Foreign groups rethink Brazil listings as buyouts gather pace

Santander’s offer for minority shareholders highlights broader shift as multinational parents seek full ownership of subsidiaries amid depressed valuations

 

 

 

 

Santander’s move to acquire the roughly 10% stake in its Brazilian subsidiary that it does not already own is the latest sign that foreign multinationals are rethinking the value of keeping their Brazilian operations listed on B3. Companies including Iberdrola—the parent of Neoenergia—, Portugal’s EDP, and France’s Carrefour have taken their local subsidiaries private in recent years. Valor learned that other multinationals are also evaluating takeover bids to acquire minority-held shares in their Brazilian subsidiaries.

The trend comes amid a backdrop of high interest rates, weak market liquidity, and a dearth of new equity offerings. After the wave of initial public offerings (IPOs) in 2020 and 2021, B3 has experienced a succession of take-private transactions, mergers and takeover bids, without enough new listings to offset the departures.

B3 data show the number of listed companies fell from 394 in 2022 to 344 as of the latest survey in June. A year ago, the exchange had 361 listed companies.

“For two consecutive years, I’ve been working on takeover bids,” said Jean Marcel Arakawa, a capital markets partner at law firm Mattos Filho. According to him, controlling shareholders and prospective buyers have identified a significant gap between companies’ share prices and their intrinsic value.

“What we’ve been seeing are situations where the controlling shareholder—or even another buyer—recognizes a discount between a company’s intrinsic value and its screen price, creating room for transactions. On top of that, it has become much harder to generate additional liquidity for these shares.”

A source at an investment bank told Valor that other foreign groups are studying transactions similar to Santander’s proposal. These assessments are at different stages and may not all result in formal offers. Still, they indicate that parent companies are reassessing whether it remains strategically worthwhile to keep their Brazilian subsidiaries publicly traded.

“That makes a lot of sense, especially if the parent company’s shares trade well in its home market,” said the source, who requested anonymity. “Broadly speaking, if the parent trades at a higher P/E multiple [price-to-earnings ratio] abroad, it’s a logical move.”

In practice, when a parent company commands a higher valuation multiple in its home market than its Brazilian subsidiary does locally, it can use its own shares as acquisition currency to buy the publicly traded minority stake at a relatively lower economic cost while capturing all of the subsidiary’s future value creation. Foreign-controlled companies still listed on B3 include Telefónica Brasil, TIM Brasil, and CPFL Energia—owned by China’s State Grid. State Grid has previously announced plans to list its Brazilian operations.

In Santander’s case, the Spanish bank intends to launch a voluntary exchange offer under which minority shareholders may swap their holdings for shares in the parent company. The transaction could reach approximately R$11 billion, representing a 15% premium over the reference market price. Before the announcement, Santander Brasil units had fallen about 21% this year on B3.

The transaction does not currently constitute a take-private deal. The offer is not subject to a minimum acceptance threshold, and shareholders may choose to remain invested. Santander said it intends to keep the Brazilian subsidiary listed on B3.

A high acceptance rate, however, would significantly reduce the free float and could make a future delisting proposal easier should the parent company decide to pursue one. According to people familiar with the transaction, no such decision has been made, although market participants consider a delisting a possibility after the offer is completed.

Beyond Santander’s specific case, the move reflects a broader shift in how multinational companies view maintaining Brazilian subsidiaries on the stock exchange. For years, a local listing provided access to Brazilian investors, funding for expansion, acquisition currency, and an independent market valuation for local operations.

That rationale has weakened as Brazilian shares have traded at what many consider steep discounts and liquidity has deteriorated. With little prospect of new equity offerings, some parent companies have concluded it makes more sense to acquire minority interests and fully capture the value generated by their subsidiaries, according to a market source.

Spain’s Iberdrola was among the latest to follow that strategy. After purchasing retirement fund Previ’s 30.29% stake in Neoenergia, it launched a takeover bid for the remaining shares, raising its ownership to about 98% of the company and paving the way for its delisting from B3.

The transaction did not reduce Brazil’s strategic importance for the group. Neoenergia remains one of Iberdrola’s main international platforms, but concentrated ownership has given the parent company greater flexibility over investment decisions and corporate strategy.

Portugal’s EDP took its Brazilian subsidiary private in 2023, saying at the time that simplifying its corporate structure was part of its strategy for what it considered a priority market. In the retail sector, Carrefour acquired the remaining shares of its Brazilian operation in 2025 and became its sole shareholder, likewise emphasizing Brazil’s strategic importance to the group. In that case, the transaction was not carried out through a formal takeover bid.

The trend has also reached Brazilian groups. Last week, Randoncorp’s controlling shareholder launched a voluntary tender offer to acquire shares in the commercial vehicle equipment manufacturer, offering shares in its subsidiary Fras-le in exchange—a structure similar to Santander’s—as part of a corporate reorganization. Although the controlling shareholder is Brazilian, the transaction reinforces the broader trend toward simpler ownership structures, supported by the fact that the parent company trades at a significantly lower valuation than its subsidiary.

Other transactions have had a similar effect on Brazil’s stock market through different mechanisms. After acquiring control of Brazilian companies, shipping groups CMA CGM and MSC opted to delist Santos Brasil and Wilson Sons, respectively, choosing to operate the assets as privately held businesses.

Despite differences among the transactions, all have reduced the universe of publicly traded companies available to Brazilian investors, at a time when the market has seen virtually no new IPOs.

Henrique Filizzola, a capital markets partner at law firm Stocche Forbes Advogados, said the trend reflects a combination of strategic considerations, macroeconomic conditions, and characteristics of Brazil’s capital markets. “In many cases, the persistent discount between share prices and the intrinsic value of the underlying assets, combined with weak market liquidity, reduces the advantages of remaining publicly listed,” he said.

He also pointed to the cost of capital and the expenses associated with maintaining a listed company. “On top of that, a high-interest-rate environment increases the cost of capital and makes capital markets a less competitive source of financing, while the regulatory and corporate governance costs associated with being a publicly traded company remain high,” he said.

In his view, the trend does not reflect a loss of confidence in Brazil but rather a reassessment of the most efficient ownership structure for capital allocation and business management. The growing number of these transactions, he said, underscores the need to improve market liquidity, broaden the investor base and strengthen the Brazilian market’s ability to properly value high-quality companies.

Contacted by Valor, Santander reiterated a statement released last week saying, among other points, that the transaction “reflects Banco Santander’s confidence in Brazil and in the growth potential of its businesses in the country.” The other companies mentioned in this article declined to comment.

*By Fernanda Guimarães — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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Central Bank expected to cut rates to 14%, leave door open to more easing

Inflation and economic activity data support another quarter-point cut, with policymakers expected to lower benchmark rate for a fourth consecutive meeting

 

 

 

 

The latest round of economic activity and inflation data has strengthened market confidence that the monetary easing cycle will continue, with expectations for another quarter-point cut—bringing the Selic, Brazil’s benchmark interest rate, to 14%—virtually unanimous among the 113 banks, asset managers and consultancies surveyed by Valor.

In addition to collecting forecasts, Valor interviewed economists from institutions that ranked among the Top 5 in the Central Bank’s most recent Focus survey for short-term Selic projections, covering the second quarter. While the prevailing view is that recent data and the Monetary Policy Committee’s (Copom) communication point to another cut at next Wednesday’s meeting, there’s less conviction about how long the easing cycle will last, given risks stemming from both the domestic and external outlook.

Of the 113 institutions that shared their expectations, only three don’t expect a 25-basis-point cut this week: Citi, Pantheon Macroeconomics, and Suno Research. Beyond August, 46 expect the easing cycle to end either at next month’s meeting or immediately after this week’s, while 64 expect at least one additional cut between September and December.

Barclays chief economist for Brazil Roberto Secemski has for some time expected a 25-basis-point reduction this week and believes developments in economic variables since the June meeting have reinforced that call. In his view, the Central Bank already signaled a preference for continuing the easing cycle in June by extending the relevant policy horizon earlier than the current institutional framework would suggest (18 months), citing the estimated effects of El Niño on prices. The latest sequence of inflation and activity data, he adds, also supports continued calibration of the degree of monetary restraint.

“Indeed, since the last meeting, most data have come in weaker than expected, although not to the extent that the risks to inflation converging to target have disappeared. We’re still operating in an environment that calls for caution,” Secemski says. He notes that the recent improvement in headline inflation owes largely to a reversal in at-home food prices, and that the easing in core inflation has been driven mainly by specific items, while labor-intensive services inflation reached a nine-year high, rising 7.3% year over year.

On Copom’s communication, the Barclays economist doesn’t expect the Central Bank to close the door to further cuts, nor to openly endorse another 25-basis-point move. “I believe the message will be ‘agnostic’ regarding future decisions, meaning Copom will stay data-dependent. My expectation, however, is that the balance of risks will continue to be tilted to the upside, though it’s not clear to me whether that will appear in the statement or only in the minutes, as happened at the previous meeting.”

BV chief economist Roberto Padovani also expects a statement that offers no guidance on the Central Bank’s next moves, leaving the door open to either further easing or a pause beginning in September.

“Given the high degree of uncertainty, the Copom will continue to avoid committing to its next steps. That’s been the approach adopted by central banks in general,” he says.

 

Padovani also expects another cut to 14%, pointing not only to the Central Bank’s “preference” for continuing to lower rates but also to recent data supporting that scenario—particularly July’s IPCA-15 inflation reading, which he views as an important sign that inflation continues to converge toward target, albeit slowly. Weaker economic growth is also expected in the near term.

“With weaker activity and inflation converging, this calibration makes sense from the Central Bank’s perspective. Monetary policy will remain tight, but to a lesser degree.”

Daycoval chief economist Rafael Cardoso also expects the Copom to cut the Selic by 25 basis points on Wednesday and to refrain from providing guidance for the next meeting, keeping alive the possibility of another cut in September.

“When we update our model assumptions, inflation projections for the new relevant horizon—the first quarter of 2028—should change very little from previous estimates and remain around 3.2%. If that proves correct, and the model incorporates the rate path embedded in the Focus survey, there may be room for another 25-basis-point cut. That’s not our base case, and conditions would have to evolve favorably for it to happen, but the probability isn’t zero,” he says.

Daycoval’s baseline scenario has the Central Bank pausing once the Selic reaches 14%.

“In our assessment, the probability of another cut in September is still a minority scenario. If the decision brings any surprises—a lower inflation forecast, say, or comments suggesting a September cut has become the likelier outcome—we may revise our view. But for now, we see this as the pause cut,” he says.

 

Having ranked among the Top 5 in several Focus survey categories in recent months, Linus Galena economist Ricardo Meirelles de Faria holds a more optimistic view, arguing that the current level of rates is excessively restrictive despite highly expansionary fiscal policy.

“I personally expect 25-basis-point cuts at each of the next four meetings, even with the back-and-forth developments in the war with Iran,” he says.

The economist notes that much of the market was disappointed by Copom’s June meeting, despite a cut having been widely priced in. In his view, part of that frustration stemmed from the Central Bank’s “clumsy” communication.

“I believe the communication will now be similar in substance, but I expect the Central Bank to be more careful when discussing inflation’s convergence toward target over the relevant horizon,” Meirelles says, adding that Copom may leave the door open to another cut at its September meeting.

 

“When we look at activity data and the IPCA, there’s room to bring the Selic down a bit further. Real interest rates are still very high, and in that sense, I know I’m somewhat outside the consensus,” he says, projecting the benchmark rate at 13.25% by year-end. “Obviously, a lot can happen, and we’ll have to monitor the elections, but the feeling is that some of that is already reflected in market prices.”

Parcitas Investimentos chief economist Vitor Martello also expects a 25-basis-point cut at Wednesday’s meeting and believes the odds of another cut of the same size in September are rising.

“Will it signal anything about September? We don’t think so. This Central Bank doesn’t usually make decisions in advance, especially in an environment of elevated uncertainty. The strategy should continue to be monitoring data on aggregate demand, economic activity and inflation—particularly core inflation—and making the decision considered most appropriate at each meeting. In our view, that decision would be to cut another 25 basis points next week and then stop at 14%,” he says.

 

“Our assessment is that the Central Bank is gaining, not losing, confidence in its baseline scenario—one of inflation remaining under pressure but gradually converging toward target, with high rates being transmitted through the economy, which the data are confirming,” he says.

Looking beyond August, BV’s Padovani believes the ideal approach is to pause the easing cycle amid a macroeconomic environment filled with uncertainty. “I think a pause makes sense now, and as the dynamics of inflation become clearer, the process of cutting rates could resume at some point in 2027,” he argues.

Among the factors that still need greater clarity, the economist cites the dollar’s behavior through year-end, the likely effects of El Niño on food inflation, and market perceptions of fiscal policy following the presidential election.

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

Source: Valor International

https://valorinternational.globo.com/

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Milei’s attacks strain Brazil-Argentina relations

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

 

 

 

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

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

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

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

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

Political differences

The comments prompted an immediate reaction from the Brazilian government.

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

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

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

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

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

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

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

Cautious approach

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

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

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

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

Sovereignty message

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

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

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

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

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

Coordinated pushback

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

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

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

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

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

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

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

*By Sofia Aguiar, Mariana Andrade and Giordanna Neves — Brasília

Source: Valor International

https://valorinternational.globo.com/

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Brazil rejects EU stance on antimicrobial controls

Agriculture Ministry demands reinstatement as approved animal-product exporter

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

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

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

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

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

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

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

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

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

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

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

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

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

*By Rafael Walendorff — Brasília

Source: Valor International

https://valorinternational.globo.com/

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Clean energy gains ground in Brazil’s remote regions

Advances in biodigesters and hybrid systems expand electricity access

 

 

Vila Restauração, in Acre state: electricity in an isolated community — Foto: Divugaão/Grupo Energisa
Vila Restauração, in Acre state: electricity in an isolated community — Photo: Divugaão/Grupo Energisa

In Vila Restauração, a community on the banks of the Tejo River in Acre, electricity was available for only three hours a day—the length of time its diesel generator operated. After that, the community returned to darkness. Food could not be refrigerated, the health clinic struggled to preserve vaccines and medications, and much of the local economic activity came to a halt. Today, a power plant combining solar panels, lithium-ion batteries, and biodiesel generators provides electricity 24 hours a day.

Installing the system required an investment of R$20 million and a complex logistics operation. About 200 tonnes of equipment traveled along highways and Amazonian rivers to reach the community, a journey that included more than seven days by boat. “The main lesson is that providing reliable energy to remote areas requires solutions designed for the realities of each location,” said Gabriel Mussi, director of major clients at (re)Energisa, the Energisa group’s energy-transition company and the organization responsible for the project.

With electricity available throughout the day, the health clinic can now store vaccines and medications safely, merchants have installed refrigerators and freezers, the school has permanent internet access, and mobile-phone coverage has enabled residents to use banking services and electronic payment methods.

“We suffered a great deal here in the dark. A lot of food spoiled because we had no way to preserve it. When we saw the lights come on, the entire community was overjoyed,” said Maria Ivone Cunha, a Vila Restauração resident.

The project in the Acre community is part of a strategy gaining ground in regions where extending the power grid remains difficult or expensive. Instead of relying exclusively on the construction of new transmission lines, these areas are receiving systems that combine different generation and storage technologies to ensure a reliable energy supply.

Falling solar-panel prices, advances in batteries, and the development of control systems have expanded the adoption of hybrid systems in regions where extending the power grid remains unfeasible. Combining solar generation, storage, and conventional generators is reducing fossil-fuel use without compromising supply reliability.

One example is Caiambé, Amazonas, where a hybrid plant combining diesel generation, solar power, and battery storage has begun operating. The system is expected to reduce diesel use by about 130,000 liters a year and avoid approximately 405 tonnes of carbon dioxide emissions annually.

The initiative is part of an effort to modernize so-called isolated systems, which still depend heavily on fossil fuels to supply communities that are not connected to Brazil’s National Interconnected System. Similar models are expected to spread over the coming years as new technologies become more affordable.

Rafael Segrera, Schneider Electric’s president for South America, said Brazil offers favorable conditions for expanding this model. However, it requires investment in technology and professional training. The company recently opened a sustainable energy hub in Amazonas focused on developing and disseminating solutions adapted to local conditions.

Most of these initiatives are concentrated in the region, where nearly all of Brazil’s isolated power systems are located. In these areas, combining different generation sources has proved a viable way to reduce diesel use without compromising supply reliability.

“Brazil has highly favorable conditions for accelerating this expansion. In addition to having a power mix comprising approximately 84% renewable sources and some of the world’s greatest potential for clean-energy generation, the country has technological capabilities and an increasingly favorable environment for innovation in electrification, automation, and digitalization,” he said. According to Segrera, the next step is to expand workforce training so professionals can install and operate these systems in different parts of the country.

The approach of producing energy close to where it will be consumed is also advancing beyond isolated Amazonian communities. In rural areas, instead of solar panels and batteries, the fuel may be generated daily on the property itself. Animal waste feeds biodigesters, where microorganisms convert organic matter into biogas.

The material remaining at the end of the process can also be used as biofertilizer on crops. In addition to reducing electricity and fuel costs, the technology gives agricultural and livestock waste a productive use.

Felipe Marques, CEO of CIBiogás, said the technology’s potential is likely to grow alongside the expansion of animal-protein production. “The country is on track to remain a leading exporter of animal protein, particularly given the prospect of increased demand in Asia and the new trade agreement with the European Union. As a result, even more protein production will be connected to the biogas and biomethane agenda and a just energy transition,” he said.

The projects also reflect a change in the approach to electrification investment. Rather than adopting a single solution for the entire country, a model is gaining ground that combines different technologies according to each region’s characteristics, bringing generation closer to consumers and reducing reliance on major infrastructure projects.

According to Mussi, this trend should become firmly established as projects are adapted to the needs of each location. “In a country with geographic conditions as diverse as Brazil’s, there is no single solution for achieving universal access to energy.”

The Energy Transition project is an initiative of the newspapers Valor and O Globo, sponsored by Vale.

*By Mario Camera — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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Broader fiscal gauge shows stimulus rising to 4.52% of GDP

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

 

 

 

 

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

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

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

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

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

Broader measure

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

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

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

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

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

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

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

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

Market visibility

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

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

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

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

Wider fiscal lens

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

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

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

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

Interest-rate debate

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

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

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

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

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

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

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

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

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

By Lu Aiko Otta — Brasília

Source: Valor International

https://valorinternational.globo.com/

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Private consumption drives Brazil’s post-pandemic growth, IMF says

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

 

 

 

 

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

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

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

Consumption strength

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

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

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

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

Fiscal support

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

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

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

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

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

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

*Por Rafael Vazquez – São Paulo
Source: Valor International
https://valorinternational.globo.com/
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Brazil extends gasoline subsidy as oil prices climb

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

 

 

 

 

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

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

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

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

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

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

*By Jéssica Sant’Ana — Brasília

Source: Valoar International

https://valorinternational.globo.com/

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Carrefour returns to growth in Brazil, improves profitability in Q2

CEO Alexandre Bompard says commercial strategies and cost-cutting initiatives drove sales growth

 

 

Carrefour delivered resilient results in Brazil during the second quarter, marked by a return to sales growth and continued improvement in profitability. The retailer’s performance in the Brazilian market came despite a still-challenging macroeconomic environment, where high interest rates continue to weigh on consumers’ purchasing power and keep retail sector sales volumes in negative territory.

“Our commercial strategies and cost-cutting initiatives enabled us to grow sales and improve margins during the second quarter,” Carrefour CEO Alexandre Bompard said in a statement.

The French retailer generated €5.46 billion in sales in Brazil during the quarter, up 9% from a year earlier. On a comparable basis, excluding currency effects, revenue increased 0.4%, reversing the 0.8% decline recorded in the first quarter.

Atacadão, Carrefour’s cash-and-carry chain in Brazil, returned to growth, posting a 0.5% increase in comparable sales and outperforming the country’s cash-and-carry market as a whole. The company said sales volumes have stabilized since the beginning of the quarter.

In its conventional retail segment, comparable sales declined 0.6%, mainly reflecting the company’s deliberate slowdown in e-commerce sales of non-food products.

To strengthen commercial momentum in Brazil, Carrefour invested in targeted marketing campaigns and expanded its product portfolio, with particular emphasis on its Bulnez private-label brand, which now includes 200 products.

The company’s financial services division also delivered strong results in the second quarter, with its loan portfolio expanding 13% while revenue rose 8%.

Carrefour’s recurring operating income in Brazil reached €359 million in the first half of the year, up 5.8% from the same period in 2025. The recurring operating margin improved by 9 basis points to 4%, supported by cost optimization measures and operational efficiency initiatives.

On a consolidated basis, Carrefour reported a net profit of €54 million for the first six months of the year, reversing a €361 million loss recorded a year earlier. Sales totaled €39.4 billion, an increase of 1.7% year over year.

The company reaffirmed its full-year guidance, including expectations for higher operating margins, increased free cash flow generation and growth in earnings per share, supported by anticipated improvements in operating performance during the second half of the year.

*By Felipe Laurence, Valor — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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Fiscal watchdog flags risk from state-owned companies’ financial situation

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

 

 

 

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

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

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

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

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

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

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

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

Treasury dependence

 

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

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

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

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

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

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

 

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

*By Jéssica Sant’Ana — Brasília

Source: Valor International

https://valorinternational.globo.com/

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