange to sell additional stock, people familiar with the discussions said. The pitches are part of banks’ efforts to secure mandates for the transactions. The first deals could come to market soon if share prices hold up.
The prevailing view is that a broader reopening of the equity market is likely to begin with follow-ons because they can be structured more quickly. Beyond improved market conditions, some companies need to bolster cash reserves, reduce debt or repair their capital structures, potentially creating demand for primary offerings.
One source cautioned, however, that the market’s enthusiasm over a potential victory by Liberal Party (PL) candidate Flávio Bolsonaro, the eldest son of former President Jair Bolsonaro, still depends on the runoff result. A more lasting rise in Brazilian assets would also require macroeconomic measures and fiscal adjustments, an area where the outlook under a possible Flávio administration remains unclear.
Follow-on pipeline
The activity began before the vote, tracking the stock market’s gains in recent weeks, but gathered momentum after the first round. Banks are now assessing which companies could take advantage of the window and which transactions could reach the market quickly if conditions remain favorable. Investment bankers say there is a large backlog of deals waiting to come to market.
Brazil’s equity market has not been completely dormant in 2026, but a significant share of this year’s volume has come from transactions with specific characteristics that did not depend on a broader reopening.
Eight share offerings raised about R$22 billion in the first half, data from exchange operator B3 show. There have been no offerings in the past three months, however.
Special transactions
The largest deal of the year so far was the privatization of water and sanitation company Copasa, which raised R$8.38 billion in June. The transaction involved the state of Minas Gerais selling shares equivalent to 45% of the company’s capital. Because it was tied to the privatization process, the deal had its own dynamics and went ahead despite conditions that remained unfavorable for conventional share offerings.
Another large transaction with unusual characteristics was Engie’s R$8.36 billion offering in July. Of that amount, R$5.74 billion came from a subscription by its controlling shareholder through the contribution of its stake in the Jirau hydroelectric plant. About R$2.6 billion effectively came from market investors.
This year also saw Compass end a nearly five-year drought of initial public offerings on B3. The Cosan-controlled company raised R$3.2 billion in May through an entirely secondary offering, meaning the proceeds went to selling shareholders rather than the company itself.
The transaction was part of controlling shareholder Cosan’s strategy to reduce debt and strengthen its capital structure. While it formally ended Brazil’s IPO drought, banks view the deal as a special case rather than the beginning of a sustained flow of new listings.
Market reopening
Banks see the current activity differently. The expectation is that higher share prices could support offerings driven not by privatizations or specific corporate reorganizations but by an improvement in market conditions themselves. The need for some companies to rebuild their capital structures reinforces the view that follow-ons are likely to come first.
Because follow-on offerings involve listed companies with an established market price and regular relationships with investors, they can be prepared and executed much faster than an IPO. That allows banks and companies to take advantage even of relatively short market windows.
Historically, equity markets tend to reopen first with block trades, followed by follow-on offerings and eventually IPOs.
The activity is not limited to listed companies. Banks have also resumed work on potential IPOs, although the prevailing view among market executives is that a more sustained reopening of that market is likely to come only in 2027.
IPO preparations
February is emerging in discussions as one of the first possible windows. By then, there should be greater clarity over the political and economic environment after the election and whether the rally in Brazilian assets can be sustained. IPOs also require longer preparation and greater market visibility.
Banks are therefore moving ahead with the necessary groundwork so companies will be ready if a window opens. The process includes documentation, governance arrangements, corporate structures and preliminary contacts with investors.
Bankers describe the strategy as preserving optionality: preparing a transaction without committing in advance to carrying it out.
One example is Brasil Terrenos, a residential land-development company. The company has confidentially applied to register as a Category A publicly held company with the Securities and Exchange Commission of Brazil (CVM), sources said. That status allows it to issue shares and puts the company in a position to move forward with a potential offering.
The application does not mean Brasil Terrenos has decided to pursue an IPO. Rather, the aim is to have the company ready to access the market if favorable conditions emerge after the election, people familiar with the matter said.
U.S. listings
While a broader revival of IPOs in Brazil is viewed as a possibility for next year, two Brazilian companies have already moved ahead with preparations for U.S. offerings, a route that some businesses are likely to pursue.
Payments company Elo and Wellhub, formerly Gympass, have made initial confidential submissions to the U.S. Securities and Exchange Commission (SEC), sources said.
Confidential filing allows companies to begin the SEC review process without publicly disclosing preparations for an offering. It does not mean the IPOs will necessarily go ahead and gives the companies the option of deciding later whether to proceed, depending on market conditions.
Elo had already hired banks to work on a potential U.S. listing. The company is owned by Banco do Brasil, Bradesco and Caixa Econômica Federal. Wellhub has also been preparing for a possible U.S. market debut.
Asked for comment, Elo said it does not comment on market rumors. The company added that “in the normal course of its business and in line with its growth strategy and optimization of its capital structure, it continuously evaluates strategic alternatives and opportunities in the capital markets.”
The other companies mentioned declined to comment.
Late payments rise as costly credit-card debt grows despite recent Selic rate cuts
Roberto Luis Troster — Photo: Rogerio Vieira
Consumer delinquencies on bank loans, a major issue in this year’s election campaign, reached a new high in August, Central Bank data show.
Among non-earmarked loans, where interest rates are freely negotiated by lenders, the share of individual borrowers more than 90 days behind on payments rose to 8% in August from 7.8% in July, the previous peak. Overall consumer delinquency climbed to a record 6% from 5.8%.
The data also show that, despite the recent cycle of cuts in the Selic benchmark rate, the economy’s average lending rate snapped a three-month decline and rose 0.2 percentage point in August to 32.3% a year. The increase reflected stronger growth in riskier forms of credit, including revolving credit-card balances and installment plans.
The rise in delinquencies and borrowing costs comes as the federal government, just ahead of the presidential election, launches a third edition of Desenrola, its consumer debt renegotiation program.
Desenrola Brasil 3.0 will cover the purchase and restructuring of debts that have been overdue for between two and four and a half years. Two previous versions have been launched since 2023.
The latest phase will focus on credit-card debt, both installment and revolving balances, as well as unsecured personal loans of up to R$10,000. The government estimates that as many as 15 million people could benefit, with up to R$150 billion in debt eligible for renegotiation.
Costlier credit
The breakdown of the data shows that Brazilians are increasingly turning to more expensive forms of emergency borrowing.
The clearest example is revolving credit-card debt, which is used when cardholders do not pay their full monthly bill. Among non-earmarked loans to individuals, revolving credit-card balances posted the strongest increase in August, rising 4.8% from July.
The average interest rate on this type of credit jumped 8.7 percentage points in the month to 444.9%a year. Delinquencies also rose, reaching a record 66.2% in August from 65.5% in July.
Across all lending categories, the increase in average rates was driven by non-earmarked credit, where rates rose 0.8 percentage point to 48.5% a year, and by loans to individuals, up 0.7 point to 38.2%.
The Central Bank also reported higher borrowing costs on credit-card installment plans, which split outstanding balances into fixed monthly payments. Rates rose to 192.1% a year in August from 189.3% in July, making it the second-most expensive type of credit in the market.
Among non-earmarked loans to individuals, which include revolving and installment credit-card debt, the delinquency rate increased to 8% from 7.1% over the same period.
Payment stress
For payroll-deducted personal loans to private-sector workers, the delinquency rate rose to 10.6% from 10%. The rate on unsecured personal loans increased to 11% from 10.6%, while overdraft delinquencies declined to 15.34% from 16.31%.
Juliana Inhasz, an economist and professor at Insper, said that although the labor market remains strong and inflation continues to ease, household income “is not entirely sufficient to cover expenses.”
“A lot of people are employed, but average incomes are still low,” Inhasz said. “[Expenses for] food, healthcare, housing and household costs have risen sharply in recent years, with a high cost of living for lower-income groups.”
Marcela Kawauti, chief economist at Lifetime Gestora de Recursos, said the delinquency data illustrate how the Selic rate’s prolonged stay at 15% from June 2025 through March 2026, put pressure on household budgets. The benchmark rate now stands at 13.75%.
“This raises a warning about how moderate the economic slowdown will be from here, because high interest rates can cause the wheel [of the economy] to stop turning abruptly, with people having to direct part of their salaries toward interest payments,” Kawauti said.
Broader trend
Roberto Luis Troster, coordinator of the Fipe Center for Studies on Brazilian Corporate Debt, or Cefeb, noted that indebtedness has been rising since 2021, both during periods of “low Selic” and “high Selic,” even as unemployment has remained near record lows and economic activity has expanded.
The Central Bank has also promised measures in the coming months to address household borrowing through costly credit lines such as credit cards and unsecured personal loans.
“Without macroprudential measures, it will be very difficult for these people to escape this cycle,” Central Bank Chair Gabriel Galípolo said in an interview last week. “It is important to create preventive and transparency measures that build awareness when people take out these credit lines, as a matter of consumer protection and financial citizenship.”
Household burden
Household indebtedness, measured as outstanding debt relative to income accumulated over 12 months, rose to 49.9% in July, up 0.2 percentage point from June and 1.1 points over 12 months.
The debt-service ratio — the estimated average amount used to repay debt as a share of average income — was unchanged from June at 28.7% in July. It was up 1.4 percentage points over the previous 12 months.
Outstanding credit in the National Financial System, or SFN, rose 0.5% between July and August to R$7.39 trillion. The increase was led by earmarked lending, which grew 0.8%, and credit to individuals, also up 0.8%.
The Finance Ministry and the Central Bank did not comment.
*By Hamilton Ferrari and Alex Ribeiro, Valor — Brasília and São Paulo
Part of financial sector applauds measure against online gambling amid concerns over legal uncertainty
A person using Pix, the instant payment system of Brazil — Photo: Hermes de Paula/Agência O Globo
The number of Pix transactions fell about 10% over the past three days, after the government published a presidential decree (MP) late Friday afternoon (25) banning online sports betting (known in Brazil as “bets”). For part of the banking industry, the ban is viewed favorably, since there are in fact many indicators that betting sites were eroding household budgets, especially those of low-income families, and thus affecting delinquency. Still, there is criticism over the legal uncertainty generated by the measure.
On Saturday (26), the number of Pix transactions (not the financial volume) was 229,600, down 11% from the average of the previous four Saturdays, according to Central Bank data. On Sunday, transactions totaled 165,900, down 12.0% on the same basis of comparison. And on Monday (28), they reached 213,000, a decline of 7.4%. Over the three days combined, the drop is 10.0%, also compared with the average for the same period in the previous four weeks.
“Obviously it’s not possible to attribute this drop in Pix only to the ban on bets, but it gives a sense of the size of the problem. It has become a public health issue,” says an industry leader. “I think it was the right decision by the government. I don’t like betting sites in any sense,” adds a banker at a midsize institution.
As Valor reported Tuesday (29), analysts also assess that the ban on bets could be positive for banks. Citi notes that more than 40 million Brazilians have already put money into these bets, representing about R$20 billion in gross revenue in the first half of this year. “The measure could leave higher disposable income for households, which would translate into better asset quality for banks, especially in the low-income segment,” says a banking source.
Another source in the sector also acknowledges that the measure could have a slightly positive effect for banks by helping ease households’ disposable income. Still, the source criticizes how the government made the decision, creating legal uncertainty and also affecting the fiscal situation.
“I think betting sites do a lot of harm to the local economy and to commerce, and they shouldn’t have been regulated the way they were, but overturning by MP a law and legal structure that was debated for months in Congress is complicated.”
A source in the fintech segment, meanwhile, says that to a certain extent the ban was already expected. “The negative externalities far outweigh the positive ones,” he says, speaking about the effects on society at large. In any case, he notes that some fintechs operate exclusively in this sector and others, though not exclusive, have significant revenue from bets, whether in handling betting flows or in international remittances. “Therefore, an abrupt change will have economic impacts on this subsegment.”
International aviation industry seeks changes to new tax rules, warning higher ticket prices could cut international passenger demand by 17.8%
Daniel Longo, head of National Civil Aviation Secretariat (SAC) — Photo: Vosmar Rosa/Divulgação
The international aviation industry has stepped up efforts in recent months to find ways to mitigate the impact of Brazil’s tax reform. The effort has received support from the Ministry of Ports and Airports, which has submitted a draft proposal with recommendations to the Finance Ministry and the Management Committee of the Tax on Goods and Services (CGIBS).
International airfares, which are currently tax-exempt, will be subject to half the standard rate under the new system, estimated at 26%. On domestic flights, the current rate of around 9% will rise to the full rate. The industry has been seeking an alternative for some time, so far without success.
Behind the scenes, sources say there is an expectation that parts of the tax reform could be postponed until after the election. That is because several sectors are facing major disagreements over the new rules. Airlines, meanwhile, have already begun selling tickets for the first months of next year without knowing exactly what tax rate they will have to pay.
According to the International Air Transport Association (IATA), if the reform takes effect as currently drafted, it would increase international airfares by 13.3%. That could reduce demand by 17.8%, equivalent to 5 million fewer passengers a year.
The National Civil Aviation Secretariat (SAC), part of the Ministry of Ports and Airports, prepared the recommendations sent to the Finance Ministry in an effort to find an alternative approach.
One proposal calls for a zero tax rate, based on the principle of reciprocity between countries. “International air transportation is governed by international agreements. And the vast majority of those countries, with a few exceptions, do not impose any type of tax on international air transportation services,” said Daniel Longo, head of the SAC.
The ministry proposed a special tax regime to the Finance Ministry, a model supported by provisions in the supplementary laws governing the tax reform. The proposals were submitted in August, but there has been no response so far. The Ministry of Finance did not respond to a request for comment.
Longo said the prospect of imposing a tax on international aviation is a concern for the ministry, particularly as tourism continues to grow. “Last year, we set a record for the number of tourists visiting Brazil. If we start adding costs, we could be reducing demand,” he said.
Another recommendation to the Finance Ministry, Longo said, involves regulations that would prioritize air operations with little or no environmental impact. Such operations would be exempt from the excise, known as the “sin tax,” which was created to impose higher taxes on activities that have negative effects on society or the environment. The tax also applies to aircraft and vessels, as well as products such as alcoholic and sugary drinks.
Chris Sununu, chairman and CEO of Airlines for America (A4A), expressed support for the SAC’s proposal for a zero VAT rate. “A lower tax burden and greater legal certainty show that Brazil is ready for further growth,” he said in a statement to Valor.
Another issue on the industry’s radar is a change to Brazil’s Electronic Air Transportation Ticket system (BP-eTA), which will begin requiring around 200 fields of passenger information. Today, the system collects only basic information, such as the passenger’s name and identification number.
Peter Cerdá, IATA’s regional vice president for the Americas, said the industry has submitted to the government a list of 15 to 25 fields that could be provided while complying with personal-data protection requirements under Brazil’s General Data Protection Law (LGPD) and international legislation.
According to IATA, the requirements currently proposed for BP-eTA would entail a level of detail significantly greater than that required in markets such as Colombia, Peru, Argentina, Spain, Portugal, and France.
“The impact is significant, both operationally and in terms of implementation,” said Cerdá, who is also president of the Latin American and Caribbean Air Transport Association (ALTA).
Cerdá said the association and executives from global airlines met with government representatives in Brasília in August. “The only people we weren’t able to speak with were officials at the Finance Ministry,” he said.
Cerdá also said the industry has asked for the new ticketing requirements to be postponed. The rules were originally scheduled to take effect in August but were pushed back to December 1. “We have 46 airlines operating in Brazil. What they [the government] are asking for is a solution that simply cannot be delivered,” he said.
Juliano Noman, president of ABEAR, said the industry views higher taxes on international airfares as a move that would hurt tourism. Just look at places like Bonito [in Mato Grosso do Sul state] and Jericoacoara [in Ceará],” he said.
One airline closely watching the changes is Portugal’s TAP, the international carrier serving the largest number of destinations in Brazil. Carlos Antunes, the airline’s head of the Americas, said TAP has put its Brazilian expansion plans on hold. “This change will mean many hundreds of thousands of euros in additional costs,” he said.
The group has no plans to launch new routes in 2027. This year, it added two routes from Curitiba and São Luís to Lisbon. TAP currently serves 15 cities in Brazil. The airline carried 2.2 million passengers in Brazil last year and aims to increase that figure by 5% this year.
CGIBS said it is reviewing thousands of contributions submitted by different sectors of the economy regarding the regulations for the IBS and that its representatives have met with SAC to discuss the aviation industry. “The committee has not yet taken a position on the proposals submitted, which are still undergoing technical review,” it said.
“Regardless of the merits of the proposals received, it is noteworthy that the committee has regulatory authority only over the IBS and cannot introduce new rules or go beyond what has been established in legislation approved by Congress,” the committee said, adding that expanding special tax regimes for certain sectors would tend to increase the burden borne by other parts of the economy.
Long-term yields at home and abroad offset support from stocks, currency and other market indicators, reinforcing expectations of weaker growth
Brazil’s financial conditions have remained restrictive since March, driven mainly by fixed income, as the Selic rate declines only gradually from 13.75% and long-term borrowing costs stay under pressure both at home and abroad.
Higher external risk explains much of this year’s tightening. In Brazil, however, market interest rates also reflect worsening fiscal concerns and rising public debt, which have pushed investors to demand higher risk premiums.
The Financial Conditions Index, or FCI, compiled by Tendências Consultoria using the Central Bank’s model as a reference, has remained in contractionary territory since March, when local and global markets deteriorated sharply following the outbreak of the conflict involving the United States, Iran and Israel.
The index reached 1.23 point at the end of March and has since become more volatile, while remaining in restrictive territory.
The indicator combines price components, including commodity indexes, oil prices and the exchange rate, with market variables such as Brazilian and international stock indexes. It also incorporates risk measures including credit default swap (CDS) movements, volatility indexes and domestic and international interest rates, which carry the greatest weight.
A negative reading signals expansionary financial conditions that support economic activity. A reading above zero, as at present, points to tighter conditions and a less favorable environment for growth.
In practice, the sharp rise in long-term global interest rates has offset improvements in domestic factors that could otherwise ease financial conditions.
The surge in U.S. Treasury yields has prevented a stronger decline in Brazil’s long-term rates, even as the Selic falls and the stock market gains on expectations of a close election between Luiz Inácio Lula da Silva of the Workers’ Party (PT) and Flávio Bolsonaro of the Liberal Party (PL).
“Interest rates abroad are the main source of tightening, followed by oil and, to some extent, currency movements, with the dollar gaining a little more traction,” said Alessandra Ribeiro, partner and director of macroeconomics and sector analysis at Tendências. “But overall, interest rates account for much of the index’s movement, which has come under greater pressure again after a very volatile year.”
Ribeiro said the FCI is at its highest levels since April, showing that financial conditions have been tight for much of the year.
“And the level is not low. We are now seeing the effects on economic activity, with models showing that financial conditions begin to affect the economy after one quarter and that the impact lasts for as long as four quarters. In other words, this will affect activity,” she said.
Growth outlook
Tendências says market performance “only reinforces the scenario of a further slowdown in activity in the second half.”
The consultancy expects gross domestic product to grow by an average of just 0.1% in the second half of this year, leaving a carryover of only 0.3% for 2027.
Tendências forecasts GDP growth of 1.8% this year and just 1% in 2027, underscoring its view that the economy will lose momentum as domestic interest rates remain under pressure.
“If we look at local assets, interest rates are pushing financial conditions toward tightening, while other markets have contributed more positively,” Ribeiro said, referring to CDS and capital markets, which have helped limit the overall tightening.
Rafael Cardoso — Photo: Anna Carolina Negri/Valor
Diverging signals
Daycoval chief economist, Rafael Cardoso, also sees domestic interest rates as a source of financial tightening, although the bank’s own FCI currently points to expansionary conditions.
One of the main differences from the Central Bank framework involves higher oil prices. Daycoval treats them as a source of financial easing because Brazil is an oil exporter.
“Some components, such as capital markets, the local exchange rate and the performance of emerging-market currencies, end up pushing the index into expansionary territory. But high domestic interest rates and credit delinquency are two factors pointing to very contractionary financial conditions,” Cardoso said.
Although Daycoval’s FCI currently signals expansion, Cardoso said the index is only one input in the bank’s GDP forecasts.
“We know that all indicators have their problems, and the FCI does not capture the duration of monetary tightening,” he said. “It may show a reading close to neutral, or slightly expansionary, but a prolonged period of tight conditions can produce weaker activity than expected.”
Cardoso said that appears to be the case now.
“An FCI close to neutral should point to GDP growth near its potential rate of 2%, but we forecast growth of 1.2% in 2027. Once we move away from the indicator itself, GDP appears likely to perform more weakly than current financial conditions would suggest,” he said.
André Lóes — Photo: Gabriel Reis/Valor
Fiscal pressure
Vivest chief economist, André Lóes, takes a similar view, saying financial conditions are severely strained in fixed income, though less so in the foreign-exchange market.
“If public-debt holders receive bad news after the election about fiscal proposals, conditions will deteriorate because the yield curve will not come down and there is also a chance the exchange rate could weaken,” he said.
Lóes said investors naturally focus on the direction of monetary and fiscal policy, but private-sector decisions also create an underlying trend that feeds into financial conditions.
“They end up being extremely important. Ultimately, when we reach a situation in which people are worried, the impact of economic policy itself starts to become limited. In other words, fiscal expansion does not help if people respond by consuming less,” he said.
Financial conditions are therefore becoming increasingly important in assessing what comes next for Brazil, Lóes said.
“And because the major imbalance is fiscal, fiscal adjustment becomes very important. Otherwise, it will not be possible to untie the knot in financial conditions,” he said.
“We do not have a balance-of-payments problem, and we managed to bring inflation down to civilized levels, although the sacrifice ratio was very high precisely because of the other imbalances,” Lóes said.
“We have three problems today: fiscal, fiscal and fiscal. If we start addressing that, we can move beyond the very short-term issues and complete the work we began 30 years ago: stabilizing the Brazilian economy and focusing on productivity growth.”
*By Gabriel Roca and Victor Rezende, Valor — São Paulo
Industry groups seek suspension of sweeping measure as government sues 17 operators for at least R$1 billion over alleged social and health costs
Luiz Fux — Photo: Luiz Silveira/STF
Brazil’s online betting industry and the federal government opened competing legal fronts Monday over President Lula’s sweeping ban on online gambling, as industry groups asked the Supreme Court to suspend the measure. In contrast, the government sued 17 operators for at least R$1 billion in collective damages.
They are the first legal actions on the issue since President Lula issued the executive order on Friday, another major policy move made days before the first round of the presidential election.
At the Supreme Court, the industry groups are seeking an injunction to suspend the measure until Congress either converts it into law or the court reviews it. No justice has been assigned yet, but the companies want the case assigned to Justice Luiz Fux, who is already handling other industry-related cases.
If the court rejects their main request, the betting companies are asking it to either exempt operators already authorized to do business in Brazil—currently, 85 companies operating 186 brands—or to delay enforcement of the ban for six months.
The National Association of Games and Lotteries, representing 32 authorized companies, filed the petition in cooperation with the Brazilian Institute for Responsible Gaming.
Among its arguments, the association says the executive order violates legal certainty, freedom of enterprise, the principle of proportionality, consumer protection, and Brazil’s federal system. It describes the measure’s timetable as “abusive.”
In a statement, the group argued that the government had overnight eliminated a market that had attracted investment, paid taxes and created jobs, while leaving millions of gamblers exposed to an illegal market with no protections.
The association also argues that no urgency justified the executive order; that such a measure cannot address criminal matters; that the government failed to estimate its budgetary or financial impact; and that it encroaches on the administrative powers of Brazil’s states.
The Attorney General’s Office acted preemptively, asking the judge handling the case to give the president’s office and the institution 72 hours to present their arguments before making a decision.
Government seeks compensation for health costs
On another front, the federal government filed a civil lawsuit in federal court in Pernambuco state because, according to the Attorney General’s Office, Brazil’s Northeast is among the regions most affected by problem and high-risk gambling because of its greater concentration of vulnerable groups.
According to the institution, the 17 companies named in the lawsuit account for about 80% of Brazil’s fixed-odds betting market.
The Attorney General’s Office also reports that 10.9 million of the 28 million Brazilians who currently gamble exhibit patterns of high-risk or problem gambling. According to the institution, between January 2018, when betting was legalized in Brazil, and December 2025, treatment for pathological and excessive gambling through Brazil’s public health system increased by 140%.
The government argues that the compensation betting companies must provide under current legislation does not cover the costs the public health system bears.
According to the Attorney General’s Office, the exact amount the companies would have to reimburse the public health system for material damages, should the government prevail, would be calculated at the end of the proceedings. The institution cites preliminary Health Ministry studies estimating losses of at least R$2.6 billion.
The government is also asking the court to order the companies to repay twice the amounts wagered by people diagnosed with gambling disorder.
Task force targets illegal platforms
Throughout the day, the government released details of actions taken by a task force created to cut off access to unauthorized platforms and prevent new online addresses from offering betting to Brazilians.
The task force identified 506 websites suspected of offering unauthorized betting and seven social media advertisements that began circulating on the day the measure was issued, despite the measure’s ban on new advertising.
The government said it would continue monitoring the platforms to ensure that advertisements are removed and proposed a technical meeting with representatives of major technology companies. A report prepared by the ministries involved recommends immediately removing advertisements first published after the provisional measure took effect.
The government also blocked messaging app channels that promoted online betting. Together, they had 212,000 members.
In an extraordinary edition of the official gazette, President Lula also issued a decree establishing a new interagency committee to police illegal fixed-odds betting and advertising.
The committee’s responsibilities include sharing information on individuals and companies involved in operating, offering, intermediating, or promoting fixed-odds betting; maintaining a unified database of internet domains, applications, and bank or payment accounts; and establishing joint protocols for blocking websites and apps.
The committee will also be able to propose standardized procedures for notifying platforms, service providers, and financial institutions, and for referring evidence of possible administrative, tax, or criminal violations to the appropriate authorities.
Measure is among options discussed to curb household debt as interest costs take a record share of debt-service income
Lauro Gonzalez — Photo: Divulgação
.Brazil’s Central Bank is at an advanced stage of studying measures to rein in household debt, which remains near record levels. One option under consideration is requiring banks to hold more capital against riskier types of lending, including credit cards, Valor has learned.
Economists, however, question how effective such a move would be in an environment of persistently high interest rates and as expensive forms of credit account for a growing share of household debt.
The Central Bank is expected to meet with banking industry representatives in the coming days, people familiar with the matter said. Financial institutions are still trying to understand what measures may be adopted and their potential impact.
“They [at the Central Bank] are designing the alternatives. We still don’t know what is coming,” one person said.
“We will have discussions with the Central Bank to understand what those measures could be,” another source said.
Central Bank Chair Gabriel Galípolo may address the issue this Thursday (Sept. 24) during the release of the Monetary Policy Report. He has repeatedly voiced concern about household debt, particularly the rapid expansion of credit-card lending.
Capital requirements
Industry sources see an increase in the risk weight applied to credit-card lending as one of the more likely options.
Under such a measure, banks would have to set aside more capital against credit-card exposure. That would raise the opportunity cost of extending this type of credit and could encourage lenders to redirect capital toward other products. The measure would be aimed at discouraging supply rather than curbing demand.
The Central Bank took a similar step 15 years ago, when auto lending was expanding rapidly. The measure helped slow growth in that segment.
Other ideas discussed in recent weeks, including higher reserve requirements or an increase in the tax on financial transactions, known as IOF, appear to have lost some momentum.
“That would only raise the cost of credit and would not discourage riskier lines, which seems to be what the Central Bank wants,” one source said.
Credit-card growth
The regulator has been paying particularly close attention to credit cards. The segment expanded sharply in recent years, driven by greater competition and broader access to banking services, and continues to grow at a fast pace.
While total outstanding credit rose 7% in the 12 months through July, the latest available data, credit-card balances for individuals climbed 14.7%. Within that category, revolving credit jumped 20.8%, installment balances rose 11.5%, and purchases paid in full increased 14.3%.
Central Bank Monetary Policy Director Nilton David said on Wednesday (Sept. 23) that the measures being studied to improve credit supply are intended to increase transparency, map risks, align incentives and reduce the potential for systemic risk.
Without providing details, David said the measures should not be confused with monetary policy.
“Everything is being designed and considered by looking at the experiences and existing legislation in other jurisdictions, in other countries. The objective is the mitigation of systemic risks, alignment of incentives and transparency,” he said at an event organized by Safra bank.
David added that the rules would not differentiate among types of financial institutions.
Financial stability
His remarks reinforce the message from the latest meeting minutes of the Central Bank’s Financial Stability Committee, known as Comef, which highlighted the need to address household indebtedness.
The committee said the Central Bank planned to adopt measures to mitigate risks associated with more expensive forms of credit. Its guidelines call for “the timely recognition of risks, the gradual accumulation of capital and more sustainable conditions for extending credit to borrowers.”
In a recent report, Safra analysts said macroprudential measures are likely to take the form of higher capital requirements for riskier credit products.
They pointed to December 2010, when the Central Bank raised the risk weight on auto loans of up to two years to 150%, at a time when that type of lending was growing at an annual pace of nearly 20%.
“We consider this episode a reference point for the type of calibration the current environment may require, rather than a forecast of the exact action. […] A comparable increase in revolving credit-card balances, unsecured personal loans and overdrafts would be the natural target if the Central Bank opts to act.”
A sell-side analyst said a higher risk weight may have limited effectiveness because some of the financial institutions expanding fastest in unsecured lending in recent years are large fintechs that currently have excess capital.
That means that even if the Central Bank raises capital requirements, those companies may still find it attractive to continue extending this type of credit as they seek to gain market share.
“Another possibility would be to require additional provisioning for certain products for a period of time, which could be more effective,” the analyst said.
Household strain
Household indebtedness has remained near record levels in recent months. It stood at 49.75% in June, just below the historical peak of 49.92% reached in January. The indicator compares the stock of household debt with income accumulated over the previous 12 months.
The household debt-service ratio—the share of disposable income used to service debt—also reached an unprecedented 28.85%.
The composition of that burden is drawing additional attention. Of the total, 17.99 percentage points go toward principal repayments and 10.86 percentage points toward interest alone.
In other words, interest payments account for 37.6% of the income households devote to servicing debt, also a record.
Several factors help explain the growing weight of interest payments, including the Selic, Brazil’s benchmark interest rate, remaining high for an extended period; a shift in the credit mix toward products with wider spreads; and pressures on household budgets, including sports betting.
This has occurred even as incomes remain strong and unemployment sits near historical lows.
“Even the rise of [instant-payment system] Pix has played a role because it led banks to compete in the credit-card segment by offering larger credit limits. With a population lacking financial literacy and high interest rates, that led to a very bad combination,” said a researcher who studies the subject.
Credit supply
Lauro Gonzalez, coordinator of the Center for Studies in Microfinance and Financial Inclusion at Getulio Vargas Foundation (FGV), said debt crises typically stem from factors that can be grouped into three areas.
The first involves macroeconomic conditions, such as the benchmark interest rate. The second relates to microeconomic factors, including financial education. The third concerns credit supply, such as the widespread availability of credit cards.
Gonzalez said the financial industry has changed significantly with the arrival of new players and the inclusion of tens of millions of new users.
“Depending on regulation, the ecosystem that is built may have more or fewer models of predatory credit supply,” he said.
In an article published in April, Gonzalez proposed seven measures to address the issue. One was precisely the higher regulatory capital and provisioning requirements for riskier loans that the Central Bank is now considering.
Another proposal was to create a debt limit for unsecured credit, similar to the 30%-of-income limit used by the industry for mortgage lending.
Debt relief
On the government side, Finance Minister Dario Durigan recently said officials are studying a new version of Desenrola, the federal debt-renegotiation program.
Banks see the potential impact of the program as neutral. These are loans that have already been written off as losses and that financial institutions already sell to asset managers specializing in distressed assets.
Even if the debts are canceled and consumers have their negative credit records cleared, banks consider it unlikely that they would immediately regain a strong enough risk profile to qualify for new loans.
It is also unclear how the program could be implemented while the government is running a primary budget deficit.
The Central Bank declined to comment.
*ByÁlvaro Campos,Lais GodinhoandHamilton Ferrari— São Paulo and Brasília
U.S. supplied about 80% of Brazil’s diesel imports in September as disruptions in Russia and Middle East tighten global market
Felipe Perez: “Diesel prices in the U.S. keep rising and have begun to affect American farmers” — Photo: Leo Pinheiro/Valor
Brazil could face a sharp impact if the United States restricts diesel exports, energy-market experts say, as President Donald Trump weighs a measure to contain record domestic fuel prices ahead of the Nov. 3 midterm elections.
Brazil relies on imports for roughly 30% of its diesel market, making it particularly exposed to any U.S. restrictions. About 80% of the diesel Brazil imported in September came from the United States, according to a source familiar with the fuel market. India is also an important supplier, though its share is smaller.
Bloomberg reports that U.S. agricultural state lawmakers are urging the White House to halt diesel exports amid the harvest season, driven by increased demand from diesel trucks. Additionally, states like Alaska have requested restrictions as winter nears, when heating fuel consumption rises.
The oil industry, however, could be hurt by restrictions on overseas sales.
“It is as if the two biggest forces within the Republican Party were in conflict. Agriculture and the oil industry are pulling in opposite directions,” said a source familiar with the discussions.
“If exports are banned and refineries have to sell at domestic prices, we need to see who would absorb the difference compared with what they could earn by selling overseas,” the source said.
It remains unclear whether any restriction, if adopted, would be temporary or whether the U.S. government could instead limit overseas sales through export quotas.
Global supplies already under strain
After Russia’s invasion of Ukraine and the ensuing sanctions, discounted Russian diesel became a major source of Brazilian imports, competing with U.S. supplies for the top spot.
However, increased Ukrainian strikes on Russian refineries led Moscow to halt diesel exports in July, exacerbating an already tight market due to supply issues in the Middle East. Additionally, China has focused on its internal needs and limited exports since the U.S.-Iran conflict started on Feb. 28.
Felipe Perez, a director at S&P Global, said that even without an official decision, a potential U.S. export suspension would disrupt global diesel flows because the U.S. is such a major supplier.
“Diesel prices in the United States continue to rise and are beginning to affect American farmers,” Perez said. “If exports are indeed suspended, refineries could reduce production because the domestic market cannot absorb all the volume and storing it is less profitable. That reduction in refinery output could also affect U.S. gasoline production.”
Perez said buyers that currently rely on U.S. diesel would have difficulty finding the same volumes elsewhere. In that case, consumers worldwide would compete for scarcer, more expensive supplies at a time when diesel refining margins have hovered near record levels in recent months.
“Diesel consumers have very little flexibility,” he said. “They cannot simply switch to another fuel. They will have to pay more.”
Reuters reported Tuesday that Trump said he supported banning U.S. diesel exports.
“I’ve already said we shouldn’t export diesel. We produce a lot of diesel. I’ve advocated that. I’ve advocated it with my team,” Trump told reporters before a meeting with Ukrainian President Volodymyr Zelensky.
Treasury Secretary Scott Bessent said the administration is examining whether a ban would be feasible and whether a full or partial restriction could work, Reuters reported. Trump also said he discussed Ukrainian attacks on Russian refineries with Zelensky.
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