Brazil advised to play nice amid tougher trade talks with U.S.

Building convergent agenda with Washington’s interests and avoiding war of words in media would be best bet, they say

02/18/2025

Brazil is likely to face greater challenges in renegotiating the impact of tariffs imposed by U.S. President Donald Trump during his second term compared to his first. While it would be helpful to avoid a war of words in the media and especially over politics, which could hinder negotiations, Brazil also could do well by developing a convergent agenda with the new U.S. administration.

This was one of the recommendations from analysts and economists at an event organized by the American Chamber of Commerce for Brazil (Amcham Brazil). They also noted that reducing domestic uncertainty could help mitigate potential external shocks affecting an economy already expected to see modest growth this year.

The first issue at hand is the 25% tariff on Brazilian steel and aluminum. According to Christopher Garman, executive director for the Americas at Eurasia Group, the process to mitigate tariff impacts will resemble 2018’s, albeit more challenging. “Previously, American producers dependent on foreign steel also exerted pressure. Brazil’s task is again to engage with these buyers and highlight the importance of Brazilian products,” he said.

Unlike during his first term, the Republican president is now more convinced that tariffs are the right tool to boost the economy and create jobs in the U.S. Evidence of this includes announcements made without full clearance or planning from his team, such as the 25% tariffs on Mexico and Canada, which were temporarily suspended less than 24 hours later.

“The bottom line is that they were retracted not because they were a mere negotiating bluster, but because they weren’t well-aligned,” argues Mr. Garman, indicating that part of the private sector remains complacent on the issue.

Mr. Garman highlights that the Trump administration is prioritizing renegotiating tariffs with partners in the United States-Mexico-Canada Agreement (USMCA), also known as NAFTA 2.0, delaying any resolution with Brazil.

Another contentious issue is reciprocal tariffs. Former U.S. Ambassador to Brazil Todd Chapman described Brazil as one of the “kings” of tariffs to protect national interests, alongside China. He cited ethanol as an example, where Brazil exports four times more in value terms to the U.S. than the inverse flow.

“Brazil has high tariffs, we have low tariffs. Why should we allow nearly free access to the world’s largest market without reciprocal access?” he summarized.

Bradesco chief economist Fernando Honorato notes that Brazil is somewhat shielded from the U.S.’s focus, given its trade deficits with the U.S. and the relatively insignificant trade flow between the two countries.

“Even an aggressive 25% tariff might reduce exports by $7 million to $10 million, minimally impacting Brazil’s trade balance,” he commented. “Reciprocity poses a risk. I’m more concerned about sector-specific impacts than broader macroeconomic ones.”

This scenario, however, underscores the risks that the lack of stability brings to Brazil’s economic outlook. “Without this anchor, external developments could quickly swing us from side to side, complicating the Central Bank’s task,” added Mr. Honorato.

Ana Paula Vescovi, Santander’s chief economist, warned of potentially indirect impacts from the new American president’s more protectionist stance on the global economy and Brazil, even if all threats aren’t realized.

A more fragmented global economy, combined with mass deportation policies, points to an economy with lower growth potential and higher inflation risk, she indicated. These measures cast doubt on the Federal Reserve’s ability to maintain its interest rate cut cycle.

“These macroeconomic risks and a stronger dollar in the medium term are concerns for the Brazilian economy,” Ms. Vescovi stated, noting that U.S. inflation expectations have been climbing since the end of last year, which could influence the Fed’s policy actions and inflation convergence.

To navigate these risks, Mr. Chapman advocated for greater private sector involvement in government negotiations. “International relations are too important to be left solely to government officials,” he affirmed.

He suggested considering investments in the U.S. as a strategy, citing companies like Gerdau and JBS, which already operate in the country.

Mr. Garman echoed this sentiment. “It won’t be easy, so there’s all the more reason to engage aggressively and highlight Brazil’s alignment with American interests,” he said. “Brazil is a critical supplier of minerals for the defense industry. The U.S. is also focused on energy security and reducing dependency on China in key supply chains. Brazil plays important roles in these areas.”

*By Marcelo Osakabe e Marta Watanabe — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Banks downgrade lending growth forecast to 8.5%

Widespread revision reflects worsening economic outlook with potentially higher inflation and interest rates slowing down borrowing in 2025 and 2026

02/18/2025

Brazilian banks have revised lending growth forecasts for this year to 9% from 8.5%, according to the Banking Economy and Expectations Survey by business federation Febraban. Among the major lenders that have already released their balance sheets, growth projections for their portfolios are even lower, around 6.5%.

According to Febraban’s survey, the portfolio of loans from non-directed funding is expected to expand by 8.1% this year (down from 8.3% in the previous survey), and the directed portfolio by 9% (down from 9.7%). When broken down by borrower type, business lending is expected to grow 7.1% (down from 7.8%), while consumer credit is expected to rise by 8.6% (down from 9.1%).

The downward revision of industry expectations was widespread, reflecting a consolidation of economic expectations for the year. “This revision was already anticipated and has been shaping up since the last quarter of 2024. The result reflects a worsening economic scenario, with expectations of higher inflation and, consequently, higher interest rates throughout the year,” stated Rubens Sardenberg, director of economics, prudential regulation, and risk at Febraban, in a press release.

The survey also collected the first projections for credit growth in 2026. The average forecast indicates a continuing slowdown in lending growth, with an anticipated expansion of 7.7% next year.

Meanwhile, there was a slight improvement in the projection for the default rate of the non-directed portfolio this year, which dropped from 4.7% to 4.6%, although it remains above the level observed at the end of 2024 (4.1%). This result can be attributed to increased caution in credit provision, which may reduce the expansion of defaults over the year.

The survey shows that a significant majority of respondents (76.2%) expect the Selic rate to rise beyond 14.25% per year in 2025, and that the cycle of cuts will not begin this year. For comparison, in last December’s survey, only 47.4% selected this option, showcasing a less optimistic view of the scenario since then.

In this context, expectations for interest rates have risen compared to the previous survey. Now, the median projection for the Selic rate is 15.25% per year by June 2025, remaining at this level at least until September.

Conversely, the projection for the exchange rate at the end of the year has improved, dropping to R$5.95 from R$6.00 previously. Regarding inflation, just under half (47.6%) of lenders believe it will be close to 5.5% (the current market consensus). However, one-third of analysts surveyed now expect inflation to be close to (or above) 6% this year.

Regarding economic activity, a little over half (52.4%) of the participants continue to project GDP growth of around 2.0% in 2025, similar to the previous survey (50% of respondents).

*By Álvaro Campos, Valor — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Consumption starts 2025 weaker as industry pushes price hikes

Retailers report sluggish sales as suppliers inquire about price increases of up to 7%

02/18/2025

Consumer spending showed signs of instability at the start of 2025, a stark contrast to the steady growth seen in the same period last year. Weekly monitoring by NielsenIQ (NIQ), obtained by Valor, indicates that February began with a slowdown in purchasing activity compared to January, shifting from strong sales volumes to a deceleration relative to 2024.

This trend did not occur a year ago when sales expanded week by week between January and February 2024.

From early January to February 9, sales volumes increased by 4.8% compared to the same period in 2024, based on NIQ’s weekly data analyzed by Valor Data. As of February 2, the cumulative growth was 5.2%. However, this increase was largely driven by the traditionally strong start of January, which tends to push the overall average higher.

Typically, the first week of the year sees a surge in sales due to consumers restocking household essentials after the holiday season. However, in 2025, sales momentum declined rapidly week by week compared to 2024, with volumes dropping for the first time between January 27 and February 2, registering a growth rate of just 2.3%.

The data is unaffected by the timing of Carnival in 2024, which took place after February 10 last year. NIQ noted that holiday-driven sales only began influencing the retail sector after February 5, according to last year’s report.

NIQ provides this data weekly to its clients, serving as a benchmark for companies to compare their performance with the broader market. Large retail groups primarily use the reports to track demand trends.

Sluggish demand

The consumption slowdown coincides with another wave of price increases from manufacturers to retailers, adding inflationary pressure on food and beverages that could further impact demand.

A large supermarket chain and a leading cash-and-carry wholesaler reported on February 14 that suppliers of essential grocery items are inquiring about price adjustments ranging from 5% to 7%. Items that had not previously been targeted for price hikes, such as eggs and potatoes, are now on the list.

“The dollar remains high despite recent declines, agribusinesses are prioritizing exports, and fulfilling 100% of purchase orders has become more difficult due to increased export volumes—these factors are all driving up prices,” said the CEO of one of these retail chains. “We are already selling eggs at over R$1 each. A year ago, a carton of ten eggs cost R$10; today, it’s R$15, and further price hikes are expected,” he added.

A separate report obtained by Valor from Scanntech Brasil, a data and research firm, noted that the average price level in January was the second highest in the past 13 months.

“January’s price levels were surpassed only by December 2024, when seasonal factors naturally drive prices higher,” the company said in its report.

Regional disparities

NIQ’s data indicates that Brazil’s Northeast region and Greater São Paulo (including the capital) are experiencing the weakest sales growth in 2025, lagging behind the national average in both supermarkets and cash-and-carry wholesalers.

These areas represent significant consumer markets, accounting for 22% of the country’s population in 2024, according to the Institute for Applied Economic Research (IPEA). Their sales performance has gained attention in recent weeks amid projections of economic deceleration and a sharp drop in President Lula’s approval rating, according to a recent Datafolha survey.

In the Northeast—a key region in Mr. Lula’s 2022 election victory—sales at hypermarkets declined by 3% in value terms (without adjusting for inflation) as of February 2, marking the worst regional performance. Volume data for this segment was not disclosed.

In large supermarkets (1,000 to 2,500 square meters), revenues in the Northeast grew by 5%, the smallest increase among all regions despite the uptick. Meanwhile, cash-and-carry sales in the region rose 12%, slightly below the national average of 13%.

Rising food prices, alongside structural economic challenges, have been cited by research firms as key factors in Mr. Lula’s record-high disapproval ratings.

Nationwide, small supermarkets have felt the slowdown the most since early January, while cash-and-carry stores have shown greater resilience.

Small supermarkets, often run by local entrepreneurs and family businesses, started the year with a 21% increase in sales compared to the same period in 2024. However, by early February, growth had slowed to just 1.4%.

Sales volatility

Valor found that the Brazilian Supermarket Association (ABRAS), the country’s largest food retail organization, has preliminary data for the week of February 3–9. The figures show a 2.8% increase in sales volume compared to 2024, following the decline posted in the previous week. According to the association, this reinforces the perception of an unstable consumption pattern in early 2025.

This data should be viewed in context: the comparison period—February 5–11, 2024—overlapped with Carnival, when sales surged 13.5%.

“We need to wait a few more weeks to assess the consistency of these peaks and valleys in consumption at the start of the year,” said João Galassi, president of ABRAS, when asked about February’s sales figures.

Mr. Galassi noted that while the recent interest rate hikes affect the broader market, they have a more pronounced impact on electronics, which rely on consumer credit. If demand for durable goods declines, more disposable income could become available for food and beverage purchases.

Despite waiting for more data, ABRAS announced at the end of January that it expects supermarket sales to grow by 2.7% in 2025—lower than the 3.7% increase in 2024. If this forecast holds, 2025 will mark the weakest sales performance for the sector since 2018 when sales rose just 2%. These figures are adjusted for inflation and reflect changes in sales volume.

This projection aligns with broader retail forecasts for 2025, which anticipate growth of 1.7% to 2% on average, compared to a 4.7% increase in volume in 2024.

Economic uncertainty

Eduardo Terra, managing partner at BTR Consultoria and a board member at several retail chains, noted that 2024 was a strong year for the sector, but companies remain cautious in their 2025 budgets. According to the Brazilian Institute of Geography and Statistics (IBGE), the retail sector grew by 4.7% in volume last year, the highest since 2012, but investment plans remain conservative.

“Since the Selic rate hike in 2021, companies have focused on improving productivity, renegotiating debt, and cutting costs. These priorities remain crucial, especially with interest rates rising again, particularly for more indebted retail chains,” Mr. Terra said.

A report sent to clients on Monday (17) by BTG Pactual’s analysis team highlighted that with weaker sales expected in 2025 compared to 2024, retailers will prioritize protecting profit margins rather than pursuing aggressive growth. Strategies to optimize working capital could lead to improved financial returns.

This cautious approach has been widespread in retail since 2021 when the COVID-19 crisis, rising inflation, and subsequent monetary tightening pushed companies to focus on margin preservation rather than sales expansion.

*By Adriana Mattos — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Trump era prompts Brazil to adjust foreign policy

Focus shifts from UN reforms to preserving multilateral system, diplomats say publicly and privately

02/17/2025

The isolationist stance promoted by U.S. President Donald Trump and his robust actions against the multilateral foreign relations are pushing Brazil to rethink its foreign policy strategy. Officials in Brasília state that the focus on reforming multilateral organizations to give emerging nations a stronger voice is gradually shifting towards ensuring the survival of the post-World War II and post-Cold War systems.

For instance, Brazil’s longstanding ambition to expand the United Nations Security Council seems more distant now. However, Brazil still has an interest in minimizing any weakening of the council. Similar concerns apply to the World Health Organization (WHO), the International Criminal Court (ICC), and climate negotiations.

In a speech earlier this month at the Getulio Vargas Foundation (FGV), Foreign Minister Mauro Vieira voiced these concerns. “Growing global inequalities elicit various reactions in the current phase. They give rise, on one hand, to the cause of world order reform, which Brazil has long advocated. But they also give rise to temptations to dismantle the order, often in the very centers where it was conceived and from which they benefited the most,” he stated. “Recent reports on trade—marked by a slew of protectionist measures and unilateral intimidation through tariffs—highlight this trend,” noted the minister.

While UN reform remains central to Brazil, a high-ranking diplomat points out that “the primary concern now is to prevent the system from collapsing.” Previously, it was about reforming to improve the system; now, it’s about ensuring its survival.

The current tumultuous context, featuring Mr. Trump, an armed conflict between Russia and Ukraine, and the global rivalry between China and the U.S., creates other “emergencies,” according to sources from the Presidential Palace and Itamaraty, as the Brazilian foreign service establishment is known. One such emergency is the climate issue. With the U.S. withdrawing from the Paris Agreement—another Trump action—Brazil is striving to prevent any fallout that could jeopardize even the COP30 summit scheduled for Belém in November.

Another pressing issue is the multilateral trade system, already ailing from the years-long weakening of the World Trade Organization (WTO). From the perspective of Brazilian diplomacy, while this system is currently malfunctioning, its complete collapse—with nations retaliating against US unilateral measures—would be even worse.

Brazil will utilize platforms such as the BRICS group of nations and the G20 to reinforce multilateralism and counter Trump’s influence. With the BRICS, Brazil aims to use the July summit in Rio to drive COP30-related agendas and foster cooperation among member countries.

Itamaraty is working to ensure that a “condemnation of unilateralism” is included in the final text of the BRICS summit, although direct references to the US are unlikely. Furthermore, Brazil is negotiating an internal BRICS pact for a “commerce truce.” According to a source involved in these discussions, this would be “a sort of gentlemen’s agreement where these countries also refrain from taking unilateral measures against each other.”

Itamaraty will also seek to convince other nations so that the group of emerging countries brings a unified climate financing proposal of $1.3 trillion to Belém in November. Brazil also wants its partners to promptly submit their Nationally Determined Contributions (NDCs), commitments each country makes under the Paris Agreement. The deadline expired on the 10th, with only 13 of the 195 signatories having sent their commitments.

Sources in Brasília note that the strategy towards Mr. Trump’s US could be temporary, considering his four-year term and that he cannot be re-elected. They also believe that protectionist measures may negatively impact employment and inflation, sparking domestic resistance.

Consequently, he may backtrack on measures like the recent tariffs on Brazilian steel and ethanol. However, Mr. Trump’s inclination to negotiate bilaterally with each partner and undermine the multilateral system is not expected to change.

*By Fabio Murakawa  e Renan Truffi  — Brasília

Source: Valor International

https://valorinternational.globo.com/
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Brazil to continue exporting critical minerals to U.S.

Top mining industry official says supply of critical minerals set to keep steady while usage in U.S. likely to shift to defense sector

02/17/2025

Critical and strategic minerals mined in Brazil are among the key inputs for achieving energy transition goals. Brazilian natural resources like copper, lithium, graphite, nickel, and rare-earth elements are poised for increased production through enhanced geological knowledge, mineral surveying, and new mining concessions, according to Brazil’s Ministry of Mines and Energy (MME).

Some of these critical and strategic minerals are sold to the U.S., and with Donald Trump’s return to the country’s leadership, the market raised concerns about potential reductions in these imports or additional tariffs. However, Raul Jungmann, president of the Brazilian Mining Institute (Ibram), asserts that Brazil will continue exporting critical and strategic minerals to the U.S. The difference is how they will be used.

Mr. Jungmann notes that out of the 51 strategic minerals consumed by the US, at least 15 can be exported by Brazil. “There is a global rush for minerals, especially strategic ones. Regarding Mr. Trump, the early indications are that there is still interest, but now the reason behind this interest is shifting.”

During Mr. Trump’s previous administration, the critical and strategic minerals purchased by the US were aimed at applications related to energy transition. Now, according to Mr. Jungmann, these products will be directed toward the defense sector. For instance, lithium from Minas Gerais is a vital component of rechargeable batteries, while nickel from Goiás, Bahia, and Piauí is used in stainless steel production. According to consolidated data from the MME, Brazil ranked as the world’s fifth-largest lithium producer in 2022, following Australia, Chile, China, and Argentina. For nickel, Brazil was the ninth-largest producer that year.

A Citibank report indicates that Brazil is well-positioned to attract investments and scale the production of critical minerals. “This could bring economic benefits to Brazil and Latin American countries through mineral supply, job creation, and infrastructure development.”

“Brazil possesses approximately 20% of the global reserves of graphite, nickel, manganese, and rare earth elements. However, production does not match the reserves, accounting for just 0.2% and 7% of the global production of rare earth elements and graphite, respectively. Only 7% of the global exploration budget for nickel and rare-earth elements is allocated to the Latin American region,” according to the bank.

*By Kariny Leal  — Rio de Janeiro

Source: Valor International

https://valorinternational.globo.com/
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Beef prices begin to ease after inflation surge

Productivity gains and increased supply drive price adjustments, with exports playing a balancing role

02/17/2025

After being one of the main drivers of inflation in 2024, beef prices in Brazil are showing signs of decline, a trend expected to continue throughout the year’s first half. Productivity gains and increased female cattle slaughter are key factors behind this movement, even as the livestock cycle shifts toward lower supply. Additionally, the opening of new export markets for Brazilian beef could help stabilize domestic prices.

The price of live cattle, which surpassed R$350 per arroba (15 kg) in São Paulo last November, has since dropped to around R$320, while beef cuts are also becoming more affordable. In the Greater São Paulo wholesale market, the price of the very popular picanha—similar to the top sirloin cap—fell by 8.28% over 30 days (as of January 13), according to Scot Consultoria. Alcatra (rump steak) and maminha (rump skirt) declined by 4.26%, and contrafilé (striploin) dropped by 3.97%.

The Brazilian Beef Exporters Association (ABIEC) forecasts a 10% increase in beef exports in 2025, reaching nearly 3.3 million tonnes. Negotiations with key markets such as Vietnam, Japan, Turkey, and South Korea could fuel this growth.

However, ABIEC does not expect the rise in exports to reduce domestic supply. Speaking to Valor, the association’s president, Roberto Perosa, said that while cattle availability will adjust throughout the year due to the livestock cycle shift, the supply to slaughterhouses and both domestic and international consumers will remain steady.

Mr. Perosa attributes this stability to a record grain harvest, which is expected to improve conditions for cattle finishing and feedlot operations, ultimately increasing carcass yields and maintaining overall beef production levels. “We will see productivity gains alongside a reduction in raw material costs,” he said.

Beyond productivity gains, Mr. Perosa said that most beef cuts exported by Brazilian meatpackers—such as front cuts and offal (including tongue, heart, tripe, and intestines)—are not widely consumed in Brazil. This means exports do not significantly compete with domestic beef supplies.

“Exports play a key role in stabilizing cattle prices in Brazil. Selling these products to Asia, where they fetch higher prices, reduces pressure on the cost of cuts consumed locally, such as filé mignon (tenderloin) and picanha (sirloin cap),” Mr. Perosa noted. “The more we export, the better the cost structure for meatpackers. That’s why opening new markets is crucial. Exports determine whether a meatpacker operates at a profit or a loss,” he added.

According to Leonardo Alencar, head of agribusiness, food, and beverages at XP, the increased culling of non-pregnant female cattle at this time of year is also expected to boost supply and keep prices under control throughout the first half of 2025.

“The question is how production and slaughter metrics will play out over the year. While slaughter numbers are expected to decline, the average weight per animal is likely to increase,” Mr. Alencar noted.

Maurício Palma Nogueira, executive director at consultancy Athenagro, challenges the expectation of supply restrictions in 2025 and also highlighted productivity improvements. “The cattle herd is getting younger, we are increasing efficiency, and turnover is accelerating. This allows for more female cattle to be sent to market without compromising herd size,” he said.

This will be the first livestock cycle shift since Brazilian beef entered the Chinese market, and Mr. Nogueira believes this could lead to different dynamics than seen in previous years. “It appears that the cattle industry is now capable of responding more quickly, which could limit major price spikes for consumers,” he said.

“As we look ahead, beef production is likely to adjust faster compared to previous cycle shifts,” he added.

Mr. Nogueira expects some fluctuations in cattle prices and beef retail prices but at a more moderate pace than in 2024. While there could be some price adjustments after the rainy season, stability is expected by the end of the year.

Mr. Perosa, from ABIEC, also anticipates more balanced beef prices in the domestic market but acknowledges that achieving a 10% export growth target “is feasible but challenging.” Even if negotiations for new markets do not materialize as planned, exports could still rise through increased sales to Chile and Mexico, as well as stronger trade with the Middle East. There is particular optimism regarding Vietnam and Japan, both of which President Lula is set to visit in the coming weeks—following a recent visit by Mr. Perosa himself.

Cesar de Castro Alves, head of agribusiness consulting at Itaú BBA, estimates that beef exports could grow between 2% and 5% in 2025, with additional upside potential if new markets open.

Mr. Alencar, however, is skeptical about reaching a 10% export increase, even with expected productivity gains in Brazil’s beef industry.

In 2024, Brazil set a new export record, shipping 2.87 million tonnes of beef—equivalent to 32% of total production.

For the U.S. market, the second-largest buyer after China, Brazil had already exhausted its 65,000-tonne duty-free beef quota—shared with nine other countries—by January 15, underscoring strong demand.

Despite this, Oswaldo Ribeiro Júnior, president of the Mato Grosso Cattle Ranchers Association (ACRIMAT), reassured that both domestic and international markets will remain well-supplied. “There will be no shortage of beef for either market,” he said.

*By Rafael Walendorff  e Nayara Figueiredo, Globo Rural — Brasília and São Paulo

Source:Valor International

https://valorinternational.globo.com/
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Central Bank president warns of challenging period ahead due to inflation

Gabriel Galípolo sees country in “elevated level” from the perspective of monetary tightening

02/12/2025

Central Bank President Gabriel Galípolo said that “we are moving towards a quite elevated level from the perspective of monetary tightening.” Mr. Galípolo participated in an event on Wednesday morning organized by the Brazilian Center for International Relations (Cebri), the Institute of Economic Policy Studies/Casa das Garças, and the Center for Public Policy Debates (CDPP).

The central banker, who took over Brazil’s monetary authority earlier this year, explained that “it’s logical” that Brazil will navigate a short-term “uncomfortable” period for society, businesses, and families, “a time when inflation should remain at an uncomfortable level, outside the target, reflecting all past events, and you expect monetary policy to gradually take effect and present a deceleration process.”

Mr. Galípolo said that within the Central Bank’s baseline scenario, what is set is “an absolutely traditional expectation of what is expected from the transmission mechanisms of monetary policy. In other words, from that point, you begin to witness a deceleration process.”

The COPOM raised the Selic policy rate to 13.25% per annum from 12.25% at the last meeting, in January. The committee also maintained the signal of a 100-basis-point hike for the March meeting.

*By Gabriel Shinohara, Valor — Brasília

Source: Valor International

https://valorinternational.globo.com

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Latin America drops off list of Brazil’s largest trade surpluses

Asian countries gain ground while Argentina plummets from fourth place in 2023 to 60th in 2024

02/12/2025

Brazil ended 2024 with a trade surplus 25% lower than the previous year and a reduced contribution from its neighbors. The list of the ten countries that generated Brazil’s largest trade surpluses in 2024 no longer includes any Latin American nations. In 2023, Argentina, Chile, and Mexico were part of this ranking. The surplus with these three countries shrank as exports declined and imports grew, driven by domestic demand.

China remained at the top of the list in 2024, although with a smaller surplus, followed by three Southeast Asian nations. Among them, Singapore—a city-state with around 6 million inhabitants—held onto third place, as it did in 2023. Malaysia and Indonesia, in ninth and tenth positions, respectively, were also present in the ranking last year but swapped places in 2024. Newcomers to the top ten were Egypt and Iran, ranking seventh and eighth, up from 16th and 12th places in 2023, respectively.

In a year when exports fell by 0.8% and imports rose by 9%, Brazil’s total trade surplus dropped to $74.2 billion in 2024, down from $98.9 billion in 2023. South America, which was the second-largest source of surplus for Brazil in 2023, slipped to fourth place in 2024, overtaken by the Middle East and Africa. Asia retained its lead for both years.

Argentina plummets

Among the Latin American countries that dropped out of the top ten, Argentina—historically a key market for Brazilian manufactured goods—had the smallest trade surplus with Brazil in 2024. The positive balance of $4.71 billion in 2023 dropped to just $201 million in 2024, pushing the country from fourth place in 2023 to 60th in 2024. Brazilian exports to Argentina fell 17.6% year over year, while imports from Argentina rose 13.2%.

A major factor behind this shift was an atypical surge in soybean exports to Argentina in 2023, which did not repeat in 2024, noted José Augusto de Castro, president of the Brazilian Foreign Trade Association (AEB).

Due to a poor harvest, Argentina had to import soybeans to fulfill its export contracts. In 2023, Brazil sold $2 billion worth of soybeans to Argentina, accounting for 12% of the total exports to the country that year. In 2024, shipments returned to normal levels, totaling just $90 million. Meanwhile, Brazilian imports from Argentina were driven by automobiles.

Livio Ribeiro, partner at BRCG and researcher at the Brazilian Institute of Economics of the Getulio Vargas Foundation (FGV Ibre), pointed out that Argentina is undergoing a severe income contraction. “In reality, the country is redefining itself as much poorer than previously perceived. Trade levels are adjusting in the short term between Argentina and the rest of the world, and its share in Brazil’s export agenda is shrinking.”

Brazil’s trade surplus with Chile also shrank, from $3.63 billion in 2023 to $1.71 billion in 2024, pushing the country from sixth place to 18th. Petroleum is Brazil’s main export to Chile, accounting for 29% of total shipments. In 2024, Brazil exported $1.92 billion worth of oil to Chile, a 38% drop from 2023, which drove an overall 16.2% decline in exports to the country. Meanwhile, imports from Chile rose by 14.8%, mainly due to increased copper purchases.

With Mexico, Brazil’s trade surplus shrank from $3 billion in 2023 to $2 billion in 2024, moving Mexico down from seventh to 15th place. This decline resulted from a 9% drop in exports and a 4% increase in imports.

Mexico, another key destination for Brazilian manufactured goods, imported $715 million worth of automobiles from Brazil in 2024. While cars remained Brazil’s top export to Mexico, sales fell 35% from 2023. Meanwhile, Brazilian imports of vehicle parts and accessories from Mexico rose by 22.3%.

Welber Barral, partner at BMJ and former foreign trade secretary, noted that Brazil and Mexico have a longstanding trade agreement primarily focused on the automotive sector. “There’s a proposal to expand the agreement to include more products, but one major obstacle is Mexico’s protectionist stance on agriculture,” he said.

Mr. Barral added that the more aggressive trade policies of U.S. President Donald Trump toward the United States-Mexico-Canada Agreement (USMCA)—the updated version of NAFTA negotiated during his first term and set for review in 2026—could push Mexico to revisit trade talks with Brazil. “It would be an opportunity, though the trade instability caused by Trump’s new tariffs is bad for the entire world,” he said.

Growing influence

For Mr. Ribeiro of BRCG, the decline in trade surpluses with Latin American countries is part of a broader shift in which Brazil is losing its traditionally captive regional market to China. “This is particularly evident in 2024, as China ramped up its exports—especially toward the end of the year—anticipating a worsening trade war,” he said, referring to the expected escalation of tensions between China and the U.S.

Looking ahead, Mr. Ribeiro said the key question is how global trade will balance in 2025. “The 2024 trade agenda was influenced by specific factors, but overall, Brazil remains a major commodity supplier, primarily to Asia. It also exports some industrial products to the Americas, but these are increasingly being replaced by Chinese goods.”

Despite its decline in 2024, Brazil’s trade surplus with China remains by far the largest among all partners, totaling $30.73 billion, down from $51.15 billion in 2023. The drop was driven by both lower exports, which fell to $94.4 billion (nearly $10 billion less than in 2023), and higher imports, which rose from $53.2 billion in 2023 to $63.6 billion in 2024.

Government data indicate that soybean exports accounted for much of the decline in shipments to China. In 2023, amid a record grain harvest, Brazil exported $38.9 billion worth of soybeans to China. In 2024, with lower agricultural production, sales fell to $31.5 billion. Shipments of oil and iron ore remained relatively stable, and together, these three products made up 75% of Brazil’s total exports to China in 2024.

Commodity prices played a significant role in these trends. The average price of crude oil exports fell by 4.4% in 2024, while iron ore prices declined by 5.2%. Soybean prices plummeted by 16.9%, further affecting trade values. Meanwhile, China’s GDP growth remained stable, rising by 5.2% in 2023 and 5% in 2024.

The surge in Brazilian imports from China was driven by domestic demand and China’s strategy to redirect its excess supply to new markets amid rising protectionist measures from the U.S. and Europe. In 2024, Chinese cars took advantage of favorable tariffs and stood out in Brazil’s import data. Boosted by electric and hybrid models, Brazil imported $3.1 billion worth of Chinese automobiles in 2024—triple the value of 2023.

For Mr. Castro of AEB, Brazil’s trade surpluses with China, as well as with countries like Egypt and Iran in 2024, reflect strong commodity sales. The top export to Egypt was corn, followed by sugar and molasses. For Iran, Brazil’s main exports were corn, soybeans, and soybean meal.

Singapore, which ranked third in trade surpluses with Brazil in both 2023 and 2024, serves as a key re-export hub, particularly for China and Southeast Asia. The Netherlands, which held second place both years, plays a similar role for the European Union.

*By Marta Watanabe e Álvaro Fagundes — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Government rejects trade war, says U.S. isn’t aiming at Brazil

Brazil’s finance minister, Fernando Haddad, said U.S. President Trump’s tariffs are “a generic thing for everyone,” and reaffirmed Lula administration’s willingness to negotiate

02/12/2025

Brazil’s minister of institutional relations, Alexandre Padilha, stated on Tuesday (11) that Brazil “will not engage in any trade war” when commenting on the tariffs imposed by U.S. President Donald Trump on steel and aluminum imports. This measure directly impacts Brazil, which was the second-largest supplier of steel to the U.S. last year, trailing only Canada.

“Trade wars benefit no one. Brazil does not encourage and will not engage in any trade war,” he said during a meeting with mayors.

On Monday (10), President Trump imposed a 25% tariff on steel and aluminum imports to the U.S. The Brazilian government is still considering how to respond to this measure, but the initial inclination is to seek negotiations with the U.S. government rather than adopting retaliatory measures.

One approach could be to persuade the Trump administration to reinstate the export quota policy, which had been negotiated between Brasília and Washington during the first term of the Republican president (2017-2021).

Finance Minister Fernando Haddad said that unilateral tariff impositions by the U.S. government, such as the 25% tariffs on steel and aluminum imports, “are counterproductive for the improvement of the global economy” and that “the global economy loses with this contraction.” Minister Haddad also mentioned that “this is not a decision against Brazil; it is something generic for everyone” and reaffirmed the government’s willingness to negotiate. According to him, the Ministry of Development, Industry, Commerce, and Services is gathering information to present to President Lula for decision-making.

The Aço Brasil Institute, which represents steel manufacturers in the country, expressed surprise at President Trump’s decision to impose a 25% import tariff on steel regardless of origin. However, they remain confident “in the opening of dialogue between the governments of the two countries to reestablish the flow of steel products to the United States based on the agreements reached in 2018.”

The taxation nullifies an agreement made with Brazil during Mr. Trump’s first term, which set export quotas for the U.S. market at 3.5 million tonnes of slabs and semi-finished products and 687,000 tonnes of rolled products. This measure was negotiated after the U.S. had established 25% import tariffs. “It’s important to note that the negotiation that took place in 2018 met not only Brazil’s interest in preserving access to its main external steel market but also the interest of the American steel industry, which demands Brazilian slabs,” Aço Brasil stated.

In 2024, the U.S. imported 5.6 million tonnes of slabs to meet domestic demand, as they are not self-sufficient in this type of steel product. Of this volume, 3.4 million tonnes came from Brazil. According to Aço Brasil, Brazilian sales fully complied with the conditions established under the “hard quota” regime. The institute also notes that Brazil has been “plagued” by a significant increase in imports from countries engaging in “predatory competition, especially China.” As a result, the industry has requested that the Brazilian government implement trade defense measures, currently applicable to nine types of steel (NCMs).

“Therefore, contrary to the claims in the American government’s decision of February 10, there is no possibility of circumvention occurring in Brazil for steel products originating from third countries to the United States,” Aço Brasil argues. According to the institute, the United States and Brazil have a longstanding commercial partnership historically favorable to the U.S., with an average trade surplus of $6 billion over the past five years. Considering the main items in the steel chain (coal, steel, and machinery and equipment), the U.S. and Brazil negotiate approximately $7.6 billion, with the U.S. having a surplus of $3 billion.

*By Fabio Murakawa, Ruan Amorim, Guilherme Pimenta e Stella Fontes — Brasília and São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Itaú signals possible guidance revision amid economic uncertainty

CEO Milton Maluhy Filho says projections could improve if macro conditions exceed expectations, while analysts view bank’s outlook as conservative

02/07/2025

After another year of record results in 2024, Itaú Unibanco, Brazil’s largest private bank, released a conservative guidance for 2025, according to market analysts. Itaú CEO Milton Maluhy Filho emphasized on Thursday (6) that this stance reflects greater macroeconomic uncertainty but noted that if conditions improve beyond initial expectations, the bank may revise its projections upward.

“Guidance represents a range, not a fixed point,” he said. “In 2024, we started the year with a certain portfolio pace and ended with a completely different one” he added, referring to stronger-than-expected credit expansion last year. If the economic outlook turns out to be more favorable, Itaú has significant capacity to accelerate, he noted. “We’ve never been better positioned to handle any scenario.”

Credit growth

Itaú’s expanded loan portfolio reached R$1.35 trillion in December 2024, marking a 15.5% increase over 12 months. Adjusted for exchange rate fluctuations, the expansion was 10.2%. The bank had already revised its 2024 guidance upward, projecting growth between 9.5% and 12.5%, but for 2025, it now forecasts a much lower expansion of 4.5% to 8.5%.

The cost of credit is expected to range between R$34.5 billion and R$38.5 billion, a figure Mr. Maluhy said he is comfortable with.

For the bank’s Brazilian operations, Mr. Maluhy expects credit growth to land in the middle of the guidance range, between 6.5% and 7%. In the small and medium-sized business segment, growth could once again exceed double digits, he added.

Mr. Maluhy highlighted strong portfolio management efforts and said even the more volatile segments—such as personal and SME loans—are in healthy shape.

Regarding delinquency rates, he acknowledged there could be a slight increase but expects overall stability.

“It’s hard to imagine further improvement in default indicators, as they are already at historic lows,” he said. Itaú’s delinquency rate stood at 2.4% in the fourth quarter of 2024, down from 2.6% in the third quarter and 2.8% in the last three months of 2023.

During an earnings call, Mr. Maluhy was asked about Itaú’s net interest margin with the market, which is projected between R$1 billion and R$3 billion for 2025. He acknowledged that this figure is difficult to forecast, and given macroeconomic uncertainties, the bank chose a conservative estimate.

“Our ability to improve market-related margins is there, but it will depend on the scenario,” he said. “If we perform better than expected, we may revise guidance in the first or second quarter.”

On dividend distribution, Mr. Maluhy said that, barring any major changes, the bank expects to pay an additional dividend on 2025 earnings. “Our goal is not to retain excess capital,” he said. “When an extraordinary dividend is paid every year, it stops being extraordinary—so we’re calling it an ‘additional’ dividend now,” he added.

Mr. Maluhy also praised the government’s initiative to revamp the private payroll loan market in collaboration with banks. “It could become a very strong credit program, highly beneficial for the country,” he said.

The private payroll loan market is currently valued at around R$40 billion, with Itaú holding a 30% share. However, Mr. Maluhy said the bank would prefer to hold a smaller share in a much larger market—potentially four to five times its current size.

While acknowledging implementation challenges, he said that once the project is completed, it will greatly facilitate business participation.

“The new payroll loan system must be available across all channels—there cannot be a monopoly by a single marketplace,” he noted.

Market reaction

Analysts praised Itaú’s fourth-quarter results, highlighting credit growth, record-low delinquency rates, and strong profitability. However, the conservative guidance and slightly lower-than-expected implied profit left some market participants unimpressed.

Goldman Sachs estimates R$45.0 billion in net income for 2025, 3% below previous projections. “We believe Itaú continues to deliver the best performance among Brazil’s traditional banks. However, the overall earnings, dividend, and guidance announcement did not bring major positive surprises,” Goldman Sachs analysts said.

Citi analysts also described the guidance as somewhat disappointing, noting that Itaú’s credit provisions assume a highly challenging macroeconomic environment. However, they pointed out that if the economy proves resilient, there could be room for adjustments.

“Despite operating expense pressures, we believe Itaú has room to reach the upper end of its guidance range,” Citi noted.

*By Álvaro Campos e Mariana Ribeiro, Valor — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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