China’s drive for self-sufficiency could reshape agricultural demand

Asian country invests in technology, biosecurity, and management to increase food production; Brazil is a major meat supplier to the Chinese market

 

 

 

Feed plant of DBN in Beijing
Feed plant of DBN in Beijing — Photo: Danton Boatini Júnior/Valor

Visitors to DBN’s pig-feed factory in Beijing must follow a strict safety protocol that includes putting on foot coverings and spending one minute in a disinfection chamber before entering, under the watch of local employees. The measures to prevent any type of contamination are more than justified. Since the outbreak of African swine fever that wiped out nearly half of the country’s pig herd in the late 2010s, companies in the sector have strengthened biosecurity standards to prevent the disease from returning.

“Every day we test raw materials, for diseases, the environment and disinfection,” engineer Yin (who did not disclose his full name) told a group of journalists and representatives of Brazilian companies who visited the facility this month.

Biosecurity measures were essential to the recovery of China’s pig industry, but investment in technology and management also contributed to the recovery, said the engineer, who is responsible for the feed factory. China’s pig herd currently has 39 million breeding sows, according to the U.S. Department of Agriculture (USDA).

The African swine fever outbreak accelerated the industry’s move toward greater use of technology, with small farms being replaced by large commercial operations. “After the swine fever, production is increasingly shifting toward professional companies and large groups. There are no longer those farmers with fewer than three or five pigs,” Yin said. The shift has also boosted demand for animal feed. At DBN, it is growing by about 5% a year.

Thanks to mechanization, DBN’s feed factory has fewer than 20 employees. Only a few of them were working when the newspaper visited the facility. The health crisis helped advance the adoption of technology across China’s livestock industry, but the movement—which spans several segments—is also linked to another concern in Beijing: food security.

A key focus of the country’s 15th Five-Year Plan, China’s strategy to strengthen food security has the potential to reshape a market in which Brazil is currently one of the largest suppliers. Chinese companies are already the world’s second-largest producers of chicken meat and are recovering pork production. For beef, the USDA projects that China will produce 7.1 million tonnes this year.

Beijing’s intention is to reduce China’s vulnerability in areas considered strategic. In recent decades, Chinese diets have diversified, with meat accounting for a larger share of consumption. With a population of 1.4 billion, the country has traditionally been viewed as one of the world’s largest food importers.

The Five-Year Plan launched in March 2026 to guide China’s economic and social development lists increased grain production among its priorities, along with reducing external dependence and investing in seeds, genetics, and mechanization. It also calls for strengthening the country’s livestock industry.

According to the latest report by the Organization for Economic Cooperation and Development (OECD) and the United Nations Food and Agriculture Organization (FAO), which provides projections for 2026 through 2035, China is expected to continue increasing self-sufficiency in pork, with imports becoming less important. Investments in biosecurity and large-scale production are identified as pillars of China’s policy.

In 2024, China was the main destination for Brazilian chicken exports, receiving 562,200 tonnes. But last year, shipments fell to 250,300 tonnes, less than half the previous volume. Increased Chinese production contributed to the decline, but the main reason was the detection in May 2025 of avian influenza at a commercial farm in Rio Grande do Sul, which led to a ban on Brazilian chicken.

For pork, China imported 159,200 tonnes from Brazil last year, making it the second-largest destination for Brazilian pork, behind only the Philippines.

In 2025, China imported 1.7 million tonnes of Brazilian beef and was Brazil’s largest customer. This year, however, it established a quota system for several supplier countries, limiting Brazilian shipments to 1.106 million tonnes. The introduction of quotas, justified as a measure to safeguard China’s livestock industry, shows that Beijing is also turning to protectionist measures to achieve self-sufficiency.

And animal proteins are not the only target. China also wants to reduce its soybean imports, which currently come mainly from Brazil and the U.S. with which it is engaged in a trade war. To that end, Chinese animal-nutrition companies have been changing feed formulations, using a smaller proportion of soybean meal.

But Suping Geng, DBN Biotech’s vice president for Latin America business, does not expect a significant substitution in the short term because soybean meal remains nutritionally superior in pig-feed formulations. “If you talk to feed producers, they still believe soy is better than corn,” the executive told reporters during a visit to DBN’s laboratory in Beijing.

*By Danton Boatini Júnior, Globo Rural — Beijing

Source: Valor International

https://valorinternational.globo.com/

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Brazil’s minimum tax may benefit some wealthy investors

Financial income already taxed above the new 10% floor could offset dividend withholding and generate refunds for some high-net-worth taxpayers

 

 

 

 

 

 

Carolina Chao and Mariana Oiticica — Foto: Rogerio Vieira/Valor
Carolina Chao and Mariana Oiticica — Photo: Rogerio Vieira/Valor

Brazil’s new 10% minimum tax on high-income earners, which will apply starting with annual tax returns filed in 2027, could have an unintended consequence for the government: some of the country’s wealthiest investors may end up receiving tax credits or refunds.

The tax, created by Law 15,270 of 2025, applies to annual income above R$600,000, or R$50,000 a month. It was designed to offset the exemption granted to people earning up to R$5,000 a month and the lower tax burden for those making up to R$7,350. The legislation was paired with a 10% withholding tax on profits and dividends exceeding R$50,000 a month.

For wealthy individuals whose income comes mostly from financial investments, however, the dividend tax may ultimately have little effect, said a partner at a traditional wealth management firm.

“If you have two-thirds of your billions invested and the other third coming from dividends, you will pay zero,” the person said. “The side effect is that it will give the richest taxpayers a tax credit.”

Tax offsets

Any excess tax withheld on dividends will be taken into account when the annual minimum income tax is calculated and could result in part of that amount being refunded, said Gustavo Haddad, head of tax practice at Lefosse Advogados.

Haddad noted that the withholding is only an advance payment of the annual minimum tax. It applies when a company distributes more than R$50,000 to an individual in a given month.

Receiving less than that amount each month does not mean the taxpayer will escape the 10% levy when all income is added up in the annual return.

“People need to pay attention and manage their wealth properly, looking not only at each individual distribution but at their overall position, including dividends and other income. That is something that needs to be monitored to avoid an unpleasant surprise,” Haddad said.

The minimum tax weighs more heavily on people who receive most of their income through dividends, he added. If two-thirds of a taxpayer’s income comes from financial investments already taxed at 15%, that portion may be enough to bring the effective rate on total income up to the 10% minimum, allowing the amounts withheld on dividends to be fully refunded.

If two-thirds of income comes from dividends, by contrast, the tax already paid on investments may not be enough to meet the 10% minimum across the taxpayer’s total income.

“From a wealth-management perspective, the income tax does not necessarily increase the tax burden in practice, because the proportion of income already taxed may mean that what was withheld during the year is refunded,” Haddad said. “People for whom dividends represent a larger share of income, however, are more likely to be effectively subject to the minimum tax.”

“The client and advisers need to be proactive in their analysis and in rebalancing the portfolio, because that can make a difference to the tax bill in May 2027 or to the size of the refund. The calculation needs to be made over the calendar year,” he added.

Portfolio view

The minimum tax changes the way wealth needs to be managed, but it does not mean the wealthiest individuals will necessarily pay less than they did before the law was enacted, said Mariana Oiticica, the BTG Pactual executive responsible for wealth planning.

“Before, we looked separately at financial assets, real-estate income and offshore assets. That logic no longer works. You have to assess the client’s full situation, look back at what has happened, consider the direction for this year and then make adjustments,” Oiticica said.

“What the change in legislation has brought is complexity. It will not necessarily result in families paying more income tax,” she added.

There is no longer a standard formula, she said. Each situation has to be assessed individually.

If a person’s income comes solely from financial investments, the minimum tax does not affect that income, added Carolina Chao, head of wealth planning at BTG Pactual.

The largest fortunes, however, tend to combine several sources of income, such as rental properties, dividends from holding companies or stock portfolios, and income from overseas companies.

Someone who has already paid 27.5% at source on employment income, or 15% on an exclusive investment fund or offshore structure, has already settled that portion of the tax obligation with the Federal Revenue Service, Chao said.

“It is a minimum tax, not a maximum one,” she said. “The refund applies only to the 10% advanced on dividends. The rest is already behind you.”

Dividend exposure

The taxpayers most affected are likely to be entrepreneurs and self-employed professionals who derive a large share of their income from dividends, said Yuri Freitas, head of wealth planning in Brazil at UBS Global Wealth Management.

For investors living mainly off financial assets, the law’s mechanics make clear that those already paying between 15% and 22.5% on fixed-income investments, 15% on offshore holdings or tax on equities may already have an average rate above 10% and could potentially receive an income-tax refund the following year.

“But we still need to see how the Federal Revenue Service’s system will be designed. Sometimes the mechanics matter as much as the text [of the legislation] itself,” Freitas said.

The dividend tax, as designed, is essentially a tool to ensure that taxpayers reach the minimum 10% rate, he said.

“There may be situations in which the income tax ends up functioning as a large compulsory loan, withheld in one year and refunded in the next.”

When filing the annual return, taxpayers will have to perform two separate tests.

The first is to determine whether the effective tax rate paid by the company distributing the proceeds exceeds 34% in corporate taxes and the Social Contribution on Net Profit, known as CSLL. If that threshold is exceeded when dividends paid to the individual are factored in, the taxpayer is entitled to a refund.

Many companies, however, fall below that threshold, meaning their partners or shareholders will not qualify for reimbursement. Publicly traded companies will also face the challenge of informing the market of the consolidated effective tax rate across the group.

The second test, Freitas said, is to add up all income received, including dividends, while excluding gifts treated as advances on inheritance, inheritances themselves, tax-exempt securities and capital gains.

If R$10 million remains after those exclusions, the minimum tax due would be R$1 million. A taxpayer who had already paid R$1.3 million would be entitled to a R$300,000 refund.

“Where it will really hurt is when a major business owner derives an overwhelming share of income from dividends and has not yet built up a separate pool of financial investments to balance the average tax rate,” Freitas said.

Lawyers, dentists and architects—professionals who operate through companies and use dividends from their businesses to fund their living expenses—are also likely to feel the impact.

Portfolio choices

As UBS reviewed portfolio adjustments, its wealth-planning team examined whether investors might benefit from replacing tax-exempt securities with taxable assets that would raise their average tax rate, Freitas said.

“Even if the return may be slightly higher on an asset taxed at 15%, from a financial standpoint the investor is still better off with the tax-exempt security,” he said, referring to the amount ultimately left in the investor’s pocket. “There is no point maximizing the refund and losing sight of the financial result.”

BTG has created a calculator to help its bankers assess whether portfolios need to be recalibrated based on each client’s overall income profile.

By entering information from the 2025 annual tax return, bankers can determine whether it makes sense to maintain the current allocation to tax-exempt assets or shift somewhat more money into taxable investments, Oiticica said.

“It provides an idea of the client’s tax burden so we can understand what will happen in 2027 and what potential adjustments can still be made this year to take advantage of possible income-tax optimization,” she said.

Luca Salvoni, a tax partner at Cascione Advogados, said that, based on what he has seen so far among the firm’s clients, individuals with substantial net worth who carefully manage the balance between financial investments and dividends will generally be able to avoid an additional minimum-tax liability.

“But that will often mean moving away from tax-incentivized securities,” Salvoni said.

Taxpayers who derive most of their income from dividends and have few other sources of income, by contrast, “will have little room to get around the rule,” he added.

Uneven impact

The principle behind the 10% headline rate is that the wealthiest taxpayers should pay at least that amount, said Hugo Menezes, legal adviser at wealth manager Aware Investments.

“People who have other sources of income, or are in a situation where the company is already taxed at a 34% rate, will effectively not pay that 10%. They already have substantial tax credits, or the company’s operations are already taxed at a significant rate. Many wealthy people will not pay it because they meet those conditions.”

The people likely to feel the greatest impact, Menezes said, are professionals operating under Brazil’s Simples Nacional simplified tax regime or the presumed-profit regime who receive dividends from companies whose effective tax rates do not reach 34%.

“The tax will end up landing on the midsize business owner. For truly high-income individuals, once the annual adjustment is made, it will more or less cancel itself out—they will not pay an extra 10%,” he said.

One question that has emerged in discussions, Menezes added, is how much cash an individual actually needs each month to maintain his or her standard of living.

One option would be for the company to distribute fewer dividends while the individual draws down an investment such as a bank certificate of deposit to supplement monthly income, seeking to “avoid as much of the 10% tax as possible within what the law allows.”

By Adriana Cotias — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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Petrobras confirms oil discovery at mouth of Amazon River in Amapá

CEO Magda Chambriard says discovery confirms the region’s potential, but further studies are needed to determine commercial viability

 

 

 

Perobras: discovery demonstrates that company will remain a major oil producer in Brazil — Foto: Alexandre Cassiano/Valor
Perobras: discovery demonstrates that company will remain a major oil producer in Brazil — Photo: Alexandre Cassiano/Valor

Petrobras CEO Magda Chambriard confirmed Monday (17) the discovery of oil in the Amazonas River Mouth basin, off the coast of Amapá state. “There is oil; we don’t know how much. We are extremely optimistic,” the CEO said while visiting, alongside President Lula, a drilling rig carrying out the first work on the FZA-M-59 block off the state’s coast.

Chambriard said the discovery confirms studies pointing to significant oil potential in the region. Drilling of the Morpho well in the FZA-M-59 block began in 2025. The work is expected to take 15 to 20 days. During her presentation, Chambriard displayed an oil sample collected at the site, confirming the presence of the resource.

On Friday (14), Petrobras had reported “indications of hydrocarbons” without specifying whether the discovery involved oil or natural gas.

The discovery in the Amazonas River Mouth basin demonstrates that Petrobras will remain a major oil producer in Brazil, Chambriard said. The find does not yet have commercial value, she added. “Announcing a discovery is different from announcing a commercial discovery. We still have a series of studies to determine the potential for oil production,” she noted.

According to the executive, Petrobras needs to replenish its reserves after Brazil’s pre-salt oil production reaches its expected peak between 2034 and 2035.

Chambriard also said that once drilling of the first well is completed, the company will have a better understanding of how much oil is present in the area. Petrobras has three more wells to drill in the FZA-M-59 block and another six in different areas of the region. For the remaining wells, the state-owned oil company is awaiting additional licenses from Brazil’s environmental protection agency IBAMA.

Petrobras has so far invested $300 million (about R$1.5 billion) in drilling the Morpho well in the Amazonas River Mouth basin, said Clarice Coppetti, the company’s corporate affairs director. In a news conference after visiting the drillship in Amapá, she said that R$150 million of the investment has gone toward environmental protection and wildlife-response infrastructure. Drilling costs $1 million a day.

Regarding licenses for three additional wells in the FZA-M-59 block, Coppetti said IBAMA issued an opinion on August 10 requesting additional measures, including an increase in the number of vessels and the expansion of capacity at a wildlife-response center in Oiapoque, Amapá, to care for manatees in northern Brazil. She said Petrobras and IBAMA are engaged in “constant dialogue,” with the process being monitored by the Chief of Staff Office.

Chambriard said every stage of the studies on Brazil’s Equatorial Margin has reinforced Petrobras’s optimism about the region’s potential. She noted that the oil giant’s bid for the block, in a 2013 auction, was part of an effort to diversify exploration investment toward Brazil’s North and Northeast. “When that happens, production follows,” she said.

The announcement came after a week of reconciliation between Lula and Senate President Davi Alcolumbre, who attended the event on Monday (17). It also coincided with the start of the election campaign. The announcement came just days after the government issued decrees regulating markets linked to the energy transition, including green hydrogen, carbon capture and storage, and sustainable aviation fuel.

The Equatorial Margin, particularly the Amazonas River Mouth basin, is considered one of Brazil’s last oil frontiers. It is also an environmentally and socially sensitive region, prompting years of debate over the feasibility of oil exploration there.

The Amazonas River Mouth discovery was not the first Petrobras has announced on the Equatorial Margin. In 2024, the state-owned company found indications of hydrocarbons at the Pitu Oeste well in the Potiguar basin, off Rio Grande do Norte state. That same year, Petrobras reported “petroleum accumulation” in ultradeep waters at the Anhangá well in the same basin. At the time, the oil giant was appealing IBAMA’s denial of a permit for the Amazonas River Mouth block. The permit was ultimately granted in October 2025.

*By Fábio Couto and Kariny Leal — Rio de Janeiro

Source: Valor International

https://valorinternational.globo.com/

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Corporate bonds try comeback, but only low-risk issuers succeed

Banks began testing market in July and managed to distribute 62% of securities after four months of selling less than half

 

 

 

 

Bruno Spilberg of SPX says demand for corporate bond is there, just not at the rates they seek — Foto: Divulgação

Bruno Spilberg of SPX says demand for corporate bond is there, just not at the rates they seek — Photo: Divulgação

After nearly four months on hold, Brazil’s corporate bond market began showing its first signs of improvement following a restrictive second quarter, although the recovery remains highly limited and concentrated among lower-risk issuers. This pattern is expected to remain through year-end, with the strongest issuers potentially able to extend the maturities of their bonds.

Issuances totaled R$40.1 billion in July, when banks returned to test the market. Another R$59 billion in offerings were underway, according to a survey by ABC Brasil’s research department. Debentures alone accounted for R$28 billion, 40% above the R$20 billion recorded in June.

Another sign of a recovery came from the distribution of offerings. In July, investors absorbed 62% of the securities, the first time the figure had exceeded 60% since February. In previous months, banks had kept a larger share of the issuances in their portfolios as demand retreated. In June, the amount placed in the market was just 46%. In May, it was 42%; in April, 40%; and in March, 47%.

The recovery remains selective and concentrated among large companies and issuers with better credit quality. This means investors have shifted toward these assets in what is known as a “flight to quality.” “Institutional and excellent-quality [securities] are selling well. ‘Mid’ and ‘high yield’ [companies with medium and high returns, but greater risks] are struggling,” said a source who requested anonymity.

The slowdown in the corporate debt market began in March, following a strong start to the year. A series of corporate events interrupted private-credit funds’ fundraising flows and prompted investors to move into more conservative assets, such as bank securities. With demand reduced, several transactions launched between March and April were not fully absorbed by the market.

“Banks ended up acting as a shock absorber during this period of nervousness,” said Samy Podlubny, head of fixed income at UBS BB. According to him, for more than three months, institutions focused their efforts on distributing securities and reducing positions that remained in their portfolios, which limited the launch of new offerings.

With much of this inventory already distributed in the secondary market and fund redemptions more stabilized, issuances began to gain traction again. One of the transactions that marked the reopening of the window was that of Axia, formerly Eletrobras.

The company raised R$1 billion in early July, of which 99% went to funds and individuals, according to data from the Securities and Exchange Commission of Brazil’s (CVM) offering-registration system. It later raised another R$2 billion in a separate offering, concentrated among funds. Taesa, ISA Energia Brasil, and Copel also issued debentures during the month.

Guilherme Maranhão, Itaú BBA’s head of fixed income, said fund redemptions were absorbed without major disruptions in the secondary market. At the same time, banks managed to reduce the positions accumulated during the period of weaker demand. “There was a period of digesting the transactions that remained on the institutions’ books,” he said.

According to Maranhão, the recovery also began to emerge in tax-incentivized debentures, a segment that was hit harder by fund outflows and returned to investors’ radar after the repricing of assets. Recent transactions recorded what was considered strong demand, but the executive stressed that it is still too early to say the window has fully reopened. “The sample is still small.”

Companies continue to need to calibrate the price, size, and structure of offerings to attract investors, particularly for lower-quality credits. In this environment, some fundraisings may come with shorter maturities. “Of course, it varies from case to case, but during periods of volatility, it is common for investors seeking to shorten duration to prefer shorter-dated securities,” said Felipe Thut, head of fixed income at Bradesco BBI.

The high level of interest rates could also lead companies, particularly those raising funds for infrastructure projects, to initially issue shorter-term debt and subsequently replace it with longer-term transactions if conditions improve.

In the first half, the change in investor sentiment and the search for issuers with the highest credit ratings reshaped the corporate debt market. A survey by Quantum Finance for Valor shows that the number of issuers fell significantly while the average size of transactions increased.

About 70% of issuances during the period were concentrated in the first three months of the year—those that were already underway before the shock caused by Raízen and GPA, owner of the Pão de Açúcar chain, seeking out-of-court reorganization in March. And the trend, according to Samer Serhan, a partner at JiveMauá, is for the market to remain extremely selective through year-end. “We haven’t seen such a strong search for extremely high-quality assets since 2023 [the year of the Americanas crisis],” he said.

According to him, issuers with lower credit assessments have found it more difficult to access investors.

The Quantum survey shows that the number of securities fell 34.9% from January to June, while the number of issuers declined 16.9%, from 225 to 187. As a result, the average size of transactions increased 25.9% to R$436.5 million during the period.

Tax-exempt bonds on the rise

 

The most emblematic case was Sabesp, which raised R$14.7 billion in the first half, nearly 10% of the total volume issued. The amount was almost twice the R$7.3 billion raised by Ecovias Rio Minas, the largest issuer during the same period in 2025. In February alone, Sabesp raised R$8.58 billion in two transactions linked to the IPCA inflation index, maturing in 2038 and 2041.

The concentration among large companies was accompanied by growth in tax-incentivized debentures, which are used to finance infrastructure projects. IPCA-linked securities accounted for 44.4% of the volume issued in the first half, up from 32.7% a year earlier. In monetary terms, they grew 11%, from R$59.8 billion to R$66.5 billion, bucking the market’s contraction.

“Infrastructure transactions tend to be larger and more structured, consistent with the financing of projects that are large in scale and have long maturation periods,” Serhan said.

Debentures linked to the DI rate remained in the lead, but lost ground during the period. Their share fell from 59.3% to 51.4%, with volume declining 29%, from R$108.3 billion to R$76.9 billion. IPCA-linked issuances averaged R$679 million, nearly twice the R$343 million average for conventional transactions tied to the DI rate.

The shift is also reflected in the sectoral breakdown. Electricity, sanitation, and transportation and logistics together accounted for 62% of the volume raised in the first half. Electricity remained virtually unchanged from the previous year, at R$52.9 billion. Sanitation nearly doubled, from R$12 billion to R$23.7 billion, while transportation and logistics generated R$16.9 billion.

In the opposite direction, issuances by the financial sector fell approximately 73%, from R$39.9 billion to R$10.6 billion. The market, which in 2025 had strong combined participation from the energy and financial sectors, became more concentrated in infrastructure and regulated services.

Serhan highlights that the large number of concessions awarded in recent years, particularly in transportation and urban mobility, has created new financing needs. At the same time, the Brazilian Development Bank (BNDES) began providing a larger share of the funds allocated to projects, while some investment schedules were extended, reducing the immediate need for fundraising.

The greater selectivity is also explained by the mismatch between the rates companies are willing to accept and the returns demanded by investors. Bruno Spilberg, senior credit portfolio manager at SPX, said fund redemptions reduced their capacity to absorb new offerings. At the same time, companies began postponing transactions as buyers demanded higher premiums.

“There is demand from companies to issue, but there is no investor appetite at the rates they want,” he said. “Those who can are holding back issuances. Only the obvious names are raising funds.”

Guilherme Almeida, head of fixed income at Suno Research, noted that through February, the market had been working with a more favorable outlook for interest-rate cuts. The reversal of that expectation, the steepening of the yield curve and increased volatility prompted companies and investors to adopt greater caution.

The dispersion in rates shows the degree of selectivity. According to Almeida, top-tier infrastructure issuers were able to raise funds at rates close to IPCA plus 6.2% a year, while higher-risk transactions reached double-digit rates. Among securities linked to the DI rate, additional spreads ranged from 0.20 to 13.84 percentage points.

In July, fund flows also showed some normalization. Private-sector credit funds attracted R$14.4 billion after a string of withdrawals in the first half. Infrastructure funds, meanwhile, recorded net redemptions of R$1.6 billion, below the R$8.7 billion withdrawn in June.

Improved fund flows and the reduction in banks’ inventories are helping to reactivate issuances, but they do not yet signal a broad-based recovery. A survey by ABC Brasil of 88 investors shows that 56% expect debenture issuances linked to the CDI rate to grow by at least 10%. For incentivized debentures, 47% project an increase of that magnitude.

According to Odilon Costa, who heads the bank’s research division, the more constructive outlook is related to lower expectations for spread widening. Among incentivized debentures, 66% of respondents expect premiums to remain stable or narrow, compared with 21% in the second-quarter survey.

Despite the decline in issuances, the secondary market remains liquid. After growing 33.9% in 2025, to R$947.4 billion, trading volume increased 20.6% in the first half of this year, to R$494.6 billion, according to Quantum. In July, trading totaled R$99.5 billion, virtually unchanged from June, according to ABC Brasil. “The market is still healthy; the secondary market is turning over well,” Serhan said.

Banks expect issuances to gradually normalize during the second half as investors rebuild their portfolios and institutions resume originating transactions. Among asset managers, however, a more cautious view prevails: as long as interest rates remain high and funds have not fully recovered their fundraising capacity, the reopening is likely to remain concentrated among the highest-quality issuers.

*By Fernanda Guimarães, Rita Azevedo and Liane Thedim — São Paulo and Rio de Janeiro

Source: Valor International

https://valorinternational.globo.com/

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São Paulo court rules in favor of banks in forex cartel case

TJSP rejects trade group of exporters’ claim seeking to hold 20 banks liable for R$20bn in losses by exporters

 

 

Port of Paranaguá, Paraná
Port of Paranaguá, Paraná — Photo: Divulgacao

The 11th Chamber of the São Paulo Court of Justice (TJSP) on Thursday rejected a request by the Brazilian Foreign Trade Association (AEB) to receive nearly R$20 billion in compensation from more than 20 banks accused of participating in an alleged international foreign-exchange cartel. The decision can be appealed. AEB represents major exporters in Brazil.

The so-called “FX cartel” was uncovered in 2015 and remains under investigation by Brazil’s Administrative Council for Economic Defense (Cade), where some of the accused parties have entered into agreements. The Cade is investigating alleged manipulation of exchange rates involving foreign currencies, specifically in the spot foreign-exchange market, through advance communication on digital platforms.

According to the investigations, the operations involved coordinating currency purchases and sales between January 2008 and December 2012. In 2015, traders’ chats came to light indicating coordinated efforts to influence foreign-exchange market benchmarks.

AEB subsequently sought R$19.15 billion in compensation. The amount is based on a study by researchers at the University of Campinas (Unicamp), who estimated an exchange rate and calculated how much exporters lost between January 2010 and December 2011, arriving at a total of R$107.4 billion.

According to the claim, manufacturing companies were the most affected, followed by the extractive and agricultural products sectors. Because AEB represents nearly 20% of Brazil’s exporters, that percentage was applied to the estimated total loss, considering the period between 2010 and 2011.

AEB argued in its claim that even foreign-exchange contracts entered into by its members with other banks—which are not defendants in the case—would have suffered damages because the alleged cartel affected the platform used by all of them.

The case reached the 11th Chamber of the TJSP after AEB appealed a lower-court decision that rejected its claim. In a decision dated February 22, 2022, Judge Luiz Gustavo Esteves found that the claim could not be brought as a class action. “The interest being protected is individualized and must be assessed according to the specific circumstances of each exporter, with the association seeking only collective protection for its members,” he said.

The judge dismissed the case without ruling on its merits, finding that it concerned the specific interests of certain exporting companies, which could not be pursued through a public civil action.

The ruling issued Thursday (13) by the 11th Chamber also found that a public civil action was not appropriate because there was no common origin for the alleged damages. According to the TJSP ruling, there was no common source of harm, and each company’s situation would have to be examined individually, including how it was allegedly affected by any exchange-rate coordination—something the banks also argue would not be possible.

According to Frederico Ferreira, a partner at Bermudes Advogados who represented one of the banks in the case, the Central Bank itself had already confirmed that there had been no conduct capable of altering exchange rates in a similar lawsuit brought by Petrobras. In light of this, the court concluded that the allegation of a cartel’s existence was insufficient to support a claim for compensation.

During the hearing, Ferreira argued that if the traders had the power to change exchange rates every hour of the day for so many years, they could have used that power to resolve currency crises. Attorneys Fernando Serec of TozziniFreire and Débora Fernandes of Machado Meyer also made oral arguments, in agreement with representatives of all the banks.

Contacted by Valor, the Brazilian Foreign Trade Association (AEB) declined to comment on the decision. Citibank, Bradesco (Kirton Bank) and UBS/Credit Suisse said they would not comment on the case. BTG Pactual, Itaú BBA, Santander Brasil, Bank of America, Banco Société Générale Brasil, Morgan Stanley, Standard Chartered, Banco Bocom Bbm, Standard Chartered Bank (Brasil), MUFG Bank Ltd. (formerly The Bank of Tokyo-Mitsubishi), HSBC Bank PLC, Banco BNP Paribas Brasil, and Deutsche Bank did not immediately respond to requests for comment.

No spokespeople could be reached for Inbursa, Tokyo Mitsubishi, J.P. Morgan Chase Bank, Banco Fibra, BNC Brazil Consultoria Empresarial, or Royal Bank of Canada.

On the administrative side, the Cade’s technical staff concluded in April an investigation into cartel formation in the offshore foreign-exchange market and recommended that six financial institutions and six individuals be found liable. The case will still be sent to the agency’s tribunal for a ruling, which may uphold or overturn the technical opinion. The investigation is separate from the inquiry into Brazil’s onshore foreign-exchange market, which remains under review by Cade’s technical staff.

If the Cade issues a finding of liability, the companies involved could face fines of up to 20% of their gross revenue. Individuals found responsible for the violation could face fines of up to 20% of the amount imposed on the company.

*By Beatriz Olivon — Brasília

Source: Valor International

https://valorinternational.globo.com/

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Foreign investors accelerate exit from stocks, FX ahead of election

Ibovespa and real move away from the year’s best level as election approaches and President Lula is poised to win

 

 

 

 

Gustavo Medeiros — Foto: Reprodução/Youtube

Gustavo Medeiros — Photo: Reprodução/Youtube

The fast-approaching election period has heightened caution toward Brazilian markets among foreign investors, who have been making sizable withdrawals from the country. Data from B3 show that in Tuesday’s session (August 11), nonresident investors withdrew R$4.7 billion from the stock market, the largest single-day outflow since April 22, 2021.

In August alone, foreign investors have already accumulated net withdrawals of R$11.9 billion from the stock market. This year, the balance of foreign funds in the local stock market peaked in April, when it showed an inflow of R$56.5 billion. Since then, outflows have totaled more than R$32 billion, reducing the accumulated positive balance in 2026 to R$24.4 billion.

At least so far, the deterioration in sentiment has shown no signs of exhaustion. Thursday (13), once again, the Ibovespa and the real ended the session lower, underperforming other comparable markets. At the close, Brazil’s benchmark stock index fell 0.23% to 167,101 points, while the dollar rose 0.25% to R$5.1925.

In the face of the recent aversion to domestic assets, the Ibovespa is now up 3.71% this year, well below the 23.3% gain recorded through mid-April. The spot dollar is now down 5.40% against the real but had fallen by nearly 11% in May.

“This is a permanent exit [by foreign investors], or at least until the election is over, is the following day. Stocks and the dollar seem to have shifted to a different level and won’t return in the short term. It seems there is no longer the seller from yesterday [Tuesday], but there is also no buyer at better prices. That is the feeling looking at prices today [Thursday],” said Ivo Chermont, chief economist at Quantitas.

 

One of the firms to recently change its asset allocation was Sycamore Capital, which has $180 million under management and reduced its exposure to Brazilian stocks from 5% to close to zero in client portfolios, according to Jean Van de Walle, the wealth manager’s investment director.

One factor behind the decision was the high probability of President Luiz Inácio Lula da Silva (Workers’ Party, PT) winning, Walle said. “My investment thesis was based on Lula’s defeat and Brazil joining a movement toward reforms more favorable to private-sector investment.”

Persistent inflation and the political clash between the local administration and Donald Trump were additional reasons for the change. Following the adjustments, the executive said he now holds only small positions in Vale and Petrobras.

In the foreign-exchange market, the foreign investor’s moves on Monday and Tuesday may have encouraged local funds’ activity on Wednesday, when they bought $1.3 billion, according to B3 data on the derivatives market cited by currency traders and fund managers.

Although the data contain some “noise,” because they classify local funds operated from abroad as nonresident transactions, the indicator provides guidance to market participants. In April this year, the bet in favor of the real had approached a record level, surpassing the $12 billion threshold. Since then, that position has declined sharply and, according to market participants, the net position is now short the dollar against the real by only $600 million.

If pessimism persists, the net short-dollar position could become a long position in the U.S. currency, something that has not occurred since June 2, 2025, traders said.

Jorge Dib, a portfolio manager at Galapagos Capital, notes that it is difficult to determine the true price-setter in the foreign-exchange market but says that when looking at the firm’s model for the real’s movement against other currencies, it is possible to see that politics is on the radar. “It seems to me that there is an increase in volatility because of the election, and if you look at the history of other election years, we will see that this is common.”

The executive explains that in the “carry-to-vol” strategy, volatility carries significant weight, so investors who had been pursuing this type of trade in Brazil because of high interest rates may reduce their exposure as fluctuations increase. “Given the calendar, with a ‘deadline’ for the formal registration of candidates, an increase in volatility is to be expected because the election period is effectively beginning,” he said.

In Dib’s view, even if volatility increases over the coming months, if the external environment remains favorable to carry trades and interest rates remain high in Brazil, the domestic currency is likely to regain ground in the post-election period.

“This is even with the more adverse seasonal flow, because if the real becomes more depreciated than its peers and external tailwinds are favorable, an opportunity opens up because interest rates will still be high and volatility will fall again. In other words, the carry trade becomes attractive again.”

Although he attributes the greater volatility to the election scenario, the Galapagos manager says foreign withdrawals from Brazil are not driven by this factor, but rather by the global context.

This line of reasoning is shared by Gustavo Medeiros, global head of macroeconomic research at Ashmore. In his view, foreign capital withdrawals from the local stock market appear to be more technical than directly related to the election or a rotation into other emerging markets. The Ashmore executive explains that foreign flows into emerging markets have been negative in 2026, mainly because of heavy outflows from Taiwan and South Korea following strong gains in those countries’ stock markets, a move he considers “very likely a portfolio rebalancing.”

Although he does not see the approaching election as a driver of stock-market outflows, Medeiros said he is cautious about Brazil’s contest in a scenario in which, according to him, “fiscal risk is still not priced in.”

During the session, interest-rate futures initially appeared set to decline across the yield curve, but short- and medium-term rates ended more stable, while long-term rates rose, affected by other domestic markets. The DI rate maturing in January 2027 ended unchanged at 13.75%, while the DI rate for January 2031 rose from 14.455% to 14.53%.

*By Arthur Cagliari, Bruna Furlani, Maria Fernanda Salinet and Gabriel Caldeira — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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U.S. agrees to WTO talks as China seeks to join Brazil’s case

Beijing files document with the body, saying it “has a substantial commercial interest” in Brazilian tariff consultations

 

 

 

WTO headquarters in Geneva — Foto: Andreas Bastian/DPA/AP Images
WTO headquarters in Geneva — Photo: Andreas Bastian/DPA/AP Images

The U.S. responded on Monday (10) to Brazil’s request for consultations at the World Trade Organization (WTO) to discuss the two tariffs imposed on Brazilian products imported by the country. In a document sent to the body, the U.S. stated that it “accepts Brazil’s request to initiate consultations” and that its representatives are “available to talk with representatives of your mission on a date convenient to both parties for holding the consultations.”

Also on Monday, China requested to take part in the tariff discussion between the U.S. and Brazil, stating that it “has a substantial commercial interest in these consultations.”

In the document, the country says the measures could also affect Chinese exports, since the discussions could affect the competitive conditions for its products in the U.S. market.

“China therefore respectfully requests that it be allowed to participate in the consultations in this dispute,” reads an excerpt from another document linked to the discussion.

The U.S. statement submitted on Monday responds to the complaint filed by Brazil with the WTO, formalized at the end of last month by the Ministry of Foreign Affairs through Brazil’s Permanent Mission to the WTO, in Geneva.

On July 27, Brazil stated that the measures adopted by the U.S. violated commitments made by the country under the multilateral trading system and represent an attempt to impose sanctions unilaterally.

The initiative challenges the two surtaxes announced last month by the Office of the U.S. Trade Representative (USTR), both based on Section 301 of U.S. trade law: the first, an additional 25% tariff related to the investigation into Brazilian trade practices.

The second is the 12.5% tariff linked to the inquiry into Brazil’s alleged failures to curb the exports of products made with forced labor. Combined, the measures raise taxation on a portion of Brazilian products exported to the U.S. market.

In the statement sent to the WTO, Brazil argues that Washington disregarded the most-favored-nation principle, one of the pillars of international trade, by applying specific tariffs against Brazilian products without extending the same treatment to other members of the organization.

It also contends that the U.S. began charging tariffs above the limits bound with the WTO. Another point of the complaint is the allegation that the U.S. resorted to unilateral measures to respond to alleged trade violations, instead of using the dispute settlement mechanism provided for by the organization itself.

“The U.S. is acting inconsistently with Article 23.1 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) by seeking to redress alleged violations of obligations, or other nullification or impairment of benefits under the covered agreements, or impediments to the attainment of the objectives of those agreements, through unilateral determinations and the imposition of tariffs, rather than having recourse to and abiding by the rules and procedures set out in the DSU,” reads an excerpt from the statement.

The document also recounts the history of the trade dispute between the two countries. Brazil notes that, since February 2025, the U.S. has been adopting successive additional tariffs against trading partners under various justifications.

*By Agência O Globo — Brasília

Source: Valor International

https://valorinternational.globo.com/

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Public debt reduces space for private debt, pressures investments

Scenario reduces and increases the cost of resources available for the capital market

Roberto Troster, coordinator of Cefeb and the study’s author, says the figures are a warning sign because they lead to a vicious dynamic — Foto: Rogerio Vieira/Valor
Roberto Troster, coordinator of Cefeb and the study’s author, says the figures are a warning sign because they lead to a vicious dynamic — Photo: Rogerio Vieira/Valor

Public debt remains on the rise and crossed an important threshold this year: reaching 77.2% of GDP in April, it surpassed the share of private-sector debt, which includes households and companies, at 75.7% in the same month, according to a report by the Center for Studies on the Financing of Brazilian Companies (Cefeb) at the Institute for Economic Research Foundation (Fipe).

The development revealed a classic phenomenon in macroeconomics, “crowding out,” or the displacement effect, in which the public sector absorbs an increasingly larger share of available savings and financial-market resources to roll over its liabilities. Because the government is the lowest-risk borrower, it “pushes” the private sector out of capital markets and makes credit for productive investment more expensive.

Roberto Troster, coordinator of Cefeb and the study’s author, says the figures are a warning sign because they lead to a vicious dynamic. “The government demands more resources, and this raises the risk premium and interest rates for those taking out financing,” he says.

The study provides an X-ray of the mechanism through which monetary policy is transmitted to credit in the country and calculates a 0.97 correlation between the average funding cost of the federal government’s domestic marketable debt and that of private debt, indicating an almost symmetrical alignment. When the government finances itself at a higher cost, the private productive sector immediately feels the impact, Troster says. In this way, he argues, the state acts as the financial market’s “anchor price.”

At the same time, in the economist’s assessment, credit policy is poor and based on short-term operations, which increases defaults. As payment delays continue to rise, the supply of credit contracts and banks tighten lending criteria. Companies tend to shelve expansion plans as they seek to deleverage and improve operational efficiency.

“Fiscal policy has lost any countercyclical character,” says Carlos Kawall, a former secretary of Brazil’s National Treasury and founder of asset manager Oriz. “It is expansionary by definition, regardless of whether the economy is doing poorly or well, especially because it is doing well, with low unemployment.”

The study uses Gross General Government Debt (DBGG) as its basis, which includes the federal government (including the National Social Security Institute, or INSS), states and municipalities. Through the end of 2025, according to the report, public and private debt were growing in parallel, showing an economy becoming more leveraged. “In April 2026, the divergence becomes explicit. Public debt shoots up to 77.2%, while private debt falls to 75.7%.”

Troster says the last time the “crowding out” phenomenon occurred was under the government of Dilma Rousseff, between 2014 and 2016. However, the impact on the private sector now is likely to be much more dramatic because the country has never had a capital market that was as relevant to companies’ liabilities. According to the Cefeb study, the segment’s share of the debt of publicly traded companies rose from 14.8% to 22% between 2022 and 2026, while the share of bank credit fell from 38.4% to 31.2%, indicating a structural shift in companies’ sources of financing.

Kawall points out that investors are on the other side of these issuances, including a large number of individual investors. “We do not have this previous experience in Brazil, but international experience shows that the effect on how the economy functions tends to be amplified because it is more widespread,” he warns. According to him, a banking crisis generally remains more contained and under the control of the Central Bank. However, he notes that between 2023 and 2025, the country experienced a “crowding in” movement, with the “boom” in the private debt market, which largely replicates the public debt’s indexing structure, with securities linked to the CDI and IPCA.

The former Treasury secretary says it is “concerning” to see the government moving toward “crowding out.” It is, he says, a model that consistently depends on increasing the stock of public debt, but that has also used higher revenues to finance itself, through measures such as increasing the IOF financial transactions tax and taxing exclusive closed-end funds.

Economic growth, he assesses, was not enough to absorb the increase in spending, particularly mandatory spending, with the adjustment of the minimum wage and the reindexation of health care and education expenditures. Kawall points out that, when the fiscal framework was introduced in 2023, experts were already warning that it did not guarantee the sustainability of the debt trajectory.

Long-term issuance loses steam

 

Because the economy grew more than expected, the debt trajectory has not been explosive so far. Kawall notes that the request submitted to the Senate at the end of July for authorization to expand the capacity for sovereign borrowing abroad, proposing to replace the current cumulative ceiling of $100 billion with $35 billion, shows that the Treasury needs to broaden its investor base because of the growing difficulties with longer-term issuances in Brazil. The share of foreign-currency debt would rise from the current 3.8% of total debt to 7%.

“Even with the growth of recent years, the credit market is small compared with the needs of the private sector, while the state is too large. Government debt has grown much more than private debt,” says Jeferson Bittencourt, head of Macroeconomics at ASA Investments and also a former secretary of the National Treasury. He explains that there is the structural problem of Brazil’s low level of savings and the cyclical problem, which is fiscal stress.

The country’s savings, Bittencourt says, are made up of households, companies and the government. “What contribution does the government make to these savings? None; it generates negative savings, consuming other people’s savings, paying high interest rates, over short terms and with a low risk assessment.” Therefore, he says, “crowding out” manifests itself in higher interest rates and shorter terms for the private sector.

The largest companies can still issue debt in the capital markets, at an average cost of 13.68% for debentures, according to the Cefeb report, but smaller companies face greater restrictions, leaving them dependent on bank credit, at an average cost of 18.40% for legal entities, or investment funds in receivables (FIDCs). The difference, the study shows, reached 4.53 percentage points in April, the date of the data analyzed. “Issuing debt at this cost imposes a line of value destruction on most sectors of the real economy,” Troster says.

The effects of this asymmetry are showing up in companies’ financial health. The default rate among legal entities reached 4.8%, a historic peak: among micro and small companies, the rate reached 6%, while it remained at 0.5% among large companies. The number of companies with negative credit records also increased, rising from 6.66 million in January 2024 to 8.96 million in April this year, a 34.5% increase. Meanwhile, the difference between corporate and sovereign borrowing costs, according to Cefeb, remained reasonably stable between January 2022 and April 2026, generally fluctuating within a range of 2.5 to 4.5 percentage points.

Subsidies guaranteed to certain sectors worsen the problem, Bittencourt says, because they are shielded from monetary policy and end up putting further pressure on interest rates. The provision of cheaper credit to certain sectors is also cited by professor Carlos Pedroso, former chief economist at MUFG Bank Brasil, who notes that the presence of the Brazilian Development Bank (BNDES) has been growing again. He expects lower GDP growth next year, a scenario that would only be avoided if there is an adjustment in the public sector.

In an interview with Valor, the executive secretary of the Ministry of Finance, Rogério Ceron, declined to comment specifically on the Cefeb study but offered a conceptual assessment of “crowding out.”

For him, longer-term rates have three components: rising interest rates around the world, over which Brazil has no control; the trajectory of fiscal policy in Brazil; and the large supply of tax-exempt securities, which puts pressure on the placement of government bonds. “We want a country with lower interest rates; that is a consensus. How do we do that? We need to start dismantling [the two components over which we have influence].”

According to Ceron, on the fiscal side, it is necessary to “send the signals needed to remove the risk premium from the curve resulting from uncertainty.” Regarding tax-incentivized securities, a subject the Finance Ministry has raised repeatedly, he advocates a broad debate because, given the strong growth in issuances, the volume is incompatible with the country’s long-term savings and the situation “is not healthy.”

For the secretary, “someone has to give”: “Either the Treasury itself has to extend the process of seeking the optimal composition of the debt or, on the other hand, these private-sector borrowers who use these instruments will also have to undertake some adjustment. This has to be debated and resolved. We can no longer postpone it.”

Kawall agrees that tax exemptions for certain investments, such as tax-incentivized debentures and real estate and agribusiness credit bills (LCIs and LCAs), are a distortion that worsens the problem, as the financial market itself has pointed out, but “not by a long shot” are they the fundamental reason Brazil is seeing stress at such high levels. “If there were a correction to this taxation, would the problem be solved? No.” The former Treasury secretary also points out that the government itself encouraged demand for these investments, which are more sought after by higher-income investors, by taxing, for example, contributions to VGBL private pension plans.

Bittencourt points to other problems. “There are countries that have higher debt than Brazil, others that have higher costs, but none that have both at the same time,” he says.

Other countries, he says, have more room to maneuver to cut spending. In the U.S., for example, 20% of spending is discretionary, while in Brazil that share is less than 5%. “Fiscal adjustment in Brazil is much more complex than in another country.”

(Jéssica Sant’Ana contributed reporting from Brasília.)

By Liane Thedim  — Rio de Janeiro

Source: Valor International

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Weak economic backdrop, rising defaults weigh on Brazil retailers

Major chains are tightening costs, rethinking credit, seeking new sales channels as household debt, weaker consumption pressure Q2 results

 

 

Renner cut 2026 growth forecast, ruled out expanding customer credit, taking a “cautious” approach — Foto: Ana Paula Paiva/Valor
Renner cut 2026 growth forecast, ruled out expanding customer credit, taking a “cautious” approach — Photo: Ana Paula Paiva/Valor

The difficult macroeconomic environment is taking a toll on the performance of Brazil’s major publicly traded retailers this year, with the first batch of second-quarter earnings showing a growing negative impact from high household debt on sales. Companies say delinquency remains under control, but have already warned that broader indicators point to rising household defaults nationwide.

The tougher environment has affected even the food retail market—theoretically less vulnerable to an initial demand contraction than businesses dependent on credit—as well as apparel and footwear, electronics and technology, executives told analysts last week.

Companies have detailed internal measures they plan to take in the second half, as the election race gets underway, to halt the slowdown or improve their bottom-line results.

GPA, owner of Pão de Açúcar, says it will exercise greater spending discipline through year-end, while Magazine Luiza is preparing to strike agreements with more competing platforms to boost online sales, which declined in the first half. Assaí, meanwhile, is sticking with its “take-from-the-competition” strategy, accelerating the rollout of pharmacies inside its stores this year to tap a new segment and return to faster growth.

Renner said Friday (7) what it will not do to improve its weak April-June results: extend more credit through its Realize financial arm. “We remain cautious and more selective in our credit origination,” CFO Daniel dos Santos told analysts.

The company also warned in its earnings report that as of June 30, Brazil had 83.7 million people with overdue debts, compared with 77.8 million a year earlier, “representing about half of the economically active population, according to Serasa’s Default Map.”

The market’s negative sentiment weighed on retail stocks in Friday’s trading session (7), with the sector spending part of the day among the biggest decliners on the benchmark stock index Ibovespa. Shares of Renner, Magalu, and Assaí were sharply lower in the morning. The three stocks ended the day down 8%, 3.72%, and 2.94%, respectively.

The move is affecting the short- and medium-term performance of the Consumption Index (Icon), the main benchmark tracking shares of Brazil’s major retailers as well as service companies. Over the past six months, Icon has fallen 17.27%, according to calculations by Valor, closing Friday at 2,830 points. Over the same period, the Ibovespa posted a smaller decline of 7.37%. So far in 2026, Icon is down 9%, while the Ibovespa has gained 7%.

According to Alexandre Santoro, CEO of GPA, in a letter accompanying the second-quarter earnings report, the macroeconomic environment remained difficult, “marked by higher household debt, as well as rising delinquency, and by greater competition for disposable income among consumption, financial expenses and new categories of discretionary spending, such as betting platforms.”

The executive also said the company, which is undergoing an out-of-court restructuring, is implementing an efficiency plan involving cuts in expenses and capital expenditures. So far, it has delivered slightly more than 50% of the savings expected under the plan, and this effort will also involve tighter control of operating expenses.

GPA’s net revenue fell 9.6% from April through June compared with 2025, while its net loss widened 16% to R$252 million.

At Assaí, revenue rose 0.9% to R$19.1 billion—below the inflation rate for the period—as lower volumes and consumers trading down from more expensive to cheaper brands weighed on sales, the retailer said during an earnings call. In an example presented during Friday’s call (7), a shopping cart containing 91 kilograms of products would cost R$830 using leading brands and R$437 using alternative brands. In other words, as consumers increasingly trade down, the retailer suffers a significant decline in the value of sales.

Assaí’s net profit more than doubled to R$537 million, driven by tax credits and improved financial results.

In the fashion segment, the World Cup and the weak macroeconomic environment hurt sales at publicly traded retailers, according to second-quarter reports.

In a segment where impulse purchases are increasingly important, competing for consumers’ attention with games played at different times—in an economy with less disposable income—proved particularly difficult for retailers.

Adding to the challenges, this occurred as the federal government decided, after May, to cut the 20% import tax on products coming from abroad, directly affecting apparel imported from China, which began entering Brazil in larger volumes.

Data released by the major chains show that Renner was the hardest hit, followed by C&A and Riachuelo, according to Valor calculations.

According to financial statements, apparel revenue rose 8.9% at Riachuelo, 5.6% at C&A, and 2.5% at Renner. In same-store sales—stores operating for more than 12 months—the gap between this year’s and 2025’s figures stands out. Last year, C&A’s same-store sales rose 17.1%; this year, growth slowed to 4.1%.

At Riachuelo, the pace fell to just over half, from 15.8% growth last year to 7.8% from April through June. Renner posted the sharpest decline among comparable-store bases in the second quarter across all the chains, with growth of just 1.5% this year versus 18.6% in 2025.

The high comparison base naturally tends to weigh on this year’s figure, but analysts were struck by the magnitude of the slowdown in 2026. “The World Cup affected foot traffic until the end of the games, and once Brazil was eliminated [from the tournament], that improved somewhat, but the impact continued through the end,” said André Michel Farber, CEO of Riachuelo.

C&A CEO Paulo Correa told analysts on Wednesday (5) that during previous World Cups, demand declined during the games but returned close to normal afterward. This year was different. “There was an impact on sales every week, even after Brazil was eliminated.”

“Our growth would have been higher if not for the World Cup. There were impacts, but I’m also concerned about economic activity. In any case, I have a positive view of the second half,” he said.

It is unlikely that the slowdown in sales can be attributed solely to the tournament, which is why companies also cited the macroeconomic impact of weakening demand. In any case, amid the uncertainty, the market is likely to wait for third-quarter data to quantify the effect of the slowdown, which became intertwined with the impact of the games.

Renner’s revision announced Thursday (6), cutting its 2026 net revenue growth forecast from 9%-13% to 4%-8% after weaker-than-expected second-quarter sales, is one way of preparing for an environment that has turned tougher than anticipated.

Benefiting from the World Cup, Magazine Luiza saw demand for televisions, home appliances such as refrigerators and microwaves, and furniture increase 39%, 15%, and 10%, respectively, at its physical stores.

The retailer’s store operation also grew 10.3% from April through June compared with 2025. That was not enough, however, to support the group’s overall sales for the quarter.

From April through June, Magalu’s net revenue fell 2.6% to R$8.9 billion, weighed down by weaker online demand, which has a greater impact on the company’s overall figures. E-commerce shrank by nearly 12%, and the channel accounts for 65% of sales.

“Listing products through third-party partnerships is a short-term initiative to resume online growth while maintaining profitability,” CEO Frederico Trajano told analysts Friday. Starting in October, the company, which began selling on Amazon in June, will have its products eligible for Prime and will provide logistics services for the platform.

Trajano also said the retailer is expected to announce new partnerships over the coming months, “or even in the coming weeks.” Industry sources are considering the possibility of an agreement with Mercado Libre. “We believe we will be able to resume online growth, which was hurt in the first half while maintaining profitability.” The retailer’s net loss widened 197% to R$72 million from April through June.

Trajano also referred to “hundreds of initiatives” to automate operations and further review expenses. “We have had a hiring freeze since the beginning of the year. We are also exercising tight control over all expense lines, using our initiatives for matrix-based expense management. We have consultants supporting us, and there is still a lot more to harvest in terms of cost reductions. There is significant room for savings.”

(Vitória Nascimento contributed reporting)

*By Adriana Mattos — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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