Fangda commits to purchasing at least 20% of niobium output from the Araxá Project in Minas Gerais, with upfront payment to St George
01/20/2025
Australian mining company St George and China’s Liaoning Fangda Group, one of the world’s largest steel producers and heavy mining equipment manufacturers, signed a memorandum of understanding to collaborate on the development of a niobium and rare earth elements extraction project in Araxá, Minas Gerais. St George expects to finalize similar agreements in the coming weeks.
Under the agreement, Fangda has committed to purchasing at least 20% of the niobium output from the Araxá Project, providing upfront payments to support the project’s financing. Production, projected to begin in 2027, is expected to reach 5,000 tonnes of niobium annually. Thiago Amaral, St George’s director in Brazil, noted that Fangda also manufactures mining equipment that could be utilized at the Araxá site, located adjacent to CBMM’s mine. Additionally, Fangda will provide technical consultancy and support for the mine’s development and construction.
The deal took approximately four months to negotiate. “As a private company with significant niobium consumption, Fangda proved to be the ideal partner for this process,” said John Prineas, executive chairman of St George Mining.
Mr. Prineas noted that discussions with other potential buyers are ongoing, with plans to secure more niobium pre-sale agreements in the coming weeks. In addition to Fangda’s commitment, St George has a similar deal with SKI HongKong Limited (SKI), which also involves pre-purchasing 20% of the Araxá Project’s niobium output.
The pre-sale agreements come as a strategic solution for St George, which has faced difficulties raising funds.
Last week, St George announced commitments to raise A$20 million in a new share placement on the Sydney Stock Exchange. The funds will be used to pay for the Araxá Project.
The Araxá Project encompasses three licenses owned by Itafos Araxá Mineração e Fertilizantes, a subsidiary of Itafos. In August 2024, St George signed a binding agreement to acquire the project for $21 million plus a 10% equity stake in St George. Of the total, $10 million has already been paid, with $6 million due by May 2025 and the remainder by February 2026.
St George aims to produce 5,000 tonnes of niobium annually by 2027. For comparison, CBMM, the global leader in niobium production, processes 150,000 tonnes annually.
To advance the project, St George will conduct additional drilling to evaluate the mine’s resources, with only 10% of the area currently explored. The next phase involves establishing an industrial complex, estimated to cost R$2 billion. Financing for this phase will rely on loans and additional pre-sale agreements for niobium.
The primary product will be ferroniobium, although the company is also considering producing niobium oxide. The Araxá mine contains reserves of rare earth elements, which St George also plans to exploit.
Mr. Prineas emphasized that the company does not intend to compete directly with CBMM, which dominates 80% of the global niobium market and is controlled by the Moreira Salles family. “Our goal is to meet the demand currently unmet by CBMM and supply the market,” Mr. Prineas said.
Industry anticipates intensified U.S.-China trade tensions, but implications for Brazil remain unclear
01/20/2025
Four years after concluding his first term as president of the United States, Donald Trump has returned to office. Since his victory in November last year, Brazil’s agribusiness representatives have been evaluating the potential consequences of a renewed trade war between the U.S. and China.
In 2018, Trump imposed tariffs ranging from 10% to 50% on hundreds of Chinese imports, including agricultural and other products. Beijing retaliated by restricting imports of U.S. goods. These measures ultimately benefited certain segments of Brazilian agribusiness, such as the soybean sector, which gained market share in China due to the tariffs imposed on U.S. soybeans.
Experts consulted by Valor indicate that the direction of U.S. trade policy under Mr. Trump’s second term is still uncertain. “First, we need to see if Trump follows through on the 100 measures promised for inauguration day. Then, we need to analyze and understand those announcements. Without concrete details, it’s difficult to assess the direct impact on agribusiness,” said Marcello Brito, professor and technical coordinator at the Dom Cabral Agroenvironmental Foundation.
Despite the lack of clarity regarding Mr. Trump’s trade policies, Mr. Brito believes there will be no immediate disruption to the agricultural trade flow between Brazil and the U.S. In 2024, the U.S. was Brazil’s second-largest importer of agricultural products, with purchases rising 23% year-on-year to $12.1 billion, according to Brazil’s Ministry of Agriculture. Green coffee sales led the way, surging 67.6% to $765 million.
“It’s not feasible for the U.S. to suddenly impose tariffs on Brazilian coffee without having the capacity to replace what they might stop importing. Any tariff increases will be applied cautiously, targeting products with minimal impact on domestic demand,” Mr. Brito assessed.
The professor noted that a potential new trade war between the U.S. and China may have a limited effect on Brazil’s agricultural exports. “Last time, Brazilian agribusiness benefited because a large gap opened in the Chinese market,” Mr. Brito said. “But I don’t think that will happen again. There’s no longer room for a significant increase in export volumes.”
While the specifics of any new trade dispute remain unknown, global market conditions have shifted since 2018. For this reason, Mr. Brito expects limited repercussions from a more aggressive U.S. trade policy targeting Brazilian exports.
“In this second term, Trump faces a geopolitically different world. Beyond the lack of unoccupied market space, geopolitical disturbances like wars have already been factored into prices, and trade has adjusted accordingly,” he added.
Chris Trant, head of agriculture at U.S.-based consultancy HedgePoint Global Markets, suggested that Brazil will continue to dominate China’s grain supply. In 2023, China imported 105 million tonnes of soybeans, 75% of which came from Brazil.
“Trump’s proposed tariffs may create volatility in the grain market, but U.S. farmers are less dependent on China thanks to strong domestic demand. Meanwhile, China has reduced its reliance on U.S. soybeans by focusing on Brazil. A critical issue will be whether Trump reduces support for biofuel and renewable energy production,” Mr. Trant said.
The potential introduction of new policies favoring the oil industry, as seen during Mr. Trump’s first term, could impact the grain market, especially corn, noted Tiago Medeiros, Brazil director at U.K.-based trading firm Czarnikow. “Trump will aim for U.S. energy self-sufficiency, which means increasing not just oil exploration but also domestic ethanol production, particularly in California,” Mr. Medeiros said. In the U.S., corn is the primary feedstock for ethanol production.
*By Paulo Santos e Camila Souza Ramos — Campina Grande (PB), São Paulo
After wave of fake news, Lula administration withdraws regulation targeting transactions above R$5,000
01/17/2025
Facing a surge of misinformation about taxes on the popular Central Bank’s instant-payment system, known as Pix, the Lula administration revoked on Wednesday (15) a regulation from the Federal Revenue that had caused political embarrassment. The rule sought to increase oversight of monthly transfers exceeding R$5,000 made by individuals. In a damage-control effort, the government also issued a provisional presidential decree (MP) to reaffirm the free nature of Pix and equate the instant payment system to cash transactions.
The announcement came after President Lula summoned Finance Minister Fernando Haddad, Federal Revenue Secretary Robinson Barreirinhas, and Attorney General Jorge Messias to the Planalto Palace to address growing public dissatisfaction. Newly appointed Communications Minister Sidônio Palmeira also influenced the decision to revoke the rule.
“People distorted an act of the Federal Revenue,” Mr. Barreirinhas said. “We decided to revoke this measure. The rule turned into a weapon for criminals. The ‘Revenue’ will not tolerate its name being used for scams,” he added.
Mr. Haddad said the decision to issue an MP, emphasizing that the measure reinforces existing legislation ensuring Pix remains free. “Pix is protected by confidentiality, like any other payment method,” he said.
The MP will also guarantee that Pix payments are treated like cash, bank transfers, or checks, prohibiting “criminals” and businesses from charging fees for such transactions. “We’re ensuring by law that if Pix is available, buyers pay the same amount as they would with cash,” Mr. Haddad added.
As of the publication of this article, the measure had not yet been published in the “Official Gazette of the Union.”
The Finance Minister noted that the Central Bank, which created Pix, was consulted on the matter. He dismissed claims that a decline in Pix transactions in January was due to the misinformation campaign, attributing the drop to seasonal factors consistent with previous years.
The government’s U-turn followed widespread criticism and pressure from various sectors, including evangelical groups often critical of Lula administration.
Sources told Valor that pastors from different neo-pentecostal denominations contacted government intermediaries, warning that the controversy was reaching low-income communities, potentially eroding support for the Lula government.
The issue resonated with evangelicals partly because many churches rely on Pix for collecting tithes, the financial contributions made by congregants. In response, Mr. Lula’s aides worked with these influencers to mitigate the crisis’s impact.
Combating misinformation
Despite revoking the rule, the president and ministers discussed launching a new public campaign to counter misinformation about Pix. The effort may build on initiatives by Empresa Brasil de Comunicação (EBC) on social media.
During the announcement, Mr. Haddad criticized opposition figures and members of former President Jair Bolsonaro administration. “We revoked the rule to uproot this lie,” he said, referencing plans by former Finance Minister Paulo Guedes to propose a financial transaction tax, which never materialized.
Mr. Haddad also took aim at Senator Flávio Bolsonaro, who has faced allegations of embezzlement through kickback schemes. “The senator’s kickback schemes were uncovered because authorities flagged suspicious financial movements. Bolsonaro’s supporters can’t complain—they were caught by the Revenue,” Mr. Haddad said.
In response, Senator Bolsonaro issued a statement denying wrongdoing and criticizing the Lula administration, declaring, “I have a clean record.”
Attorney General Jorge Messias announced that he had directed the Federal Police to open an investigation to identify those behind the fake news campaign about Pix taxation. Mr. Messias also noted that authorities had detected “abusive practices in consumer relations” involving Pix and said the National Consumer Secretariat was being tasked with addressing potential violations.
Finally, the government plans to involve state governors in standardizing regulations related to Pix, aiming to prevent misuse and ensure consistency across the country.
*By Estevão Taiar, Renan Truffi e Fabio Murakawa – Valor — Brasília
Governors of Rio, Minas Gerais, and Rio Grande do Sul threaten to reject the program
01/17/2025
A day after President Lula signed into law the State Debt Payment Program (PROPAG) with key vetoes, tensions between the federal government and state administrations escalated on Wednesday (15). While the National Treasury defended the program, opposition governors sharply criticized the changes.
The harshest criticism came from governors Cláudio Castro (Rio de Janeiro), Romeu Zema (Minas Gerais), and Eduardo Leite (Rio Grande do Sul). Leading opposition states and some of Brazil’s largest debtors, these governors oversee administrations under the Fiscal Recovery Regime (RRF), established in 2017 to assist states in severe financial distress.
According to the presidency, Mr. Lula vetoed provisions that could impact the federal government’s primary fiscal balance. One of the vetoed measures would have allowed entities joining PROPAG to be exempt from meeting the targets and obligations of the Fiscal Recovery Regime. This veto was considered the most significant by the states.
Introduced by Senate President Rodrigo Pacheco and approved by Congress, PROPAG aims to renegotiate state debts with the federal government. The program allows payments over 30 years with real interest rates between 0% and 2% annually. The terms depend on asset transfers from states to the federal government, contributions to the Federative Equalization Fund, and investment commitments from state governments.
Governors now hope Congress will override the vetoes in the coming days. If lawmakers fail to restore the original provisions, governors have threatened not to participate in the debt renegotiation program.
States push back
Rio de Janeiro Governor Cláudio Castro said his state is evaluating whether to join PROPAG. He noted that Rio is reviewing its assets, including properties and credits, and exploring alternatives such as creating a real estate fund to address its nearly R$200 billion debt. “We’re conducting a thorough analysis to see how far Rio can go under this new reality without jeopardizing salaries, public accounts, or anything else,” Mr. Castro said during a press conference at the Guanabara Palace.
Mr. Castro described the vetoes as “disloyalty” and “100% political,” arguing they disadvantage states governed by Mr. Lula’s political opponents. “This isn’t a political war—it’s a federative issue. But I’m certain there’s a strong political component in the federal government’s stance,” he said.
Minas Gerais Governor Romeu Zema said his state, with debts of R$163 billion, will not join PROPAG if the vetoes remain. “We hope these vetoes are overturned. Otherwise, this plan won’t work—it’ll be worse than what we already have. If it remains as mutilated as it is, we won’t participate because it’s worse than the RRF,” Mr. Zema said. He also noted that he is coordinating with Governors Eduardo Leite, Cláudio Castro, and Ronaldo Caiado (Goiás) to lobby Congress to overturn the vetoes.
The National Treasury dismissed the governors’ criticisms, arguing that they do not reflect the approved legislation. National Treasury Secretary Rogério Ceron emphasized that states can remain in the RRF while joining PROPAG. Mr. Ceron estimated that the program would cost the federal government around R$20 billion if all states participate.
Despite the short-term fiscal impact, Mr. Ceron said the program provides long-term solutions for state debt, enabling resources to be redirected to areas like education through savings on interest payments.
He said that states remaining in the RRF while joining PROPAG would retain benefits such as federal guarantees for loans with private or multilateral institutions. However, they would continue to face strict spending limits tied to inflation. States leaving the RRF would lose federal guarantees but gain more flexibility with less restrictive spending rules.
“This program resolves debt issues for all states willing to join PROPAG. There might be short-term pressures for states leaving the RRF, but they have the option to stay and many have accumulated reserves to manage their obligations,” Mr. Ceron said.
Rio Grande do Sul’s Finance Secretary Pricilla Santana said the state will not join PROPAG due to Mr. Lula’s vetoes, citing increased fiscal burdens, especially after 2024’s devastating floods. “Rio Grande do Sul doesn’t have the economic or financial capacity to join PROPAG—it’s not in our interest,” Ms. Santana said.
She added, “My pragmatism dictates that I must address the state’s finances based on what is currently certain and concrete: Complementary Law 206 and the RRF. Politically, I know the governor will work hard to overturn the vetoes, and I hope for that outcome.”
*By Jéssica Sant’Ana, Guilherme Pimenta, Paula Martini, Victoria Netto e Cibelle Bouças — Brasília, Rio de Janeiro, and Belo Horizonte
In some areas, weather conditions may impact crop yields
01/15/2025
Prolonged dry spells in key soybean producing regions of southern Brazil are raising concerns among farmers about the performance of the 2024/25 harvest. While crops in Paraná are in their developmental stages, planting in Rio Grande do Sul is nearing completion amid rising temperatures that could surpass 40°C in the coming days.
In a crop monitoring bulletin released earlier this week, Brazil’s National Supply Company (CONAB) reported that soybean fields in Rio Grande do Sul are already feeling the impact of a drought lasting up to 40 days in some areas. In Paraná, dry conditions are affecting crops in their reproductive phase. Nevertheless, CONAB has so far maintained its forecast for the country’s total soybean harvest.
In Campo Mourão, northwest of Paraná state, farmer Wallace Lopes told Valor that his soybean fields have seen no rain for 20 days. “My average yield is 90 sacks per hectare, but I’m forecasting just 60 sacks this season. If it doesn’t rain soon, I think yields will drop to 30 sacks. The plants are stunted due to the heat and will likely lose productivity,” he said.
In Cascavel, western Paraná, where soybean cultivation covers nearly 100,000 hectares, the drought has already taken a toll, according to Paulo Cezar Vallini, director of the local rural union. He estimates a 10% drop in the harvest, which could reach up to 15% in some areas of the municipality. Initial projections put average productivity at 63 sacks per hectare.
Further west in Palotina, the lack of rain is also expected to impact yields, said Edmilson Zabott, president of the city’s rural union. “We’re facing a worrying situation with soybean crops. Farmers here initially expected yields of 70 to 75 sacks per hectare, but now we’ve adjusted that down to 50 to 55 sacks,” Mr. Zabott said.
He noted that rainfall stopped just before Christmas, a critical period for soybean crops requiring water for grain filling. “We didn’t get the regular rainfall we needed, and the heat has been unusually intense,” he said.
Despite farmers’ concerns, Carlos Hugo Godinho, an agronomist with Paraná’s Department of Rural Economics (DERAL), said it is still too early to assess potential losses in the state’s soybean production.
“The current conditions are considered very good overall. The drought’s effects don’t seem alarming for now, as crop maturation is generally uniform,” Mr. Godinho said. However, he acknowledged the situation could change, as widespread rainfall in the state is not expected until January 17.
The northern and western regions of Paraná, where temperatures are higher and rainfall scarce, remain the most concerning. “We’ll have a clearer picture later this week, and it’s possible the conditions recorded initially could worsen,” Mr. Godinho added.
In Rio Grande do Sul, insufficient soil moisture is delaying soybean planting. Rising temperatures are exacerbating the situation.
In areas such as the Western Border, northwest, and northern regions of the state, the lack of rain has stalled planting, which has reached 98% of the planned area. The state’s Technical Assistance and Rural Extension Company (EMATER/RS) has already noted losses in potential productivity.
“I’ve visited some parts of the state, and losses are evident in microregions, expanding with each rainless day. The combination of dry weather and high temperatures is affecting soil moisture, creating challenges even for irrigated areas,” said Alencar Rugeri, technical director of EMATER/RS.
However, Mr. Rugeri emphasized that these conditions are not uniform across the state. “In the Western border, some fields still show good potential. While some areas haven’t seen rain for 40 days, others received significant rainfall,” he said.
In Dom Pedrito, in the far south of the state, the lack of rain has not yet led to soybean losses, according to José Roberto Pires Weber, president of the local rural union. “We haven’t had rain for over 30 days. This could lead to productivity losses, but it’s premature to say for sure. There’s still time for recovery if it rains soon,” Mr. Weber noted.
Mr. Rugeri added that high temperatures are particularly detrimental to crops in the grain-filling stage, which accounts for 25% of the state’s soybean plantings. The productivity of the remaining 75% is still undetermined.
While weather forecasts predict continued heat, Mr. Rugeri urged caution before concluding whether the state’s projected harvest of 21.65 million tonnes will be achieved.
“We’re at a critical point for crop development. It’s impossible to determine the final size of the harvest now. While the outlook is challenging, there’s still room for improvement,” he said.
*By Paulo Santos e Carolina Mainardes — Campina Grande (PB), Ponta Grossa (PR)
State production contraction in November is the sharpest since june 2023, reports IBGE
01/15/2025
Industrial production in São Paulo declined by 4.7% in November compared to October, marking the most significant monthly drop since June 2023 (-5.4%). This downturn follows an accumulated gain of 3.4% over two consecutive months of growth, according to data from the Regional Monthly Industrial Survey (PIM Regional) by the Brazilian Institute of Geography and Statistics (IBGE).
São Paulo was one of nine locations out of 15 surveyed by IBGE that saw a reduction in industrial production in November. It was also the primary negative influence on the overall result, which fell by 0.6%.
According to IBGE, São Paulo’s results are linked to sectors such as oil products, food, motor vehicles, and chemical products. “These sectors were the main drivers of the state’s industrial dynamics,” says the survey analyst, Bernardo Almeida.
In comparison to November 2023, São Paulo’s industry shrank by 2.7%, while the national average increased by 1.7%. This was the first annual downturn, compared to the same month the previous year, since March 2024.
For the 12 months leading up to November, São Paulo’s industrial sector grew by 3%, matching the overall pace of Brazilian industry. From January to November 2024, São Paulo’s industry rose by 3.4%, slightly above the 3.2% growth of Brazilian industry.
With November’s performance, São Paulo’s industrial production level is 1.3% below its pre-pandemic level in February 2020, while Brazilian industry as a whole is 1.8% above that level.
A report from the Institute for Industrial Development Studies (Iedi) highlights the “industrial slowdown” in São Paulo. “The released data shows that São Paulo, which has the largest and most diverse industrial park in the country, was among the poorest performers.”
Among the nine locations with a drop in production from October to November, Espírito Santo experienced the most significant decline (-7.2%). This marks the second consecutive month of decline, with a cumulative loss of 8.4%, driven by the extractive and metallurgy sectors.
On the positive side, the highlights include increases in Pará (4.4%), Amazonas (2.7%), and Pernambuco (2.6%). In Pará’s industry, this is the second consecutive increase, with a cumulative gain of 12.8%. According to IBGE, this movement is primarily explained by the non-metallic mineral products sector.
Record debt issuance offsets a sluggish year for equity offerings and subdued M&A activity in 2024
01/15/2025
The robust growth in Brazil’s fixed-income market, particularly domestic debt issuances, provided much-needed relief to investment banks operating in the country. The segment accounted for nearly half of their total fees in 2024, marking a record year for corporate debt issuance as investors shifted toward fixed income amid high interest rates.
In contrast, revenue from equity-related activities plummeted again, hitting one of the lowest levels on record. This reflects a prolonged dry spell for equity offerings by Brazilian companies.
Data from consulting firm Dealogic, compiled for Valor, shows that revenue from core investment banking activities—including mergers and acquisitions, equity, fixed income, and syndicated loans—totaled R$4.4 billion in 2024, a 5% decline from an already weak 2023.
Fixed-income deals were the saving grace for investment banks in 2024, generating R$2.1 billion in revenue, the highest level ever for the segment. This marked a 60% increase from 2023, according to Dealogic. The surge was driven by a record R$608.1 billion in local corporate debt issuances between January and December, a 76% increase, according to newly released data from B3. International bond issuances also recovered, further boosting revenues.
Meanwhile, the equity market painted a starkly different picture. The IPO window for new companies on Brazil’s stock exchange has been closed for over three years, with no signs of reopening in 2025. Factors such as the new cycle of monetary tightening and market volatility weigh heavily. Domestically, investor risk aversion has increased following the government’s fiscal package, seen as insufficient. On the international front, uncertainty has grown due to Donald Trump’s return to the U.S. presidency, which has heightened expectations for a slower pace of interest rate cuts by the Federal Reserve.
Revenue from equity offerings, including block trades, totaled R$311.1 million in 2024, a 60% decline from R$829.6 million in 2023. This figure also represents just 7% of the R$4.5 billion generated in 2021, the last boom year for Brazil’s capital markets.
The largest equity offering of 2024—a secondary transaction tied to the privatization of water utility Sabesp—had little impact on bank revenues. Despite its size, the low fees associated with the deal meant minimal earnings for the financial institutions involved.
For 2025, investment bankers expect fixed-income issuance volumes to remain strong but less dynamic. With many companies having already accessed the market in 2024, the pipeline for new deals is not expected to be as robust.
Headwinds
In the M&A space, activity in 2024 showed signs of recovery but remained below historical averages. High interest rates and macroeconomic uncertainties could dampen enthusiasm for new transactions. However, deals involving energy and infrastructure assets stood out as exceptions, driving activity in these sectors.
Revenue from M&A deals totaled $296 million in 2024, a 25% drop compared to 2023. Many announced transactions have yet to be completed—several are still awaiting approval from Brazil’s antitrust regulator, CADE—delaying the recognition of associated revenues.
Large-scale M&A transactions involving foreign buyers and mergers between Brazilian companies seeking synergies and scale helped offset the weak equity market, said Roderick Greenlees, head of Itaú BBA’s global investment banking division.
Mr. Greenlees said Itaú closed 2024 with a strong pipeline, especially in energy, infrastructure, sanitation, retail, and consumer sectors. The bank has also expanded into sports and entertainment, industries gaining traction in global investment banking.
Bruno Amaral, head of M&A at BTG Pactual, described 2024’s transaction volume as “healthy given the circumstances,” with traditional sectors like energy and infrastructure driving activity. “Our pipeline for the year is stronger,” Mr. Amaral noted, though he cautioned that the current environment has extended the deal cycle to 18–24 months.
Fabio Nazari, head of equity at BTG Pactual, expressed optimism that a rally in the Ibovespa stock index to 140,000–145,000 points could unlock some follow-on equity offerings, boosting bank revenues.
Bruno Saraiva, co-head of Bank of America’s investment banking operations in Brazil, highlighted the resilience of the bank’s fixed-income and M&A businesses amid a challenging 2024. He noted that derivatives trading, not included in Dealogic’s data, also played a role in sustaining activity for the U.S. bank’s Brazilian unit.
“There is a lot of dialogue and activity in the M&A space this year,” Mr. Saraiva said. However, market volatility, including exchange rate fluctuations, could affect the timing of deal closures. In the equity market, Mr. Saraiva sees potential for follow-on offerings and block trades but little visibility for IPOs. Given current conditions, he anticipates another challenging year ahead.
For Erasmo Carlos Battistella, advances in public policy in the executive and legislative branches have made this a Brazilian national agenda, bringing together industry, agribusiness, environmental organizations and civil society.
01/13/2025
“The year 2024 marked one of the most important chapters in the history of Brazil’s energy transition,” says Erasmo Carlos Battistella, president of Be8, Brazil’s largest biodiesel producer. He is referring to the sanctioning of the Fuel of the Future program in October, recognized as a landmark for boosting biodiesel, ethanol, and new technological routes such as hydrotreated vegetable oil (HVO), sustainable aviation fuel (SAF), and biomethane.
Meanwhile, the approval of the Energy Transition Acceleration Program (Paten, in the Portuguese acronym); of Mover, aimed at supporting the decarbonization of Brazilian vehicles, technological development, and global competitiveness; of the National Sustainable Aviation Fuel Program (ProBioQAV); and of the Low Carbon Hydrogen Development Program (PHBC, in the Portuguese acronym) make up this backdrop for building clean, sustainable mobility. “Over the last year, we’ve seen a movement that has brought together industry, agribusiness, environmental organizations, and civil society and has been reflected in the unanimous approval of public policies for energy transition projects, which is a real Brazilian national agenda,” said Battistella.
The president of Be8 is also one of the leading characters in the pages of this story, having been involved in developing the biofuels industry for 20 years. “This is a new moment in the Brazilian economy, characterized by strong investments in the industrial park and by adding value to agribusiness, boosting the economy and green employment. The private sector is moving forward to make the energy transition a reality and turn Brazil into an international benchmark,” he says.
Investments
Even before Fuel of the Future was sanctioned, it was already possible to recognize concrete signs of a movement by the productive sector in pursuit of the Brazil’s energy transition. In 2024, the National Bank for Economic and Social Development (BNDES, in the Portuguese acronym) disbursed R$4.2 billion to the ethanol, biodiesel, and biomethane industries until November—the highest figure in the past 13 years. In a technical note, the Empresa de Pesquisa Energética (Energy Research Company or EPE) estimates that over R$1 trillion will be invested by 2034 in various technological routes.
The regulatory frameworks defined in the Fuel of the Future provide legal security and predictability for the production sector and will be the pillar for regaining confidence in the Brazilian energy market. The EPE itself has projected that the biodiesel sector will invest R$14.5 billion over the next ten years.
The decision by the National Energy Policy Council (CNPE, in the Portuguese acronym) to increase the biodiesel mandate from 12% to 14% in March 2024 and to 15% from March 2025 also indicated the resumption of public commitments to the decarbonization process and the goals defined by the Paris Agreement, with a direct impact on the reheating of this industry, which stumbled in previous years with the regression of the blend.
Important launches
Be8 was full of announcements of new developments in 2024, such as investments and product launches marked by innovation. Battistella points out that the company closed the year by announcing the acquisition of Biopar, which will allow it to expand its operations to the North, Northeast, and Midwest regions of Brazil. It also launched a biofuel that replaces 100% of fossil diesel, Be8 BeVant, a technological innovation that allows companies to significantly reduce greenhouse gas (GHG) emissions in their operations in the short term, meeting decarbonization targets.
Other news involved agribusiness. Battistella’s business group inaugurated a sustainable agricultural production model in Passo Fundo (RS), South of Brazil, which integrates high technologies with the exclusive use of biofuels, the Compostela Farm. A partnership with John Deere and SLC Máquinas which allows the field machinery to be fueled exclusively with Be8 BeVant.
At the last meeting of this forum, the Government vice-president and minister of Development, Industry, Trade and Services, Geraldo Alckmin, highlighted Mission 5 of New Industry Brazil (NIB). The plan aims to increase the use of biofuels and electric vehicles in the transportation energy matrix by 27% by 2026 and reach 59% by 2033.
To intensify the technological and sustainable use of Brazilian biodiversity, the growth targets are 10% by 2026 and 30% by 2033. Public and private investments aimed at optimizing energy efficiency will amount to R$ 468.38 billion. Of these funds, R$88.3 billion will come from public credit lines to promote innovation, exports, and productivity projects. So far, R$74.1 billion have already been contracted for 2023 and 2024, while the remaining R$14.2 billion will be available for 2025 and 2026.
Another piece of this roadmap was the Energy Transition Acceleration Program (Paten)—approved in December by the House of Representatives—which created the Green Fund. Managed by the BNDES, the fund will be supplied with tax credits held by companies with the government. The first format allows for tax transactions, i.e. the negotiation of tax debts with the Federal Government with a commitment to invest in sustainable projects, which will receive additional benefits. The other is to use the Green Fund as a guarantee to cover all or part of the financing risk, reducing interest rates and encouraging large-scale sustainability projects.
“Among the many signs pointing to the new year on the horizon in Brazil, the consolidation of the pillars of the energy transition were the most obvious,” explains Battistella. “I believe that we will see a fast response from the productive sector with investments that will boost the sustainable development of the Brazilian economy for the benefit of current and future generations,” he added.
Last year, federal government secured victories in most major cases heard in higher courts
01/13/2025
The federal government won the majority of its tax cases in Brazil’s higher courts in 2024, prevailing in 18 out of 23 significant disputes and avoiding potential losses of billions of reais. In just three cases, the combined impact was R$86.1 billion. However, the Supreme Court is still set to hear 27 additional cases, leaving the National Treasury exposed to a fiscal risk of at least R$698.7 billion.
Among the pending cases, two involve issues stemming from the 2017 STF decision on excluding the ICMS (Tax on the Circulation of Goods and Services) from the calculation base of PIS (Social Integration Program) and COFINS (Contribution for the Financing of Social Security) contributions, often referred to as the “case of the century.” These include the exclusion of ISS from the PIS/COFINS calculation base (Topic 118), where the Supreme Court plenary has already begun deliberations. Based on virtual session votes, a majority appears to favor taxpayers. Another closely watched case concerns the exclusion of PIS and COFINS from their own calculation bases (Topic 1067). Together, these cases carry a fiscal impact of R$101.1 billion.
The most financially significant case under review could cost the government R$325 billion. This dispute revolves around whether a supplementary law is required to levy PIS and COFINS on imports, which is currently done through an ordinary law, Law No. 10,865/2004, passed with a simple majority in Congress (Topic 79).
Another critical case challenges limits on tax deductions for education expenses under the income tax framework (ADI 4927), which could result in a R$115 billion loss for the federal government. Additionally, a case involving mining giant Vale addresses the use of international treaties to avoid double taxation of its foreign subsidiaries, with an estimated impact of R$22 billion.
The Vale case has seen divided opinions among justices, and the trial was paused after a request for review. The matter is scheduled to resume in the STF’s virtual plenary on February 7 (RE 870214). It remains a top priority for the Office of the Attorney General for the National Treasury (PGFN). Anelize Almeida, head of the PGFN, has personally met with all STF justices to discuss this case.
Another key issue involves the applicability of PIS and Cofins on financial revenues from technical reserves of insurance companies (Topic 1309). In June, Justice Dias Toffoli issued a preliminary injunction suspending the charges, a decision upheld in September by the Supreme Court’s First Panel. The court also recognized the general repercussion of the issue, with a potential fiscal impact of R$5.28 billion over five years. “This case currently has an unfavorable decision for the Treasury,” said Ms. Almeida, who plans to restructure her STF team this year.
Euclides Sigoli Junior has been appointed as the new general coordinator of the legal team, bringing experience from Brazil’s First Region. According to Ms. Almeida, Mr. Sigoli’s primary goals include integrating the STF team with other legal divisions and improving data transparency regarding cases and success probabilities. “I want to know how each Supreme Court justice votes based on a jurimetric analysis of prior decisions. For instance, in a specific case, what are the chances of us [PGFN] winning?” Ms. Almeida explained.
Most of the pending cases do not have fiscal impact estimates outlined in the 2025 Budget Guidelines Law (LDO). Data on the disputes were compiled by Machado Associados law firm at Valor’s request.
Key 2024 decisions
In 2024, taxpayers scored a R$6 billion victory in the STF, where justices ruled against taxing retirement and pension income sent to residents abroad (Topic 1174). Taxpayers also celebrated the reduction of penalties in administrative tax cases. The cap for qualified fines was lowered from 150% to 100%, with the higher cap now applicable only for repeat offenses.
For the government, the most significant win of 2024 involved the Special Regime of Reintegration of Tax Values for Exporting Companies (Reintegra), with a fiscal risk of R$49.9 billion. In October, the STF upheld the executive branch’s authority to freely adjust tax rebate rates under the program, which reimburses exporters for a portion of the tax burden unclaimed throughout the production chain (ADI 6040).
Another notable decision upheld the collection of PIS and COFINS on revenue from leasing movable and immovable property. Taxpayers had argued that federal taxes should not apply, as such leases do not constitute the sale of goods or the provision of services. The STF rejected this argument, preventing losses of R$36.2 billion for the federal government (Topics 630 and 684).
Most recently, the PGFN won a narrow 6-5 decision supporting the collection of social contributions on income earned from financial investments by closed supplementary pension funds (EFPCs) (Topic 1280).
Tax experts believe that some of the most significant cases in 2024 were decided by the Superior Court of Justice (STJ). These rulings were impactful due to their binding nature as repetitive appeals, establishing precedents for the judiciary, and for breaking with prior jurisprudence. One of the most critical decisions was the removal of limits on contributions paid by companies to the S System—entities like Sesc, Senai, Sesi, and Senac (Topic 1079).
The STJ’s First Section ruled that the calculation base for “third-party contributions” or “parafiscal contributions” should not be capped at 20 times the minimum wage (currently R$28,200). As a result, the tax burden, which can reach 5.8%, will now apply to companies’ entire payroll. Had the government lost the case, the estimated fiscal impact would have been R$11.7 billion. However, the case is still pending review by the Supreme Court.
For lawyer Renato Silveira of Machado Associados, the ruling has created uncertainty as the STJ excluded other contributions, such as those for INCRA (National Institute for Colonization and Agrarian Reform), from its scope. “We’ve seen varying decisions. Some courts apply the ruling consistently, while others deny similar modulation for other contributions. This inconsistency has caused significant legal uncertainty,” he said, adding that suspending the cases to resolve the issue would be a better solution.
For taxpayers, a notable victory came with the decision against taxing stock option plans (REsp 2069644 and REsp 2074564), said Ariane Guimarães, a lawyer at Mattos Filho. Another significant case involved the exclusion of ICMS-ST (substituted ICMS) from the PIS and COFINS calculation base, with an opinion and modulation issued in 2024 (REsp 1896678 and REsp 1958265). “It was determined that there is no need to demonstrate the economic impact on the substituted party, as it is already implied,” she said. “This ruling removed an obstacle that could have disadvantaged taxpayers under Article 166.”
She also highlighted the STF’s ruling on appeals regarding the automatic reversal of final tax decisions (“res judicata”) in cases where constitutional interpretations had changed (Topics 881 and 885). The STF accepted one of the companies’ arguments to remove penalties. Additionally, she pointed to a landmark decision on social security taxation of the one-third vacation bonus (Topic 985). “The vacation bonus case was one of the most emblematic, as the STF modulated its effects in favor of taxpayers due to the change in jurisprudence, considering that the STJ had ruled differently back in 2010,” she said.
Upcoming cases
Looking ahead to 2025, one of the most anticipated cases in the STJ concerns the taxation of presumed ICMS credits in the corporate income tax (IRPJ) and social contribution (CSLL) calculation bases. The case is currently being considered for classification as a repetitive appeal. A similar dispute is pending before the STF regarding PIS and COFINS (Topic 843).
Bruno Teixeira, a lawyer at TozziniFreire, said there is precedent in the Superior Court of Justice (STJ) regarding the inclusion of presumed ICMS credits in the IRPJ and CSLL calculation bases. While the precedent favors taxpayers, it is not classified as a repetitive appeal, and rulings on other tax benefits have not been as favorable. “It was thought that the issue was settled in the STJ, but significant controversy remains, especially after the amendment of Law No. 14,789 at the end of the year before last, which repealed Article 30,” Mr. Teixeira said.
Another important topic involves the authorization granted by the STJ and Supreme Federal Court (STF) for the federal government to file rescissory actions against taxpayer-friendly rulings related to the “case of the century.” These actions target decisions made between the original ruling on the merits in 2017 and the modulation of its effects in 2021. “Although the STJ and STF ruled positively for the government, the provision authorizing such actions is also under review at the STF,” Mr. Teixeira said, referencing Article 535 of the Civil Procedure Code, which is being challenged in the case (AR 2876). “If it is declared unconstitutional, the authorization granted by the courts will be nullified.”
The Office of the Attorney General for the National Treasury (PGFN) attributes the reduction in fiscal risk estimates in the Budget Guidelines Law (LDO) to the “strength of the legal arguments it defends in court.” In a statement, the agency said it aims to resolve disputes through consensual agreements, leveraging tax settlement programs such as the Comprehensive Transaction Program (PTI), which allows for agreements on 17 key issues. “We believe that negotiation and dialogue are essential tools for resolving conflicts and fostering a fairer and more transparent tax environment,” the PGFN said.
*By Marcela Villar e Flávia Maia — São Paulo, Brasília
Federal revenue in 2024 expected to be second-highest on record, aiding efforts to erase primary deficit
01/13/2025
Boosted by extraordinary payments from oil giant Petrobras and the Brazilian Development Bank (BNDES), Brazil’s federal revenue from dividends and profit-sharing rebounded in 2024, helping the government stay within its fiscal target range. Government projections indicate R$72.97 billion in dividends from state-owned enterprises (SOEs) last year, which, if confirmed, would mark the second-highest figure on record in nominal terms, trailing only 2022’s R$87 billion.
From January to October 2024, federal receipts totaled R$41.3 billion. While November and December figures have not yet been officially released, preliminary data from SOEs and public disclosures suggest the government is close to meeting its target. Treasury data through November, delayed by nearly three weeks, will be released on January 15, with full-year figures expected in February.
According to XP Investimentos, government revenue from dividends and profit-sharing reached R$72.38 billion in 2024, driven by significant year-end transfers from BNDES and Petrobras. BNDES told Valor it transferred R$5.8 billion in dividends to the federal government in November and an additional R$13.6 billion in December, while Petrobras contributed approximately R$9.7 billion during the same period.
Petrobras and BNDES accounted for the bulk of SOE dividend payments in 2024. Petrobras said it distributed R$29.7 billion to its controlling shareholder, while BNDES transferred R$29.5 billion. Together, the two state-owned companies represented 81% of the federal government’s dividend revenue. Banco do Brasil followed with R$7.5 billion (10%), and Caixa Econômica Federal contributed R$2.79 billion (3.8%). The remainder came from smaller state-owned enterprises.
After years of lower transfers, except in 2022, the upward trend in dividend payments provided critical support for primary fiscal results. These revenues, categorized as primary revenue, have become essential for the government’s effort to erase the primary deficit.
BNDES President Aloizio Mercadante said the bank increased dividend payments in 2024 to support fiscal results, while Petrobras approved extraordinary distributions from reserve accounts.
In a statement, BNDES confirmed it had “expanded dividend payments to contribute to fiscal efforts and economic stability,” while ensuring it could still invest in strategic sectors. Petrobras said “its distributions aligned with its corporate bylaws and shareholder remuneration policy”, which allows extraordinary payments as long as the company’s financial sustainability is preserved.
Economists are divided on whether the trend of high dividend payments will continue. Tiago Sbardelotto of XP Investimentos expects extraordinary transfers, particularly from Petrobras and BNDES, to remain a key strategy for boosting fiscal results amid challenges in increasing tax revenue through legislative changes. “It’s unlikely we’ll see dividend levels drop back to R$30 billion or R$40 billion in the coming years,” he said.
Felipe Salto, chief economist at Warren Investimentos, said BNDES’s payments are likely to remain elevated but cautioned against overreliance on Petrobras. “Petrobras’s payments depend on oil prices, so the government shouldn’t count on this revenue source for its fiscal recovery plans. BNDES, on the other hand, is tied to its operational policies, which suggest higher dividend payments as the bank increases disbursements,” Mr. Salto said.
Mr. Salto added that while dividend revenue is valuable, it should not form the backbone of fiscal policy. “This income is welcome but unpredictable. A sound fiscal strategy requires permanent measures to control spending and increase revenue,” he said.
Fiscal targets
Finance Minister Fernando Haddad said the government ended 2024 with a primary deficit of 0.1% of GDP, estimated at R$10 billion to R$15 billion depending on GDP calculations. This excludes extraordinary expenditures related to the state of Rio Grande do Sul.
Mr. Sbardelotto of XP warned that 2024’s results should be interpreted cautiously. “The fiscal target was only met because of significant extraordinary revenues, including dividends,” he said.
Banco do Brasil said its dividend payments complied with its “corporate bylaws, shareholder remuneration policy, and board decisions.” Caixa Econômica Federal noted that its 2024 dividend payments were related to 2023 results. “There was no dividend anticipation in 2024. We clarify that the amount paid in the 2024 fiscal year complies with Caixa’s bylaws.”
