10/06/2026

 

FOOD PRICES LEAVE BRAZILIANS FEELING POORER DESPITE ECONOMIC GAINS

Groceries have risen 60.8% since the pandemic, far outpacing overall inflation and helping explain voter unease

 

Brazilian grocery bills have risen far faster than overall inflation since the pandemic, helping explain why many consumers remain dissatisfied with the economy despite record employment and income levels. Food-at-home prices climbed 60.8% between April 2020 and August 2026, compared with a 42.7% increase in Brazil’s benchmark consumer price index over the same period.

 

Most of the increase occurred through mid-2022, amid disruptions and shifts in global supply chains. Between April 2020 and the end of 2022, food-at-home prices rose 42.4%, compared with a 21% increase in overall consumer prices. From January 2023 through August 2026, food-at-home prices rose 12.9%, while overall inflation was 17.9%. Fabio Romão, an economist at 4intelligence, made the calculations.

 

Workers’ average earnings rose 9.5% in real terms, after adjusting for inflation, between April 2020 and July 2026.

 

Experts say that this important component of household budgets has become more expensive than overall inflation, one of several factors that help explain Brazilians’ discomfort with the economy, even as macroeconomic indicators paint a more positive picture, with employment and income at record levels.

 

The negative perception reflects a combination of factors. One is economic growth from a depressed base following the 2015 and 2016 recession; income gains that remain insufficient to provide what many consider a decent standard of living; and job creation concentrated in lower-paying positions.

 

Other factors include a shrinking wage premium for workers who have completed high school or college and rising consumer aspirations in the age of social media.

 

The cost of living, purchasing power and the resulting economic unease—reflected in opinion polls and studied in academic research—have become prominent issues in this year’s presidential election. President Lula and Senator Flávio Bolsonaro, who will face each other in the runoff, have traded accusations and sought to appeal to voters’ concerns over the economy.

 

Ahead of the first round, Lula acknowledged the problem. “I know things still aren’t good enough. But I will make sure inflation remains under control. You will no longer pay the tax on low-cost overseas purchases, the minimum wage will continue to rise above inflation, and we will invest to create quality jobs with better wages,” he said.

 

“Grocery shopping today is much more expensive than it was before the pandemic. There has been a shift to a higher price level: eating has become more expensive, and short-term relief has done little to help. Food costs are part of the explanation for people’s dissatisfaction,” Romão said.

 

The economist’s calculations show that price increases were concentrated in the period immediately following the pandemic, both for overall inflation and food consumed at home. More recently, the war between Iran and the United States and the effects of El Niño have begun to weigh more heavily.

 

The higher cost of living is a global trend that has also fueled dissatisfaction in other countries, according to Laura Carvalho, an economics professor at the University of São Paulo and researcher at the Getulio Vargas Foundation’s Brazilian Institute of Economics (FGV Ibre).

 

The backdrop includes successive inflation shocks stemming from the pandemic, the start of the war in Ukraine in 2022 and, this year, the war in Iran. Surveys around the world point to the cost of living as the main reason for people’s negative perceptions of the economy, Carvalho said.

 

In the United States, the term “vibecession” was coined in 2022 to describe a similar disconnect between economic indicators and persistently negative public perceptions of the economy. The term combines “vibe” and “recession.”

 

“There is an additional issue: price increases are perceived as the government’s fault, regardless of where the shock comes from, while income gains are seen as the result of personal merit. That creates an asymmetry that lies at the heart of the economic malaise,” Laura Carvalho said.

 

An August Quaest presidential voting-intention poll—the most recent edition to include a section devoted exclusively to the economy—found that 33% of respondents believed their income had risen at about the same pace as the cost of living. Another 32% said they had not seen their income increase, while 23% believed the cost of living had risen more than their income.

 

Another factor in understanding dissatisfaction with the economy, researchers say, is a sense that incomes remain insufficient when measured against what people consider a decent standard of living and the ability to meet basic needs. Gross domestic product has grown in recent years as the economy recovered from the pandemic, but that followed six years of either contraction or weak growth from 2014 through 2019.

 

“There is this idea that income is insufficient. The question is to what extent income growth is actually translating into better living conditions and higher consumption levels, or whether it is still not enough,” said Vitor Hugo Neia, executive director of the Volkswagen Group Foundation.

 

A recent survey the foundation conducted with the Sustainable Cities Institute and Ipsos-Ipec in 10 Brazilian state capitals found that only 18% of respondents said their personal income had increased over the previous 12 months. Another 45% said it had remained stable, while 31% said it had declined. In addition, 61% took on extra work to supplement their income, and 41% cut back on meat consumption.

 

“More than income itself, what ultimately matters is purchasing power. When people say their salary doesn’t last until the end of the month, it isn’t only about prices. The income gains we’ve seen still haven’t brought a large share of Brazilians to what they consider a decent standard of living,” Carvalho said.

 

Among employed workers in Brazil, 32.2% earn no more than one minimum wage a month, according to second-quarter data from Brazil’s statistics agency IBGE. The share earning up to two minimum wages is nearly 70%, at 69.1%. That means only 30.9% of employed Brazilians earn more than R$3,242 a month.

 

Another factor cited by experts to explain the disconnect between public sentiment and Brazil’s economic indicators is a shift in expectations, influenced in part by social media.

 

“There has been an important change over the past 20 years in how people measure quality of life. In the past, people wanted a stable job and a family structured in a certain way, but that has changed,” said Igor Pantoja, institutional relations coordinator at the Sustainable Cities Institute.

 

“Today, a good quality of life is closely associated with consumption. There really is a mismatch between what the political system and institutions seek to provide and what people demand, often based on what they see on the internet and social media,” he said.

 

Carvalho also sees social media as amplifying consumer aspirations, although she considers its influence secondary to other explanations for the gap between perceptions and economic indicators.

 

“People’s aspirations aren’t the same as they were in the 2000s. It’s no longer about buying a refrigerator or flying on a plane for the first time. It is also natural that as a society develops, people begin to demand new things. And those demands are amplified by social media, where everyone shares their lives,” she said.

 

The survey by the Volkswagen Group Foundation, Sustainable Cities Institute and Ipsos-Ipec also provides a longer-term view of how people perceive changes in living standards, with a focus on social mobility.

 

Overall, 73% of respondents in the 10 state capitals said they had more education than their parents. Only 43%, however, said their income was higher than their parents’, while 51% believed they had better housing conditions.

 

“People recognize that they are more educated than their parents. But that educational mobility isn’t reflected to the same degree in income and housing mobility. It’s not that education isn’t important, but there is a sense that qualifications alone are not enough,” Neia said.

 

Source: Valor International

https://valorinternational.globo.com/

 

____________________________________

10/06/2026

 

JUSTICES WAVER BETWEEN PESSIMISM AND CAUTION ON IMPEACHMENT RISK

New Senate lineup puts members of the court on alert as Flávio Bolsonaro and his allies vow to remove justices

 

Supreme Court justices consulted by Valor are divided over whether the new Senate lineup elected in the first round will immediately translate into impeachment proceedings against members of the court. Views range from pessimism to the assessment that it is too early to say justices would lose their seats before a Senate seen as more hostile to the court.The PL will have 28 senators next year: 19 elected on Sunday (4), joining the nine already serving in the upper house. Lawmakers from other parties also support impeachment. A survey by O Globo indicates there will be at least 49 of the 54 votes needed next year.

 

One justice considers it certain that impeachment requests will advance in 2027 if presidential candidate Flávio Bolsonaro (Liberal Party, PL) is elected. “Of course it will pass. With Flávio in the presidency, there will be at least 60 votes,” the justice said.

 

The most pessimistic justices point to at least three members of the court who could come under Senate scrutiny as early as next year: Alexandre de Moraes, Dias Toffoli, and Flávio Dino. Justices and people close to them have even drawn up estimates. One, taking the deadlines for the defense into account, is that an impeachment could occur by mid-June.

 

Most justices, however, urge caution. They consider, for example, that if President Luiz Inácio Lula da Silva (Workers’ Party, PT) is reelected, initiatives against the Supreme Court could be curbed.

 

There is also an expectation that some PL lawmakers would be less radical and could oppose impeachment requests. Finally, one justice said he does not see it as so obvious that the proposals would advance in the Senate. He said some members of the centrist bloc have an interest in keeping on the court justices to whom they have greater access.

 

Senate shifts right

 

The Bolsonarist wave that set the tone of the election campaign boosted opposition candidates’ victories, producing a predominantly right-wing Senate and a shrinking centrist bloc.

 

The result affects relations among the branches of government, particularly the Supreme Court, which is facing a crisis stemming from the Master case. The scandal has shaken the court’s credibility and was an issue in Senate campaigns.

 

With 28 senators, the PL will have the largest caucus starting next year, about three times the size of the PT’s, with nine, and the Brazilian Democratic Movement’s (MDB), with eight. The shrinking of the Centrão bloc was evident in the Progressive Party (PP) and Republicans, each reduced to six members, and in the Social Democracy Party (PSD) and Brazil Union, with five lawmakers each.

 

Source: Valor International

https://valorinternational.globo.com/

 

_____________________________________

09/30/2026

 

PIX TRANSACTIONS FALL 10% AFTER BAN ON BETTING SITES

Part of financial sector applauds measure against online gambling amid concerns over legal uncertainty

 

The number of Pix transactions fell about 10% over the past three days, after the government published a presidential decree (MP) late Friday afternoon (25) banning online sports betting (known in Brazil as “bets”). For part of the banking industry, the ban is viewed favorably, since there are in fact many indicators that betting sites were eroding household budgets, especially those of low-income families, and thus affecting delinquency. Still, there is criticism over the legal uncertainty generated by the measure.

 

On Saturday (26), the number of Pix transactions (not the financial volume) was 229,600, down 11% from the average of the previous four Saturdays, according to Central Bank data. On Sunday, transactions totaled 165,900, down 12.0% on the same basis of comparison. And on Monday (28), they reached 213,000, a decline of 7.4%. Over the three days combined, the drop is 10.0%, also compared with the average for the same period in the previous four weeks.

 

“Obviously it’s not possible to attribute this drop in Pix only to the ban on bets, but it gives a sense of the size of the problem. It has become a public health issue,” says an industry leader. “I think it was the right decision by the government. I don’t like betting sites in any sense,” adds a banker at a midsize institution.

 

 

 

 

 

As Valor reported Tuesday (29), analysts also assess that the ban on bets could be positive for banks. Citi notes that more than 40 million Brazilians have already put money into these bets, representing about R$20 billion in gross revenue in the first half of this year. “The measure could leave higher disposable income for households, which would translate into better asset quality for banks, especially in the low-income segment,” says a banking source.

 

Another source in the sector also acknowledges that the measure could have a slightly positive effect for banks by helping ease households’ disposable income. Still, the source criticizes how the government made the decision, creating legal uncertainty and also affecting the fiscal situation.

 

“I think betting sites do a lot of harm to the local economy and to commerce, and they shouldn’t have been regulated the way they were, but overturning by MP a law and legal structure that was debated for months in Congress is complicated.”

 

A source in the fintech segment, meanwhile, says that to a certain extent the ban was already expected. “The negative externalities far outweigh the positive ones,” he says, speaking about the effects on society at large. In any case, he notes that some fintechs operate exclusively in this sector and others, though not exclusive, have significant revenue from bets, whether in handling betting flows or in international remittances. “Therefore, an abrupt change will have economic impacts on this subsegment.”

 

 

Source: Valor International

https://valorinternational.globo.com/

 

_____________________________________

10/19/2026

 

CONFLICTING FILINGS RAISE QUESTIONS OVER OWNERSHIP OF BRAZILIAN LENDER

Central Bank approved Francine Kallas as Pincred’s controlling shareholder, while antitrust regulator had cleared a deal identifying her brother Lucas as the buyer

 

Brazil’s Central Bank authorized in August businesswoman Francine Kallas to take control of Pintos S.A. (Pincred), a finance company based in the northeastern state of Piauí. But a year and a half earlier, the country’s antitrust regulator had cleared the acquisition of the same lender by her brother, Lucas Kallas.

 

A review by Valor of filings submitted to the Central Bank and the Administrative Council for Economic Defense (Cade)–along with corporate records from the network of companies involved in the transaction–raises questions about who actually controls Pintos.

 

The case has drawn attention because Lucas Kallas, a businessman associated with Cedro Mineração, has maintained business ties with former banker Daniel Vorcaro, of Banco Master, and has been the subject of criminal investigations and proceedings, although he has not been convicted of any crime.

 

Conflicting ownership filings

 

On November 16, 2024, lawyers representing the Kallas family filed a merger notification with Cade stating that Lucas indirectly controlled Forest Holding Financeira, the company that acquired Pintos S.A. Crédito, Financiamento e Investimentos.

 

“The buyer is a non-operating holding company wholly owned by Lucas Kallas through Monte Líbano Participações S.A.,” states both the petition signed by the family’s lawyers and the accompanying merger notification form.

 

Ten days later, however, a separate application was filed with the Central Bank seeking approval to transfer ultimate control of Pintos to Francine Prado Kallas, Lucas’s sister, according to a notice published by the monetary authority.

 

The Central Bank reviews acquisitions, mergers and the establishment of financial institutions primarily from a financial stability perspective. Its assessments include whether prospective owners meet integrity and reputation requirements, have the financial resources to sustain the business and can demonstrate the lawful origin of their funds.

 

Changes to the companies’ ownership structures came only after the application was submitted to the Central Bank.

 

On December 31, 2024, Francine injected R$85 million into Monte Líbano Participações, which owns Forest Holding Financeira. Forest was the company that actually acquired an 80% stake in Pintos. The remaining 20% of Forest was held by businessman Pedro Mesquita, of Exa Capital.

 

Despite the corporate restructuring, Cade approved the acquisition without restrictions on January 6, 2025. The transaction was cleared as a purchase by the Kallas Group, which the documents submitted by the family’s lawyers identified as being controlled by Lucas.

 

Regulatory scrutiny

 

From a practical standpoint, whether Cade approved the acquisition by a group led by Lucas or by his sister makes little difference. Pintos is a small company, and the transaction has virtually no impact on competition.

 

For the Central Bank, however, establishing who actually owns Pincred is essential to determining whether the buyer meets regulatory requirements, including those concerning integrity and reputation.

 

What remains unclear is whether the monetary authority’s review covered only Francine or also her brother.

 

Valor has been seeking comment from the Central Bank since August 26 but did not receive a response.

 

On August 18, Valor reported the Central Bank’s approval of the acquisition, noting that Lucas was among those indicted by Brazil’s Federal Police in Operation Parcours, an investigation into a suspected illegal iron ore extraction scheme in Serra do Curral, in the Belo Horizonte metropolitan a

 

Francine’s name also appears in the Parcours investigation.

 

Federal Police documents describe an email exchange in which a Cedro executive asked an asset manager to register her email address with a fund managed by Reag. The documents reportedly listed Francine’s declared assets at R$204 million.

 

Business ties to Banco Master

 

As previously reported by Valor, Lucas announced last month that he was stepping down as chairman of Cedro Participações, a holding company he founded with operations in mining, agribusiness, construction and transportation.

 

Kallas and Vorcaro have been involved in several business ventures together.

 

WhatsApp conversations involving the former banker show that the two traveled to Venezuela in October 2023 to explore opportunities in the oil industry.

 

Both were also investors in biotechnology company Biomm. In addition, the Kallas group was hired to build hospitals for Oncoclínicas, in which Vorcaro held a stake.

 

Lucas also obtained a R$254.8 million loan from Banco Master in April 2024, which was subsequently assigned to Banco Voiter.

 

The transaction appears on a list of loans submitted by Banco Master’s liquidator in court proceedings seeking to recover outstanding lending. The documents do not establish whether the debt was repaid.

 

WhatsApp exchanges between Vorcaro and Paulo Henrique Costa, the former CEO of state-controlled lender BRB, show that Master’s owner attempted to transfer the loans to BRB.

 

In one message, Costa said the proposal had been blocked by BRB’s compliance department because of the criminal investigations involving Lucas.

 

Even if the acquisition of Pintos had been submitted to the Central Bank under Lucas’s name, however, it is uncertain whether the regulator would have had the authority to block the transaction.

 

Guidance from the Central Bank’s Office of the General Counsel states that a person can be deemed unfit on integrity grounds only after a judicial conviction. Neither Lucas nor his sister has been convicted.

 

The press office representing Lucas and Francine said both are shareholders and members of the controlling shareholder group of Cedro Participações.

 

“The acquisition of control of Pintos S.A. Crédito, Financiamento e Investimento (Pincred) was conducted entirely with the advice of Pinheiro Neto Advogados, which prepared the applications and supporting explanations based on the same documents submitted to the Central Bank and Cade, both of which approved the transaction without reservations,” the statement said.

 

The representatives said the Central Bank received more complete and detailed information about the Cedro Group’s control structure, as the authority responsible for reviewing and approving transfers of control involving financial institutions.

 

“As for the merger notification submitted to Cade, specific terminology relevant to competition matters was used to describe the acquiring economic group, with all supporting documentation correctly setting out the corporate structure,” the statement said.

 

Regarding Operation Parcours, Lucas’s defense team said it “trusts that his innocence will be recognized.”

 

“The indictment is based on old facts that were already examined in a previous investigation and dismissed by the courts,” the lawyers said.

 

“The operation was based on events that occurred approximately six years after the end of any relationship between Lucas and the companies investigated in that case.”

 

The press office also said the Federal Police report “mentions funds managed by Reag only as a hypothesis that might eventually warrant further investigation.”

 

“After being formally consulted by the defense, the Federal Police stated that there is no ongoing investigation into the matter, indicating that the hypotheses were not supported by factual evidence,” the statement said.

 

Regarding the Banco Master loan, the representatives said it was obtained through a regular transaction “with an institution whose securities were, at the time, distributed by participants throughout the financial system.”

 

They also maintained that the loan had been repaid, that the funds were available and that the bank’s liquidator had been notified.

 

Cade said through its press office that the parties had not formally notified the regulator of any corporate restructuring.

 

“The competitive effects of the transaction would not change if the acquiring economic group remained the same,” the agency said.

 

Cade added that it does not comment on proceedings classified as confidential.

 

Source: Valor International

 

https://valorinternational.globo.com/

_____________________________________

 

10/26/2026

 

GLOBOPLAY REVAMPS SUBSCRIPTION PLANS, EXPANDS CONTENT ACCESS

changes bring more live channels and sports coverage to ad-supported subscribers

 

Globoplay, Brazil’s leading streaming platform, owned by Globo, is rolling out a revamped subscription offering on Monday (Oct. 26), aimed at improving the user experience while creating new opportunities for advertisers.

 

“We’re giving more people access to a broader range of content that was previously restricted to premium subscribers,” said Júlia Rueff, Globo’s executive director of digital platforms.

 

Globoplay offers three subscription tiers: an ad-supported standard plan, premium and premium+premiere.

 

Before the changes, the standard plan included Globoplay original productions, such as exclusive series and movies; live and on-demand TV Globo programming; current and classic Brazilian soap operas; short-form Brazilian, Turkish and Mexican dramas; international movies and series; the free channels ge.tv and Futura; and selected Globo FAST channels, which cater to niche audiences, such as Receitas TV and Malhação TV.

 

Starting Monday, the ad-supported tier will expand to include the content catalog available to premium subscribers, while retaining all its existing programming.

 

More than 20 live channels will be added to the standard plan, including sportv, Combate, Multishow, GNT, Globoplay Novelas and GloboNews. Subscribers will also gain access to more than 2,500 live sporting events and games each year broadcast on sportv channels.

 

New plan features

 

With the expanded catalog, the main distinction between the ad-supported and premium plans will shift from content availability to the viewing experience.

 

The tiers will differ in features such as advertising on on-demand videos, the number of simultaneous streams, picture quality and the ability to download content for offline viewing.

 

The ad-supported plan allows two simultaneous streams, compared with five for premium and premium+premiere subscribers. The two higher-priced tiers also allow users to download up to 25 titles to their libraries and offer 4K video quality.

 

“This is a subscriber-focused reorganization that improves the overall value proposition for users while creating opportunities for advertisers,” Rueff said.

 

Advertisers will gain access to new ad formats, including “welcome ads,” which allow advertisements to appear on Globoplay’s profile selection screen.

 

“Everything we do to improve the user experience also benefits advertisers because it means more people watching, greater engagement and more impact for brands,” Rueff said.

 

Profitability and growth

 

Rueff said Globoplay, which reached breakeven in 2025, is expected to turn a profit this year.

 

“We’ve improved Globoplay’s profitability while also growing our subscriber base and content consumption.”

 

From January through August 2026, Globoplay’s subscriber base grew 31% compared with the same period last year.

 

Globo does not disclose the platform’s total number of subscribers but says 30 million people access Globoplay every month.

 

Source: Valor International

https://valorinternational.globo.com/

_____________________________________

 

10/26/2026

 

BOLSONARO ALLIES LEAD IN BRAZIL’S STATE ELECTIONS

Sixteen elected governors backed Bolsonaro’s movement, but experts expect shifting alliances to preserve governability

 

Governors were elected in runoff races in five states—Acre, Amazonas, Tocantins, Espírito Santo, and Rio Grande do Norte—as well as the Federal District on Sunday (Oct. 25). Two are aligned with President Luiz Inácio Lula da Silva (Workers’ Party, PT), who won reelection with 51.78% of the vote, while four were allies of Sen. Flávio Bolsonaro (Liberal Party, PL). Including the first round, 16 of the governors elected nationwide had declared support for Bolsonaro’s political movement, seven backed Lula, and four remained neutral during the campaign.

 

The PL elected the largest number of governors, with six, followed by the Social Democratic Party (PSD), with five. The PT, Republicans, and Progressive Party (PP) each won four governorships. These five parties will control the state governments of 23 of Brazil’s 26 states and the Federal District. Overall, Sunday’s results largely confirmed the forecasts in election polls published on the eve of the vote.

 

Two candidates overturned their first-round deficits. In Tocantins, federal deputy Vicentinho Júnior (Brazilian Social Democracy Party, PSDB) defeated Professora Dorinha (Brazil Union, União Brasil), who had Flávio Bolsonaro’s backing. Vicentinho finished second in the first round with 43.94% of valid votes, compared with Dorinha’s 45.52%. Vicentinho is the son of former Sen. Vicentinho Alves.

 

In Rio Grande do Norte, governor-elect Cadu de Lula (PT) also overcame his initial disadvantage, winning 50.77% of valid votes to defeat Alysson (Brazil Union), who had remained neutral in the presidential race. Cadu Xavier, who used the name Cadu de Lula on the ballot, served as finance secretary under Gov. Fátima Bezerra (PT), whom he will succeed.

 

In Espírito Santo, former Vitória Mayor Lorenzo Pazolini (Republicans) was elected governor, defeating Ricardo Ferraço (Brazilian Democratic Movement, MDB) with 52.01% of the vote. Pazolini, who received Flávio Bolsonaro’s endorsement, stepped down as mayor of the state capital this year to run for governor.

 

In the Federal District, Gov. Celina Leão (PP), backed by Flávio Bolsonaro and former first lady Michelle Bolsonaro, won reelection by defeating Leandro Grass (PT). With 98% of ballots counted, she had 57.21% of valid votes, compared with 42.79% for her opponent. She narrowly missed winning outright in the first round, falling short by just 1,089 votes.

 

In Amazonas, Sen. Omar Aziz (PSD), who had Lula’s backing, defeated Maria do Carmo (PL). With all polling stations reporting, Aziz received 61.42% of the vote, against 38.58% for his opponent. At 68, Aziz returns to lead the Amazonas state government after serving as governor from 2010 to 2014.

 

According to political scientists, despite many governors not being aligned with Lula, neither side is expected to face major governability problems, nor is the balance of power in Congress likely to be affected. One example is Republicans, who elected governors in two of Brazil’s largest electoral districts: Cleitinho Azevedo in Minas Gerais and Tarcísio de Freitas in São Paulo. Yet in the Chamber of Deputies, Speaker Hugo Motta continues to support the governing coalition, and the Republicans also holds cabinet posts.

 

Experts expect new political coalitions and alliances to emerge, as is typical of Brazil’s federal system. André Borges, a professor at the University of Brasília (UnB), said that although the PL elected the most governors and has a sizable presence in both the Chamber of Deputies and the Senate, this does not give the party a free hand at either the state or federal level.

 

“The PL was the big winner in the state elections, but other right-wing parties also performed well, such as Republicans. Power is not concentrated in a single party,” Borges said. Politicians will still need to negotiate and build alliances, he added. He cited the PL’s attempt, after the first round, to negotiate for the speakership of the Chamber of Deputies. “Hugo Motta has put together a coalition backed by 10 parties. Everything points to his reelection. That shows a tactical mistake on their part [the PL’s], because the election was barely over when they were already telling allies they wanted the leadership of both the Chamber and the Senate. That’s not how it works,” he said.

 

Experts expect Lula to maintain an institutional relationship with political opponents, as he did with São Paulo Gov. Tarcísio de Freitas during his current term. Despite their political differences, the two worked together on the Santos-Guarujá Tunnel, Brazil’s first immersed-tube tunnel, through a public-private partnership (PPP). “There was no boycott or anything of the sort; the money was transferred,” said Claudio Couto, a professor at Fundação Getulio Vargas (FGV).

 

Couto expects that pattern to continue. “If we look at Lula’s third term, with the far right already in power in some states, he has sought to maintain institutional relations. We saw that in his dealings with Tarcísio de Freitas and even [Ronaldo] Caiado, who took a very hard line on public security. There were disagreements, but no major clashes. I believe we will see the same pattern again,” he said.

 

Political scientists note that campaign endorsements can be fragile and may shift after an election. During former President Jair Bolsonaro’s administration, for example, Bolsonaro—who is in prison after being convicted in a coup plot—broke with then-São Paulo Gov. João Doria (PSDB) and then-Rio de Janeiro Gov. Wilson Witzel (Social Christian Party, PSC). In addition, governors, particularly those of Brazil’s largest states, are “natural potential presidential candidates,” Borges noted, creating another incentive for political rifts.

 

Experts acknowledge, however, that political alignment can help during campaigns and may influence the ability to attract investment once a governor takes office. “Alignment does have an effect, but less so today than in the past because social policies have become much more decentralized. Thirty years ago, before the creation of Fundef and Fundeb, the states played an intermediary role. Today, many programs transfer funds directly to municipalities based on more universal criteria, reducing the room for political bargaining,” Borges said.

 

Borges said two state-level candidates stood out: Pernambuco Gov. Raquel Lyra, who won reelection despite remaining neutral in the national campaign and defeating João Campos (Brazilian Socialist Party, PSB), the former mayor of Recife who had Lula’s support; and Cleitinho Azevedo (Republicans), who won the Minas Gerais governorship in the first round with 55.40% of the vote.

 

Source: Valor International

https://valorinternational.globo.com/

_____________________________________

10/26/2026

 

SUPREME COURT TO FACE MORE HOSTILE SENATE

Justices Kassio Nunes Marques and André Mendonça may be more isolated than ever

 

Luiz Inácio Lula da Silva’s (Workers’ Party, PT) reelection gives the majority wing of the Supreme Court some breathing room, according to justices interviewed by Valor. The assessment is that, even though the court will have to deal with a more hostile Senate starting next year, there is room to hold back impeachment proceedings. The question is what will happen to Justice Alexandre de Moraes. The scourge of Bolsonarism for his role in the “fake news” and coup plot investigations, he lost credibility after his alleged involvement in the Banco Master case came to light.

 

The assessment is that justices Kassio Nunes Marques and André Mendonça may be more isolated than ever. The pair of Jair Bolsonaro appointees presided over the Superior Electoral Court (TSE) in this year’s elections and, according to justices, burned through all their chips betting on a Flávio Bolsonaro (Liberal Party, PL) victory. The latest instance came on Sunday, over Nunes Marques’s stance on the request to extend voting hours.

 

With no position from the Electoral Court, Supreme Court Justice Cristiano Zanin decided to extend voting from 5:00 pm to 7:00 pm, which could give the defeated group an opening, once again, to turn against the court and challenge the election result. A justice consulted by Valor considers it unlikely that the vote will be annulled, given Lula’s margin of more than 4 million votes.

 

In addition, the assessment is that Nunes Marques and Mendonça acted to expose their Supreme Court colleagues by deepening the internal crisis caused by Master, and issued rulings to hurt Lula in the final stretch of the campaign. Contacted, both declined to comment.

 

Examples, they say, include Mendonça’s release of the Federal Police (PF) report mentioning messages from former banker Daniel Vorcaro, owner of Master, sent to a phone said to belong to Moraes. The issue was heavily exploited in the first round, and the damage fell on Lula. In the final phase, there were moves against the “Lula’s Army” channel, created by Federal Deputy André Janones (Sustainability Network, REDE, Minas Gerais), and the removal from the docket of trials that could have hurt Flávio at the TSE.

 

“They picked a fight with a lot of people because they wanted to become the owners of the Supreme Court. Obviously there will be consequences,” said a Supreme Court member on condition of anonymity. In his view, it is still hard to make many predictions about the next chapters given the divided country that emerged from the ballot boxes. There are, however, two forecasts: that the court does not intend, at this time, to abandon Moraes, and that if impeachment moves forward, there will be efforts to see that Nunes Marques, who is also under strong suspicion of involvement in the Master case, becomes the target of a similar proceeding.

 

Justices and insiders also believe the court may close ranks, as it has at other times when it felt under attack: in the 2022 elections, after January 8, 2023, in the coup plot trial, and amid U.S. threats against Supreme Court members. Chief Justice Edson Fachin, who does not want his tenure marked by the impeachment of colleagues, may also adopt a more defensive posture toward the court.

 

With the outcome of the presidential race, Lula should finally be able to move forward on filling the vacancy open since October 2025, when Luís Roberto Barroso retired early. Justices Luiz Fux, Cármen Lúcia, and Gilmar Mendes will also retire during the PT leader’s term. That means the government will have at least four appointments in the coming years, a number that could grow if impeachment proceedings advance in the Senate, which would be unprecedented.

 

If he stays on the court, Moraes will take over as chief justice in September next year. Impeachment could bring forward the tenure of Nunes Marques, Moraes’s successor, with Mendonça as vice president. Justices do not yet speak very openly about the matter, but there is chatter that if Moraes leaves and Nunes Marques stays, they could pick a different chief justice in a secret vote. Normally the choice is symbolic and follows a preset order, which has never been broken to date.

 

The Supreme Court also has an ace against impeachment. At the end of last year, Mendes issued an injunction raising the quorum needed to remove justices and giving the prosecutor general exclusive authority to file removal requests against members of the court. The justice later revised the latter requirement, but it could be reinstated if the court feels threatened.

 

On another front, Nunes Marques is the rapporteur at the Supreme Court on a request to annul the conviction of former president Jair Bolsonaro, sentenced to 27 years and three months for leading a coup attempt. Justices believe the outcome weakens a possible favorable preliminary ruling for Bolsonaro.

 

The justice has said he would take the case to the full court after the runoff. Lula’s reelection could undercut that intention, given how hard it would be for the request to prosper at the Supreme Court. Besides Moraes, justices Zanin, Flávio Dino, and Lúcia, who voted to convict Bolsonaro, while Fachin and Mendes oppose reviewing the conviction, according to justices and aides consulted.

 

There are no clear indications of what will become of Mendonça’s situation. The justice is the rapporteur of two of the court’s most high-profile cases: the Banco Master investigation and the inquiry into fraud involving association fees deducted from retirees’ and pensioners’ benefits at the National Social Security Institute (INSS). He is therefore expected to retain power on the court, despite the circumstances and possible isolation.

 

Source: Valor International

https://valorinternational.globo.com/

_____________________________________

10/27/2026

 

BOLSONARO CLAN SHIFTS FOCUS TO CONGRESS

Without the presidency, political family’s four lawmakers face challenge of maintaining its leadership of the right

 

Despite Flávio Bolsonaro’s defeat in the presidential race, the family of former president Jair Bolsonaro emerged from the election stronger in Congress, with four members of the political clan elected to office. While the results should secure the Bolsonaros a foothold in the legislative arena, they also pose a challenge: maintaining their dominance on the right after losing two consecutive presidential elections to Luiz Inácio Lula da Silva. On Monday (26), the day after the election, Flávio said he intended to “organize the opposition” to the government in the coming period. He will leave the Senate in January, ending a 24-year run in elected office.

 

Analysts say Bolsonarism is undergoing a leadership reshuffle amid uncertainty over the former president’s situation. Jair Bolsonaro is under house arrest following his conviction for attempting a coup. The relationships among elected family members and rivalries within the broader right-wing camp will also be decisive for the movement’s future, experts told Valor.

 

Flávio received 48.21% of valid votes in the runoff, trailing reelected President Lula by 3.58 percentage points. On the eve of the vote, a poll released by Quaest found that 45% of voters said they feared the Bolsonaro family’s return to power more than Lula remaining in office. Meanwhile, 42% said they were more concerned about the PT leader’s reelection than a return of Bolsonarism. Another 4% feared both scenarios, 4% feared neither, and 5% did not know how to answer.

 

In the first round, the family secured two Senate seats, with terms running through 2034, and two seats in the Chamber of Deputies. The lawmakers represent the Federal District, Santa Catarina, and São Paulo, and all belong to the Liberal Party (PL).

 

Jair Bolsonaro’s wife, Michelle Bolsonaro, won a Senate seat in the Federal District, becoming the most-voted senator in the capital’s history, with nearly 940,000 votes (29%), in her first-ever run for elected office. She also became the first former first lady in Brazil to win an elected mandate.

 

The other Senate seat secured under Jair’s plan to expand right-wing representation in the chamber—and advance initiatives such as impeachment petitions against Federal Supreme Court justices—went to Carlos, the former president’s second son, who was elected senator for Santa Catarina. Following Jair’s instructions, Carlos transferred his electoral domicile from Rio de Janeiro, where he had served as a city councilor since 2001, to the southern state, one of the region’s strongholds of Bolsonarism.

 

The strategy had previously been used with the youngest son, Jair Renan, who left the Federal District, where he lived, to make his electoral debut in 2024. That year, he was elected to the city council in Balneário Camboriú, Santa Catarina. Running under the ballot name “Jair Bolsonaro,” he was elected to the Chamber of Deputies with the fourth-highest vote total in Santa Catarina, receiving 131,000 votes.

 

One of his colleagues in the lower house will be his uncle Renato, who was elected in São Paulo. Jair’s younger brother first won a seat on the Praia Grande city council in 1996 but subsequently suffered a series of defeats. His most recent loss came in 2024, when he ran for mayor of Registro, São Paulo state. This year, running with an easily remembered ballot number consisting of four consecutive twos and promoted by his party as a potential vote-getter for other candidates, he received the sixth-highest number of votes for a federal deputy among São Paulo voters, with 379,000.

 

Renato took over the ballot number previously used by his nephew Eduardo, who helped pioneer Jair’s political expansion beyond his electoral stronghold of Rio de Janeiro. Eduardo first ran for the Chamber of Deputies in São Paulo in 2014 and was reelected in 2018, when he received 1.8 million votes, the highest total ever recorded by a federal representative in Brazil at the time, a record that was later surpassed. He won reelection again in 2022. Eduardo now lives in the U.S. and lost his seat after being removed from office for excessive absenteeism.

 

“We were all elected on the strength of Jair Bolsonaro’s name and legacy,” Renato told Valor last week while campaigning for Flávio in cities across the interior of São Paulo state. The incoming representative said he expected Jair to act as “a senior adviser” to the family’s congressional bloc. He also spoke of “alignment” and “unity” but did not explain how they would work together.

 

“Carlos has his own way of thinking, Michelle has another, and Renan is very young. I will be available to support my brother, but I also have my own opinions and my own way of seeing the world,” Renato said. The transfer of Jair’s political capital to his relatives can be seen as evidence of the former president’s continued influence, even while under arrest and without access to social media.

 

“Today, the movement’s identity and the family’s unity depend on its leader, Jair Bolsonaro. [However,] based on everything we know so far, there is a strong chance the family will split. They barely managed to campaign together,” said political scientist Maria Hermínia Tavares de Almeida, professor emerita at the University of São Paulo (USP).

 

One sign of internal tensions within the clan was Michelle’s limited involvement in Flávio’s campaign. Four months before the election, the stepmother and stepson had a falling-out that damaged the senator’s candidacy. Weeks later, they publicly announced a reconciliation, but the former first lady remained largely absent from campaign events alongside the presidential candidate.

 

Robson Carvalho, who holds a doctorate in political science from the University of Brasília (UnB) and researches political dynasties in Brazil, said Michelle has an opportunity to establish herself through her Senate office, particularly by engaging with evangelical voters and women. However, he noted that her stepsons are also seeking to carve out political space.

 

“Michelle could emerge as a bulwark. Some say she could even distance herself from the family, but I still see power as closely tied to the family’s political core, despite the leadership she has among evangelicals, which represents a different form of political capital,” he said.

 

Despite the family’s presence in Congress, Carvalho noted that losing the presidency represents a setback for the Bolsonarist project. “The group’s family-based political power is diminished because it will once again lack the power of the presidency. The group will turn its attention to Parliament, but it will not control the heart of the Executive branch,” he said.

 

One distinctive feature of this election for the Bolsonaro family is that it will encourage its members to operate across different parts of the country, according to the political scientist. “The Bolsonaro family goes beyond the conventional pattern of political dynasties because we see kinship operating upward, downward and horizontally,” Carvalho said.

 

He authored a study on “the dimensions of family-based political capital in the Senate and the harm it causes to democratic representation.” According to him, the combination of family ties and positions of decision-making power in Brazil is associated with obstacles to political renewal and risks stemming from the concentration of power.

 

In Almeida’s view, Bolsonarism—which she describes as the local expression of “far-right populism”—“is much bigger than the family. It is a political and social movement with considerable electoral appeal.”

 

That strength has enabled the election of a number of “young male and female representatives” who secured substantial vote totals by campaigning on Bolsonarist platforms, said the political scientist. “These are emerging leaders who do not have the Bolsonaro surname,” the professor said, commenting on the rise of Bolsonarist figures outside the family.

 

Source: Valor International

https://valorinternational.globo.com/

_____________________________________

10/27/2026

 

BUSINESS GROUPS CALLS FOR FISCAL ADJUSTMENT AND POLICY CONTINUITY

Industry associations back lower interest rates and preservation of sectoral policies, including concession auctions and special regime for critical minerals

 

Brazilian businesses wants the new government of Luiz Inácio Lula da Silva (Workers’ Party, PT), reelected on Sunday (25), to present a fiscal adjustment plan that allows for lower interest rates for businesses. At the same time, trade associations backed the continuation of sectoral policies they consider important, such as the national critical minerals policy, the infrastructure concessions agenda, the zero tax rate on the basic food basket, and the end of online betting.

 

“The investment rate is between 18% and 20% today. That is very high. We need an investment rate that is practically half of that, in the single digits. And the working capital rate would need to be cut by 40% to 50%,” said José Velloso, president of Abimaq, which represents machinery and equipment manufacturers in Brazil.

 

To get there, he argues that Lula must urgently address the fiscal issue by putting public accounts in order, with measures such as administrative reform and an overhaul of Social Security, as well as a rework of the public budget that tackles lawmakers’ earmarked amendments.

 

The path the government will take on fiscal policy is in question. Decoupling health spending from tax revenue, for example, which many economists see as one of the alternatives, is not expected to be implemented in Lula’s fourth term.

 

“During his campaign, President Lula always defended the public health system, SUS, emphatically. But at the same time, fiscal adjustment is necessary. So raising or cutting the health budget is very complicated. I believe it will be maintained, but the challenge is finding other means,” said Antonio Britto, executive director of the hospital association Anahp, a former governor of Rio Grande do Sul, and a former Social Security minister.

 

Velloso said the negative market reaction on Monday (26) after the election was expected, since polls had indicated a win by Flávio Bolsonaro (Liberal Party, PL), who was backed by the financial sector, as more likely.

 

Venilton Tadini, chief executive of Abdib (the Brazilian Association of Infrastructure and Basic Industries), believes the tension in financial markets should settle quickly. “This first symptom is normal, because the banks’ structures are built for this. They set up bets and futures market operations, but it adjusts very quickly, and that doesn’t worry us,” he said, adding that he expects the president-elect’s government to signal adjustments and that maintaining this level of friction with industry and financial markets is untenable.

 

He said this turbulence should not, for example, affect the various infrastructure auctions scheduled for the end of this year. “Those who will take part are already settled, unless the projects don’t have a well-structured risk-return profile,” he said.

 

Tadini expects the infrastructure auction agenda to proceed as normal. “We believe in the continuity of the program, which is what has happened since 2017. The ideological baggage about transferring operations to the private sector is gone.”

 

The Brazilian Photovoltaic Solar Energy Association (Absolar) said in a statement that the main short-term test of the new cycle will be the first two capacity reserve auctions for contracting battery systems, scheduled for Dec. 2 and 4. “The association stresses the importance of defining the funding conditions for the auctions and argues that they should launch a recurring, annual agenda for contracting storage,” it said. Absolar said institutional dialogue and consensus-building will be needed in the coming years.

 

In the critical minerals sector, Lula’s reelection also points to the maintenance of the National Critical and Strategic Minerals Policy (PNMCE), along the lines in which it had already been under discussion.

 

The policy, which created a council linked to the Presidency to review corporate transactions considered sensitive to national sovereignty, has until December to be fully regulated, a tight deadline for tying up all the loose ends currently pending.

 

“Government-linked officials are already trying to speed up some decrees [under the new law], and some will directly affect the critical minerals council, such as which projects will go through the council and which won’t,” said Marisa Cesar, chair of the board of the Critical Minerals Association (AMC), which brings together companies in the supply chain for minerals such as lithium, nickel, graphite, rare earths, and copper.

 

The detail on which projects would be subject to that scrutiny remains one of the sector’s concerns, and should be clarified as the council is regulated.

 

A change of government at this moment, she said, could have altered the way the policy had been shaped so far. “Even though Lula had already defined some criteria, Flávio could have changed the design of this policy and this council,” she said.

 

On the challenges ahead for the PT administration, the association cited lowering interest rates and putting together a multiparty government that can deal with the National Congress, where the PL won the largest caucus in both the Chamber of Deputies and the Federal Senate.

 

The Brazilian Supermarket Association (Abras) also argued for maintaining policies adopted by the PT administration. Among them, it cited the zero tax rate on the basic food basket under the tax reform, the end of online betting, which increases household debt and cuts into income earmarked for buying food, and the preservation of the new rules for food and meal vouchers under the Workers’ Food Program (PAT).

 

Source: Valor International

https://valorinternational.globo.com/

_____________________________________

10/30/2026

 

HOUSEHOLD DEBT HITS RECORD 50.1% OF ANNUAL INCOME

Delinquency also reaches historic highs as elevated interest rates strain borrowers and raise questions over the Central Bank’s next move

 

Brazilian household debt exceeded 50% of annual income for the first time on record, the Central Bank reported. The ratio reached 50.1% in August, its highest level since the data series began in January 2005. Delinquency on non-earmarked loans to individuals also hit a record 8.1% in September. Analysts attribute the deterioration to high interest rates and the growing share of household income devoted to debt payments.

 

The Central Bank’s Monetary Policy Committee (Copom) will decide on the benchmark interest rate next Wednesday (Nov. 4), amid uncertainty over whether to extend or pause the monetary easing cycle that began in March.

 

The Central Bank measures household indebtedness as the ratio of outstanding debt to income accumulated over the previous 12 months, using gross household disposable national income as its benchmark. The debt-service ratio, which measures the share of monthly income used to repay loans, also reached a record in August, rising to 29% from 28.8% in July.

 

Fernando Rocha, the Central Bank’s head of statistics, said household indebtedness remains on an upward trend, despite relatively small fluctuations in recent months. “Although household indebtedness has been fluctuating for several months, particularly throughout this year, between 49.7% and 49.9% of annual household income, it rose further in August, reaching 50.1%,” he said.

 

Last week, the Central Bank announced measures aimed at curbing the active, personalized marketing of expensive credit products to vulnerable borrowers. The restrictions target people whose income is insufficient to cover basic living expenses, those with limited financial knowledge due to low levels of education, borrowers who repeatedly rely on emergency credit, and those with recurring overdue balances. Central Bank Chair Gabriel Galípolo said additional measures would be announced before the end of the year.

 

Another warning sign is the delinquency rate on non-earmarked loans to individuals, which rose 0.1 percentage point in September to a record 8.1%. The economy-wide delinquency rate, covering all loans to households and businesses, remained at 5%, matching the highest level in the series.

 

Structural pressures

 

Sara Paixão, a macroeconomic analyst at InvestSmart XP, said structural factors, particularly high interest rates, continue to drive delinquency despite debt renegotiation programs such as Desenrola. She warned that expectations of slower economic activity in 2027 could make it even harder for households to manage their finances.

 

“Weaker [GDP] growth could affect job creation and increase unemployment, undermining households’ ability to repay their debts and making it harder for delinquency rates to decline,” Paixão said.

 

Rubens Sardenberg, director of economics, prudential regulation and risk at the Brazilian Federation of Banks (Febraban), said the latest figures suggest delinquency has yet to peak.

 

“It gives the impression that the process is continuing. It’s not acute, and the worst phase seems to have passed, but there’s still some deterioration to come.”

 

Febraban’s periodic survey of member banks projects that the delinquency rate on non-earmarked loans to individuals and businesses will reach 6.1% at the end of this year before easing to 5.9% by the close of 2027.

 

Goldman Sachs warned in a report that credit conditions would face headwinds in the coming months as economic growth slows, delinquency increases, and household indebtedness and debt-service burdens remain at record levels.

 

“However, lending activity by state-owned banks, together with credit lines supported by the federal government and these institutions, should continue to sustain the credit cycle,” the bank said.

 

Citi analysts also pointed to further deterioration in household credit quality, even as the overall delinquency rate held steady at 5%.

 

“In consumer lending, delinquency on private-sector payroll-deductible loans increased 20 basis points month over month to 10.8%, while credit card delinquency rose 10 basis points to 10%, and personal loan delinquency remained stable at 11.1%.”

 

Pressure on banks

 

During Bradesco’s third-quarter earnings presentation, held before the presidential runoff, CEO Marcelo Noronha said the macroeconomic outlook had deteriorated regardless of electoral developments. He described widespread pressure on credit quality, affecting not only Bradesco but the banking industry as a whole.

 

“I see a period of greater pressure ahead, but I’m confident that our loan portfolio is much more tightly controlled than the market’s,” Noronha said.

 

Bradesco’s delinquency rate rose to 4.6% in September, from 4.3% in June and 4.1% a year earlier.

 

At Santander, the rate climbed to 3.4%, compared with 3.3% in June and 2.8% in the earlier comparison period. The bank said the deterioration was driven primarily by lower-income borrowers and the agribusiness sector.

 

Chief Financial Officer Carlos Muñiz said credit card deterioration had previously been confined to lower-income customers but was now beginning to spread to middle-income borrowers.

 

“Among high-income individual customers and businesses, performance has been reasonably good,” Muñiz said.

 

Interest rate uncertainty

 

Leandro Padulla, an economist at ASA, expects the Central Bank to cut the Selic benchmark interest rate by 25 basis points to 13.5% next Wednesday. However, he said the recent selloff in Brazilian assets following President Luiz Inácio Lula da Silva’s reelection had “significantly increased the likelihood of a hold.”

 

“If the committee goes ahead with the cut, we expect it to adopt a more cautious tone, acknowledging that the deterioration in financial conditions has reduced the room for further monetary easing. Under that scenario, the most likely signal would be a pause in December,” Padulla said.

 

Febraban’s Sardenberg said the trajectory of delinquency in 2027 would depend heavily on the macroeconomic environment, which in turn would be shaped by the new Lula administration’s policies, particularly its fiscal stance.

 

“We’re in an environment where the economy is slowing down, there’s no doubt about that, and this could affect employment, while household debt-service burdens are already quite high. On the other hand, banks are cautious, and riskier lending segments are slowing. So if the government addresses the fiscal issue, we could see delinquency deteriorate but at a gradually diminishing pace. However, if the market continues to price in a very high interest rate curve, there could be a significant additional deterioration [in delinquency],” he said.

 

Tighter lending rules

 

On Thursday (Oct. 29), Itaú BBA lowered its 2027 earnings forecasts for Nubank, citing continued deterioration in consumer credit conditions. Analysts warned that lower-income borrowers and unsecured lending products — two areas where the fintech has a particularly strong presence — were likely to face the greatest pressure.

 

They also highlighted risks from new macroprudential measures expected to be announced soon by the Central Bank.

 

“The measures under consideration include stricter prudential requirements for certain credit products, closer monitoring of borrowers’ repayment capacity, and greater emphasis on suitability and financial affordability — the ability to meet repayment obligations — when credit is granted,” the analysts said.

 

An industry executive said implementing the new measures would be operationally challenging but expected the Central Bank to introduce tighter restrictions. One possibility is an increase in the risk-weighting factor applied to credit card lending.

 

“The risk-weighting factor is definitely on the table, but I have doubts about its effectiveness. If you raise the cost, that could reduce credit supply on one hand, but it could also lead to higher prices for consumers on the other. It’s not a simple equation,” the executive said.

 

Source: Valor International

https://valorinternational.globo.com/

____________________________________

10/30/2026

 

BRAZIL’S INFLATION OUTLOOK DARKENS AFTER LULA’S REELECTION

Market forecasts point to higher inflation through 2028, raising doubts about further Selic cuts

 

Markets are already bracing for a sharp deterioration in inflation expectations, which is likely to create additional challenges for Brazil’s Central Bank in setting monetary policy. That is the picture emerging from a survey of about 30 market participants conducted by BGC Liquidez and shared in advance with Valor. The findings show a significant worsening in economists’ outlook following President Luiz Inácio Lula da Silva’s reelection.

 

The median of the estimates collected by BGC points to inflation, as measured by the Extended Consumer Price Index (IPCA), of 5.30% this year and in 2027, and 4.30% at the end of 2028. This represents a sharp deterioration compared with Focus, the Central Bank’s weekly survey with economists, released earlier this week, when the median forecast stood at 5.19% for December, 4.34% for the end of next year and 3.75% for 2028.

 

“We regularly speak with a large number of asset managers, who tend to revise their short-term forecasts more quickly. That allows us to anticipate Focus survey movements by one to two weeks. Based on the figures we have, the market is pricing in a 0.96-percentage-point increase in its 2027 IPCA forecast and a 0.55-point increase for 2028. I don’t think that is a particularly large move,” said Carlos Thadeu, an economist covering inflation and commodities at BGC Liquidez.

 

He also noted that 11% of the firms surveyed now project inflation above 6%, pointing to a substantial deterioration in inflation expectations over the coming years.

 

Looking at the components of the 2027 forecasts, Thadeu estimates that food prices account for about 0.25 percentage points of the increase, regulated prices for 0.40 points, services for 0.31 points, and industrial goods for 0.11 points. “The biggest impact comes from fuel prices, particularly because the market understands that the government will not subsidize them indefinitely. In services, there is also considerable concern about the effects of changing the 6×1 work schedule,” he said.

 

In the BGC economist’s view, the market had previously been willing to give the opposition the benefit of the doubt regarding the possibility of introducing a new fiscal anchor. “Without that, the market has been left without a clear sense of direction,” he said. Economists are also deeply concerned about the effects of changes to working hours at a time when some sectors of the economy are facing labor shortages and some companies are already “being squeezed on margins as wholesale prices rise, along with financing costs and the tax burden.”

 

“Economic policy is what lies behind this inflation forecast revision,” Thadeu noted. He believes that, had the opposition won the presidential election, the market would have given it the benefit of the doubt regarding the possibility of a change in economic policy that could have paved the way for lower interest rates. “But now, no one expects a significant reduction in rates anymore. Interest rates will remain high over the next four years. I don’t know how this will be brought into balance without a recession to ease some of the pressures,” he said.

 

Thadeu believes that one way to mitigate the inflationary pressures now taking shape would be to put someone in charge of economic policy whom markets view as having enough independence to pursue the fiscal agenda. “The problem is that the market is skeptical at this point,” he said. In his view, the next finance minister will have a hard time earning investors’ confidence. “The problem is not just the fiscal deficit, but a spending policy in which spending exceeds revenue, pushing interest rates higher and creating a feedback loop that fuels the public debt.”

 

Some firms have already announced substantial changes to their inflation forecasts. On Wednesday (28), Buysidebrazil, led by economist Andrea Damico, said it had raised its 2027 IPCA forecast to 4.7% from 3.9%, while setting its 2028 inflation estimate at 4.0%.

 

Data collected by Valor in recent days also show notable upward revisions. Panamby Capital, led by former Central Bank director Reinaldo Le Grazie, raised its forecast for next year’s IPCA to 5.1% from 4.0%. Banco ABC Brasil increased its estimate to 5.0% from 4.3%, while Tag Investimentos lifted its projection to 5.5% from 4.6%.

 

“The reversal in expectations about fiscal policy happened very quickly, and this is not some abstract issue for monetary policy. It affects the basic inputs everyone uses to forecast inflation, including the Central Bank. When we went from Friday to Monday and pressed a button to update our forecasts, the Central Bank’s job became more difficult,” said Tiago Berriel, head of economic research at BTG Pactual, during a morning call.

 

“We have seen exchange-rate forecasts revised, and we will probably see inflation expectations worsen over the relevant policy horizon in the next Focus survey. When those inputs are fed into the Central Bank’s models, it will find that the room for rate cuts is uncertain,” the economist stresses. He no longer sees room for another cut in the Selic policy interest rate next week. “This is an environment of considerable uncertainty. If we factor in inflation inputs, which are still deteriorating, along with the enormous uncertainty about what lies ahead, a more cautious approach seems reasonable: wait and pause the easing cycle.”

 

Source: Valor International

https://valorinternational.globo.com/

_____________________________________

 

10/30/2026

 

BRAZILIAN ASSETS SLIDE AMID INVESTOR FLIGHT TO SAFER BETS

Post-election turmoil drives losses across stocks and bonds, prompting portfolio managers to favor CDI-linked investments and overseas equities

 

October is ending with heavy losses across Brazilian assets, from equities to fixed-rate and inflation-linked bonds. Amid the market turmoil following the presidential election, investments tracking the Selic benchmark interest rate and the CDI interbank rate have emerged as the year’s top performers, delivering a steady 11.7% return so far.

 

President Luiz Inácio Lula da Silva’s reelection upended market expectations that had taken hold after Senator Flávio Bolsonaro of the Liberal Party (PL) led the first round. Investors unwound positions that had been built around expectations of interest rate cuts, including domestic cyclical stocks and bets on a stronger real. Those trades reflected a belief that a change in government would bring aggressive fiscal adjustments, paving the way for lower interest rates and inflation, and potentially a stock market rally.

 

The Ibovespa, Brazil’s benchmark stock index, had fallen 9.2% through Oct. 29. The damage was even greater among smaller companies listed on the B3 stock exchange, with the small-cap index plunging 16.7%. Year to date, the two indexes were up 5% and down 18%, respectively. The Imob real estate index had lost 22.4% for the month and 20.2% for the year.

 

Fixed income has offered little shelter outside floating-rate securities. The IRF-M, an index compiled by the Brazilian Financial and Capital Markets Association (Anbima) that tracks a basket of fixed-rate government bonds, declined 1.3%. The IMA-B 5+, which tracks inflation-linked securities with maturities exceeding five years, fell 1.4%.

 

As a result, fixed-rate Treasury bonds maturing in 2029 and 2032 now offer yields above 15% annually, compared with the current Selic rate of 13.75%. Inflation-linked Treasury bonds maturing in 2032 are yielding 7.8% above inflation. Are these levels a warning sign or a buying opportunity?

 

Investment executives say they have scaled back exposure to Brazilian assets while increasing international allocations, particularly in equities. Within domestic portfolios, they favor more liquid CDI-linked investments and shorter-term government bonds.

 

Defensive positioning

 

Brazil faces a combination of structurally higher capital costs, fiscal vulnerabilities, and a likely economic slowdown accompanied by persistent inflation pressures next year. That environment is reducing the expected returns of several asset classes relative to the CDI, said Sylvio Castro, head of global investment solutions and funds of funds at Itaú Unibanco.

 

With less room for interest rate cuts and some economic deceleration already expected in 2027, Castro said portfolios have shifted toward less volatile Brazilian assets.

 

“The decision was to reduce portfolio risk.”

 

Itaú’s investment division has broadly reduced its exposure to Brazilian equities, exiting domestic cyclical stocks. It had already been favoring foreign equities with currency hedges to neutralize fluctuations in the real. The U.S. S&P 500 index is its main tactical exposure, supplemented by individual shares of companies at the forefront of innovation.

 

In fixed income, the adjustments have involved shortening the average maturities of fixed-rate and inflation-linked positions while increasing allocations to floating-rate securities.

 

Castro noted that global demand for capital has risen in recent years, driven by defense spending and the restructuring of supply chains. He pointed out that the historical average yield differential between Brazilian and U.S. 10-year inflation-linked bonds is close to 500 basis points.

 

With U.S. real interest rates now higher, the relationship implies Brazilian real yields of around 7%. Bringing them back to the 5% to 6% range would require the spread to narrow to approximately 300 to 350 basis points. That, he said, depends on fiscal policy.

 

“In a world with a higher cost of capital, unless the country is willing to make a much greater fiscal effort, it will have to live with permanently higher interest rates.”

 

The consequence would be higher risk premiums across all asset classes.

 

Castro added that inflation expectations for 2027 have risen, while market pricing now points to stable interest rates or even an increase. The Central Bank’s Monetary Policy Committee (Copom) meets next week to decide the direction of the Selic rate.

 

Although market pricing incorporates risk premiums and does not directly forecast monetary policy decisions, it influences expected investment returns across most asset classes, with short-term floating-rate securities a notable exception.

 

Fiscal credibility

 

Investors had expected a Bolsonaro victory to make fiscal adjustment both more likely and faster, said Gilberto Kfouri, chief investment officer at BNP Paribas Asset Management. Lula’s rhetoric, by contrast, had suggested greater reluctance to pursue such measures.

 

If the government fails to act with urgency and postpones announcing its economic team and measures to restore some balance to public finances until next year, Brazilian assets will remain under pressure.

 

“It needs to announce credible measures to bring interest rates down,” Kfouri said.

 

For now, BNP Paribas Asset Management has shortened the average maturities of its interest-rate-sensitive positions. Kfouri noted that the futures market no longer prices in a Selic cut in November, while December contracts already reflect expectations of an increase.

 

In equities, the firm has sought to make portfolios more defensive by favoring exporters, whose dollar-denominated revenues benefit from a weaker real.

 

Potential upside

 

Rodrigo Bresser-Pereira, CEO and CIO of Bresser Asset Management, estimates that a decline in Brazilian real interest rates to around 5% could lift the Ibovespa by at least 60% from current levels.

 

“That’s considering only the lower discount rate. If you factor in lower interest rates, the economy’s average growth rate increases, and the multiple also changes,” he said. “If you assume Brazil will grow an additional 3% in a year, that would justify a valuation twice as high as today’s.”

 

Still, Pereira cautioned that investors cannot yet build portfolios around such a scenario. In his view, the government has failed to recognize that its policy of accelerating spending and generating excess demand in the economy ultimately produces extremely high interest rates.

 

“About 80% of the debt is linked to the Selic, including NTN-B bonds,” he said. “At least R$300 billion is being transferred to rentiers because of these interest rates.”

 

In managing the firm’s equity fund, Pereira has favored infrastructure and financial companies. He estimates that public utility concession operators offer prospective total returns of around 12%, compared with approximately 7.5% for NTN-B inflation-linked government bonds. Oil giant Petrobras is also among the fund’s holdings.

 

Overseas, he prefers financially solid technology companies. He does not believe their valuations reflect a bubble, arguing that “there are no signs that these companies themselves will become victims of disruption.”

 

Uncertainty and opportunity

 

Fiscal uncertainty and the future direction of economic policy are making it difficult to determine how much risk to take in Brazilian portfolios, said Guilherme Loureiro, CIO at Monte Bravo Corretora.

 

“When patience runs out, structural issues become embedded in asset prices, and that matters for portfolio construction.”

 

Loureiro sees the possibility of a market turnaround and substantial asset appreciation, but only if the government adopts a credible fiscal agenda.

 

“Without that, structurally high interest rates will weigh on prices and growth,” he said. “The incentive to act is strong. The world wants Brazil. The country is insulated from conflicts, has commodities, rare earths, clean energy…”

 

He nevertheless worries that a rapid stabilization in financial markets could weaken the government’s incentive to pursue fiscal adjustments.

 

As Brazil’s economy continues to operate under high interest rates, Monte Bravo is avoiding excessive domestic risk. Loureiro likened the current investment environment to navigating through dense fog, “when you pick up binoculars and all you can see is white for miles ahead.”

 

That uncertainty calls for a more defensive approach, with larger cash positions held in highly liquid CDI-linked assets. Loureiro said he has also been avoiding credit investments as economic activity slows and financial conditions tighten.

 

In this environment, international diversification makes sense, he argued.

 

“Interest rates are also higher overseas, and stocks aren’t expensive,” Loureiro said.

 

He added that this type of diversification currently offers potential returns of around 8% to 9% in U.S. dollars.

 

Source: Valor International

https://valorinternational.globo.com/