Companies seek to pay dividends with redeemable preferred shares

Novo Mercado firms ask B3 stock exchange to ease rules amid push to preserve tax exemption

 

 

 

12/03/2025

Major publicly traded companies listed on Brazil’s Novo Mercado, the B3 segment with the highest corporate governance standards, are preparing to ask the Brazilian stock exchange for flexibility that would allow them to distribute dividends using redeemable preferred shares as a form of stock bonus.

This mechanism would enable companies to distribute dividends this year without an immediate cash outflow, allowing them to benefit from the income tax exemption on accumulated profits calculated through the end of the year.

Although the Senate’s Economic Affairs Committee (CAE) approved a bill on Tuesday (2) extending the deadline for calculating and paying such dividends through April of next year—aligning it with companies’ annual financial reporting—the search for tax-efficient payout strategies remains urgent.

The bill also introduced the concept of a “non-taxable profit reserve,” which would allow companies to distribute these earnings tax-free until 2028. This provision aims to give legal clarity to corporations, whose regulations require dividends to be paid within the same fiscal year in which they are declared.

Still, uncertainty remains over whether the Senate-approved text will survive unaltered, as the bill must return to the Lower House and then be signed into law. Tax experts recommend companies proceed with planning as though the original deadlines remain, to maximize the tax-exempt portion of retained earnings.

To that end, several companies are evaluating whether to distribute dividends using redeemable preferred shares. Under current rules, companies listed on the Novo Mercado are allowed to issue only common shares, which come with voting rights.

Temporary waiver

As a result, requests have begun arriving at B3 for a temporary waiver that would allow these companies—some of the country’s largest, with billions of reais in retained profits—to issue redeemable preferred shares for this specific purpose, without violating listing rules.

The Brazilian Association of Listed Companies (Abrasca) is leading this effort after being approached by member firms. In recent days, the association has surveyed companies to assess demand for such issuances, according to a source. Companies confirmed their interest on Tuesday, the person said.

B3 is expected to decide in the coming days whether to grant this flexibility, so companies can hold shareholder meetings before year-end. Brazilian corporate law requires a minimum 21-day notice to call such meetings.

Abrasca told its members the timeline is tight, as companies choosing this route must complete corporate approvals before year-end. In a letter reviewed by Valor, the association said B3 has shown a “willingness” to evaluate an “exceptional treatment with urgency.”

A person close to the matter said B3 is currently reviewing the request. Approval would depend on the condition that the “one share, one vote” principle is preserved, meaning the redeemable preferred shares must carry voting rights equivalent to common stock until they are redeemed. A decision is expected soon.

Pressure on currency

“Redeemable preferred shares have already been used by some private companies,” said Conrado Stievani, a capital markets partner at law firm BMA.

He noted that this strategy not only helps companies avoid draining cash or increasing debt but could also ease pressure on the exchange rate this month. That’s because a significant share of these companies’ stock is held by foreign investors, who would repatriate the funds if dividends were paid in cash.

By paying dividends in redeemable preferred shares, companies can stagger the redemption, essentially converting the shares to cash, over the coming years.

This approach has already been taken by Axia (formerly Eletrobras), which announced around R$40 billion in retained earnings this year and opted to pay shareholders in redeemable preferred shares. These can be redeemed in future years, without triggering income tax. Axia, currently listed on B3’s Level 1 governance segment, which allows preferred shares, plans to migrate to Novo Mercado.

Stievani added that his firm has seen this structure increasingly adopted by privately held companies. Publicly listed firms are also exploring other options, especially those with large foreign investor bases.

One such strategy is to launch follow-on offerings and extend dividend rights to new investors participating in the offering. “In those cases, the company aligns the right to receive dividends with the new shareholders,” he explained, noting that companies with strong stock performance are particularly interested.

He said the more conservative companies are likely to announce the dividend and complete the offering still this year, despite the shortened capital markets calendar in December. Others may announce now but execute the offering next year.

Erickson Oliveira, a partner at law firm Levy Salomão, said the pace of dividend announcements reflects a split between more conservative companies, with available cash, and others. “Our advice is that companies stick to their plans and act as if the law hasn’t changed, given the tight deadlines,” he said.

Thiago José da Silva, a corporate law partner at Pinheiro Neto Advogados, agreed. He recommends companies declare dividends on profits accumulated through the end of September, based on their third-quarter results, and pay them if cash is available. “That way, they protect as much of the retained earnings as possible,” he said.

For profits from the last quarter of the year, companies must wait until their annual financial statements are released next year. Silva said companies are exploring alternative solutions in cases where the profit reserve doesn’t match available cash

*By Fernanda Guimarães — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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Political rift laid bare as top lawmakers skip tax exemption ceremony

Lula, ministers seek to ease tensions after Lower House Speaker Hugo Motta and Senate President Davi Alcolumbre boycott event

 

 

 

11/27/2025 

The absence of Lower House Speaker Hugo Motta and Senate President Davi Alcolumbre from the ceremony enacting a personal income tax exemption bill exposed a widening political rift between the executive branch and Brazil’s Congress.

Despite the clear message behind the boycott, President Luiz Inácio Lula da Silva and his cabinet used the event at the presidential palace to downplay tensions, offering praise and conciliatory gestures to both congressional leaders.

In his speech, Lula avoided direct references but alluded to the situation, saying leaders must “learn how to talk” and “find the middle ground.” “No one has to be like the other. We just need to respect each other, learn to talk, and always find a middle ground that doesn’t serve one or the other, but serves everyone,” he said.

Institutional Relations Minister Gleisi Hoffmann, tasked with managing congressional relations, delivered the most direct message. She downplayed the absence, saying it “in no way overshadowed” their contributions.

“Political disputes and the defense of ideas are part of the process of winning over the majority of society,” Hoffmann said.

Finance Minister Fernando Haddad also weighed in, acknowledging the strain but stressing the importance of Congress in the tax reform. “Without the efforts of Motta and Alcolumbre, it would not have been possible to implement the income tax exemption for those earning up to R$5,000 starting next year,” he said.

The coordinated absence of both leaders reflects a renewed alliance between Motta and Alcolumbre, who had been at odds since the House passed a constitutional amendment limiting judicial action against lawmakers in September, a proposal unanimously rejected by the Senate a week later, angering Motta and other Lower House leaders.

Behind the snub

While their decision was aligned, Motta and Alcolumbre had separate reasons for skipping the event. Alcolumbre is at odds with Lula over his decision to nominate Jorge Messias, head of the Office of the Attorney General (AGU), to a seat on the Supreme Federal Court (STF). Alcolumbre made his dissatisfaction public and gave Messias only two weeks to lobby senators before his confirmation hearing scheduled for December 10.

Motta, on the other hand, is feuding with the Workers’ Party (PT), not Lula himself. He voiced discomfort over criticism from PT leader Lindbergh Farias after appointing lawmaker Guilherme Derrite to report on the controversial anti-gang bill. Motta felt the attacks on social media and in public statements were excessive.

Another reason Motta avoided the event, sources said, was a recent embarrassment when he was booed and heckled during a government ceremony on Teacher’s Day in Rio de Janeiro.

Spotlight shifts to political rivals

In the absence of the two congressional presidents, the spotlight fell on two political adversaries: Congressman Arthur Lira and Senator Renan Calheiros, the official rapporteurs of the income tax exemption bill.

Lira, Motta’s predecessor as speaker and now a key power broker, seized the moment. He offered praise for Lula, even hinting at a possible fourth term.

“It’s been an honor to work with Lula over these two years in an institutional, close, and correct relationship, always focused on ensuring balance in key votes for the country,” he said.

Lira also acknowledged Hoffmann and Haddad: “A special embrace to Minister Gleisi Hoffmann, my colleague in the Lower House, who has been doing a tough and thankless job coordinating this.”

Despite being longtime political rivals in the state of Alagoas, Lira and Renan’s presence on the same stage did not generate friction. To avoid tension, the presidential staff seated them on opposite ends of the stage—Renan at one end, Lira at the other.

In his speech, Renan criticized the country’s elite for resisting the tax cut. “It was pure terrorism from the privileged,” he said.

*By Renan Truffi, Sofia Aguiar, Giordanna Neves, Andrea Jubé, Murillo Camarotto and Beatriz Roscoe — Brasília

Source: Valor International

https://valorinternational.globo.com/

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Brazilian firms hit by 27% profit drop in Q3 amid cost pressures

Companies show resilience, but high interest rates, weak demand and stronger real took a toll

 

 

11/27/2025 

Publicly traded companies in Brazil showed operational resilience in the third quarter, posting results that exceeded analysts’ expectations despite headwinds such as slowing domestic consumption, persistently high interest rates, a stronger real, and lower international commodity prices.

A survey by Valor Data of 386 non-financial companies found that net revenue rose 6.2% in the quarter to R$1.04 trillion, while net income dropped 26.9% to R$46.5 billion, dragged down by a sharp increase in financial expenses.

The figures confirmed a continued deterioration in margins, mainly due to rising operating costs and expenses. Profit was also hurt by a 27.2% jump in financial expenses, as companies faced higher debt service costs with Brazil’s base interest rate Selic at 15%.

For analysts interviewed by Valor, the season turned out to be “better than feared.” “In the weeks leading up to earnings season, expectations were for weak results, but the numbers came in surprisingly strong,” said Fernando Ferreira, chief strategist at XP. Of the companies covered by the brokerage, 55% beat profit estimates and 39% exceeded revenue forecasts.

Daniel Gewehr, chief strategist at Itaú BBA, agreed, highlighting the companies’ operational health. “It wasn’t an excellent season, but it was better than expected given a tough comparison base,” he said. Still, he noted that operational gains were not enough to offset higher interest expenses.

“Companies were very resilient this quarter. There isn’t a widespread revenue slowdown, just some isolated cases,” said Aline Cardoso, head of equity research and strategy at Santander. “This was the quarter with the steepest year-on-year profit decline, but the trend should improve from now on as the interest rate differential narrows.”

Analysts pointed out that the average Selic rate in the third quarter was 15%, up from 10.75% a year earlier, which significantly increased borrowing costs, especially for more highly leveraged companies. “The market rewarded those companies that delivered stronger cash flow generation to absorb these impacts,” Gewehr said.

Sector highlights

Construction, telecommunications, and utilities were the top-performing sectors in the quarter, while commodity exporters, especially mining companies like Vale, also stood out. On the negative side, retailers (particularly in apparel and food) and healthcare companies disappointed, with Hapvida being a notable laggard.

Among companies focused on Brazil’s domestic market, the impact of slowing consumption was already visible. But analysts noted that operational adjustments made after the pandemic and more proactive management have helped companies remain operationally resilient with mostly solid cash generation.

Commodity exporters managed to maintain strong results despite macroeconomic pressures such as a stronger real—the average dollar exchange rate fell from R$5.55 to R$5.45 during the year—and declining prices for Brent crude and pulp. Iron ore, however, rose from $99.68 to $102.03 per tonne, explaining the good performance of producers in that segment.

Companies like Petrobras and Vale increased production volumes to offset negative indicators, such as lower investments in the case of the oil company and higher operating costs in the case of the miner. Analysts also noted that the real’s appreciation reduced the value of dollar-denominated debt, which helped ease pressure on balance sheets.

Post-earnings volatility

A striking feature of the quarter was the market’s strong reaction to earnings disappointments. Post-earnings volatility exceeded historical averages and heavily punished names like Hapvida and Natura.

“This is related to the growth of quant funds, which trade on trends and already account for 50% of daily trading volume on the stock exchange,” explained Ferreira of XP.

Cardoso of Santander added that the growing presence of foreign capital throughout the year—net inflows into B3 reached R$25.3 billion through October—often driven by algorithms and less familiar with local company fundamentals, tends to trigger rapid sell-offs in the face of negative events, amplifying post-result declines.

Looking ahead, analysts remain cautiously optimistic, with expected interest rate cuts seen as the main catalyst for profit recovery. They noted that the average interest rate in the fourth quarter of last year was already higher, which should reduce the year-over-year comparison of financial expenses.

Gewehr of Itaú BBA forecasts that earnings among domestically focused companies could rise by more than 20% next year, boosted by monetary easing, even if the economy slows and grows less than 2% in 2026. XP sees a trend of upward earnings revisions for 2025 and projects a 12% gain for the Ibovespa stock index next year.

* By Felipe Laurence — São Paulo

Source: Valor Internatonal

https://valorinternational.globo.com/

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Medical school programs face new wave of litigation in Brazil

With average monthly tuition at R$13,000, degree is grappling with rising student delinquency

 

 

11/25/2025 

Brazil’s Ministry of Education (MEC) has reviewed 97% of the lawsuits seeking authorization to open new medical school programs. However, a new wave of litigation is now preventing this long-running saga from coming to an end. This time, colleges whose requests were denied or only partially approved are going to court to overturn MEC decisions based on criteria established by the Federal Supreme Court (STF). There are at least 30 injunctions of this type.

So far, 4,354 medical school seats have been authorized through court-ordered analyses. That number may reach 4,689 once all cases are processed. For comparison, there are 6,200 seats accredited through the More Doctors Program (Rounds I and II), which has been the official channel for authorizing new medical programs since 2012.

“The new More Doctors call for proposals had to be suspended due to a new wave of litigation. We’ve been receiving new court orders challenging our decisions and directing us to revisit them,” said Marta Abramo, Secretary for Regulation and Oversight of Higher Education at MEC, during a seminar hosted on November 6 by the Rio de Janeiro State Association of Private Education Providers (SEMERJ).

The ministry temporarily suspended, for 120 days, the third More Doctors call to reassess the availability of beds within Brazil’s public healthcare system (SUS), since many of these inpatient slots have been taken up by medical courses created under provisional rulings. All medical students—whether enrolled at public or private institutions—are required to complete practical training within the public health system.

There are also medical programs operating without MEC accreditation, having been launched under provisional rulings authorizing their entrance exams.

“MEC representatives updated and clarified important points for educational leaders. There is a new environment for medical training in Brazil, which makes the topic highly relevant,” said SEMERJ President Claudia Romano.

The seminar also included representatives from the University of São Paulo’s School of Medicine, Instituto D’Or (the research arm of Rede D’Or hospital group), Estácio, and Afya, as well as Minister of Health Alexandre Padilha. They also discussed medical residencies—which are facing a shortage of positions—and the new exam that will assess newly graduated physicians.

By mid-last year, there were roughly 370 lawsuits seeking authorization for 60,000 new medical school seats. The Supreme Court issued rules to bring order to this demand, and 89 cases qualified to proceed.

According to the Medical Demographics in Brazil study by the University of São Paulo’s School of Medicine, there are nearly 51,000 medical school seats in 2025, 80% of them at private institutions. Five years ago—before litigation accelerated—that number was 38,800. The surge in lawsuits began in 2018, when the Michel Temer administration imposed a five-year moratorium on the creation of new medical programs.

In this environment of abundant seats, colleges are already facing issues with student delinquency—an unthinkable scenario until recently. Medical school has typically been the most attractive degree in higher education, given its low rates of late payments and dropouts and the high value of tuition.

A survey by Instituto Semesp and Principia Educação—a firm providing factoring of receivables in education—shows that medical school now ranks as the fourth program with the highest delinquency rate. The top three are law, nursing, and engineering, considering in-person programs.

“The litigation around new program authorizations, combined with incentives to attract students through scholarships, has completely changed the delinquency dynamics in medical education,” said Rodrigo Capelato, Semesp’s executive director.

“This shift reflects the increase in available seats. In the past, students didn’t fall behind on payments for fear of losing their spot, because many others wanted it,” said Newton Maia, founder and CEO of Principia.

The rise in medical school delinquency goes against the broader trend in the sector. Data from Instituto Semesp and Principia show that the overall indicator fell: in the first half of the year, the delinquency rate stood at 8.73%, a 1.9% improvement over the same period in 2024. The study considers payments more than 90 days overdue.

The main causes of delinquency are job loss or reduced income (62.8%), lack of financial planning (58.1%), rising household expenses (44.2%), health problems (32.6%), delayed wages or reduced family support (30.2%), and personal financing commitments such as car, home, or motorcycle loans (30.2%).

Many colleges—particularly those located in remote areas—are failing to fill classes even after multiple call-back rounds. In 2014, the applicant-to-seat ratio at private institutions was 27 to 1. In 2024, that ratio fell to 7.4 applicants per seat, according to the National Institute for Educational Studies and Research (INEP), an MEC agency.

According to Maia of Principia, in other degree programs, it is common for students to skip paying for a semester and then request a transfer at re-enrollment time. But in medical school, this “modus operandi” is more difficult because tuition is so high. The average monthly tuition is R$13,000. “If a student goes two or three months without paying, the debt becomes very large. It’s a complex scenario for the institutions as well,” he said.

Principia does not provide factoring of receivables for medical programs due to the high tuition amounts. Maia noted that it would require a different model to calculate default risk.

The Brazilian Association of Higher Education Institutions (ABMES) stated, in a press release, that when the Supreme Court ruled on Declaratory Action of Constitutionality (ADC) 81, the understanding was that case analyses would follow previously established criteria, especially those outlined in the More Doctors program. “MEC’s Seres Administrative Rule No. 531/2023 introduced new parameters, such as regional indicators and population thresholds, which had not been used previously in authorization procedures, including those from More Doctors calls.”

The association added that “the programs covered under ADC 81 were evaluated by INEP following the official quality and infrastructure criteria established by law. In this context, some institutions have turned to the courts to ensure that their cases are reviewed under the criteria in effect at the time of the STF decision, safeguarding their legal certainty.”

*By Beth Koike — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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Brazil’s rare earths attract Western interest

Five companies announce financing, planned funding, or strategic deals amid global race for critical minerals

 

 

 

11/25/2025 

Western countries have deepened their engagement with companies developing Brazilian rare earth mining projects, a group of elements now central to tensions between the U.S. and China. At least five companies with projects in Goiás, Minas Gerais, and Bahia have recently announced financing, intended financing, or strategic agreements with development lenders and firms from the U.S. and other countries, including Canada and France. At the same time, sources consulted by Valor describe efforts to attract investment and strengthen Brazil’s domestic supply chain.

The movement comes as Brazil’s rare earth reserves draw attention from the U.S. following the tariff war launched by Washington, which turned the group of 17 mineral elements into part of Brazil’s commercial bargaining strategy to reduce tariffs.

Rare earths are a group of chemical elements strategic for the energy transition and defense. They are used in high-tech industries, from wind turbine production to batteries, including those for hybrid and electric vehicles.

In negotiations between China and the U.S. after the tariff war launched earlier this year by President Donald Trump, rare earths are a central point because China holds the world’s largest reserves. The country also dominates nearly the entire supply chain, accounting for 69% of global production and 91% of refining.

China restricted U.S. access to its rare earths in retaliation for tariffs imposed by the Trump administration. More recently, U.S. Treasury Secretary Scott Bessent said he expects an agreement with China on the elements to be concluded soon.

U.S. interest in Brazil’s rare earth reserves stems from the fact that they are the largest outside China and could help reduce U.S. dependence. But Brazil currently has only one commercially operating mine, Serra Verde Pesquisa e Mineração (SVPM), in Goiás. And last year the country accounted for less than 1% of global production.

Seeking international partners in the mining sector is natural, said Ana Paula Repezza, business director at the Brazilian Trade and Investment Promotion Agency (ApexBrasil). She participated this month in an event organized by the European Commission in Brussels, where the agency sought European investment for rare earths and other critical minerals.

“The mineral chain is naturally globalized and, China aside, I don’t think any country in the world can be self-sufficient in capital and technology for exploration and processing along the entire chain,” she said.

Repezza added that foreign investment becomes a viable alternative for projects in pre-operational stages to accelerate development and help reduce risk. “Mining is a very high-risk activity, and the more partners and investors you have, the better,” she said.

Interest has increased due to growing awareness of the importance of critical minerals for the energy transition and recent geopolitical tensions between the U.S. and China over American access to Chinese rare earths.

SVPM secured up to $465 million in financing in August from the U.S. International Development Finance Corporation (DFC) to help expand production of heavy rare earth metals, according to the Financial Times.

Canada’s Aclara Resources, which has a pre-operational project in Goiás, announced in September that it received a commitment of up to $5 million from the DFC for a feasibility study.

Australia’s Viridis Mining and Minerals, with a pre-operational project in Minas Gerais, said on Tuesday (18) that it received a letter of interest from Export Development Canada (EDC) for early support of up to $100 million in debt financing. According to the company, it also received a nonbinding support letter on December 10 from France’s export credit agency confirming eligibility for financing.

In the realm of agreements, goals vary from offtake contracts to future processing and refining. Australia’s St. George Mining, which has a pre-operational niobium and rare earths project in Minas Gerais, announced in September a memorandum of understanding with REAlloys, a major supplier of magnets to the U.S. defense and technology industry, for a potential long-term offtake of up to 40% of its rare earth output.

Australia’s Brazilian Rare Earths (BRE), with a pre-operational project in Bahia, announced last month an agreement with France’s Carester, a specialist in rare earth separation and refining, for a 10-year initial offtake of heavy metals. The French company will also provide services for the development of BRE’s separation refinery planned for the Camaçari Petrochemical Complex near Salvador.

For Elaine Santos, a researcher at Portugal’s National Laboratory of Energy and Geology (LNEG), the relationships Western countries are forging with these Brazilian projects signal an attempt to reorganize the geopolitics of the rare earth supply chain. “It indicates that the U.S. and its allies are trying to reduce dependence on China, which dominates the critical stages of separation, refining and permanent magnet production,” she said.

A specialist in the sociology of energy and strategic mineral resources with postdoctoral research at the University of São Paulo’s Institute of Advanced Studies, she said the dynamic also highlights Brazil’s vulnerability. Despite holding strategic resources—most of which are still only resources, not reserves—Brazil does not control strategic stages of the supply chain.

“It is natural that external actors move early to secure positions from the outset,” she said. “There is clearly a push to secure access to rare earths from the pre-operational phase. Given Brazil’s significant resources, the country has the geological potential to be a strategic player in a market that will only grow,” she added.

The risk, she warned, is that Brazil repeats its “historical trajectory” and stays limited to exporting critical raw materials while other countries consolidate technology, metallization and component production.

But ApexBrasil is working to prevent that, according to Repezza. At the Brussels conference, attracting investment for stages beyond extraction, such as processing and downstream manufacturing, was one of the agency’s main goals. To promote interaction with investors, the agenda included presenting Brazil-based projects to development institutions and public and private banks. Projects by Meteoric, Aclara and St. George, along with others focused on minerals such as silica and graphite, were among them.

“Apex’s strategy for attracting investment in critical minerals is directly linked to the New Industry Brazil program, whose pillars include strengthening the mineral chain,” Repezza said. “The aim is to have as many links in the chain as possible operating within Brazilian territory.”

The proposed National Policy for Critical and Strategic Minerals, now moving through Congress and intended to define the policy’s principles, was also presented by the Ministry of Mines and Energy during ApexBrasil’s meetings in Europe.

“We are revising our regulatory framework for critical minerals mining to make the exploration licensing process even more investor-friendly, which is important news for foreign investors,” she said.

Bryan Harris, managing partner at Sabio, a consultancy focused on Latin America, said the West has recognized Brazil as an “excellent” potential partner. “Western nations have finally realized that they must diversify their supply of critical minerals, and quickly.”

He said the growing engagement with Brazilian projects shows how seriously these countries are treating the issue. Developing rare earth supply chains outside China will take years, require deep reforms and involve complex coordination among countries, he added. “But the fact that money is already beginning to flow shows that this has become a geopolitical and industrial priority for Western nations.”

Goiás recently signed memorandums of understanding with Japan’s Organization for Metals and Energy Security (Jogmec) and with the U.S. State Department’s Bureau of Economic, Energy and Business Affairs to advance rare earth development in the state, according to Adriano da Rocha Lima, Goiás’s secretary-general of Government.

With Japan, the state hopes to attract investment to move projects further along the processing chain. With the U.S., the goal is technological cooperation and potential knowledge exchange.

“It is still an initial outline, meant to establish a basis for more detailed discussions, which is what is happening now in both cases. We are moving into the phase of defining objectives, targets and financial matters. Discussions with Japan are more advanced, and yes, there is a prospect of financial investment, but no amount has been set,” Rocha Lima said.

The state also enacted a law in August creating the Goiás Authority for Critical Minerals (Amic-GO) and defining strategic minerals, including rare earths, niobium, nickel, copper and titanium. The authority will coordinate development of a state policy for critical minerals and establish a state fund to support the sector.

“A bill is being discussed in Congress, but we moved ahead and passed a state law,” he said. “It sets out measures to give the state sovereignty to use its resources in the way most advantageous to Goiás, so we do not simply export raw ore without adding value.”

*By Michel Esquer — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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Brazilian companies rush to adapt to dividend tax change

Firms call shareholder meetings to approve payouts before new 10% levy

 

 

 

11/25/2025 

Awaiting presidential approval from Luiz Inácio Lula da Silva, Bill 1087 of 2025 has prompted publicly traded companies in Brazil to move quickly to adapt to the upcoming 10% tax on profits and dividends outlined in the legislation.

In a race against time, companies are calling shareholder meetings to approve the distribution of profits earned through December 31. Under the bill, earnings recognized by the end of 2025 will remain tax-free, provided the distribution is approved this year.

Uncertainty surrounding the bill, which may still be altered by presidential vetoes, was evident during recent earnings calls for the third quarter. Companies such as Caixa Seguridade, Direcional, Mills, and Unipar told analysts they are still evaluating different options and have yet to make final decisions on how to proceed.

Tax experts report a surge in queries, noting that the bill contains provisions that clash with Brazil’s corporate law. “Companies are either going to end up in conflict with the CVM [Securities and Exchange Commission] or the tax authorities,” said Rodrigo Maito, tax partner at law firm Dias Carneiro Advogados. “There’s a complete mismatch between the approved bill and corporate law.”

While the Corporate Law (Lei das S.A.) requires dividends to be paid within 60 days of the decision in the same fiscal year, the bill allows profits and dividends recognized through the end of 2025 to be paid out as late as 2028.

The December 31 deadline to approve payouts from “past profits” is expected to trigger a rush to close interim financial statements, since full audited results for the fourth quarter will only be released next year. “This creates an incompatibility for corporations,” Maito noted.

Different paths

On an earnings call, Ricardo Gontijo, CEO of homebuilder Direcional, said the company is “still evaluating what can be done” to minimize the impact on shareholders. However, he noted that the company is well positioned, given its cash and leverage levels. “We’re looking at what’s feasible while maintaining our conservative and disciplined approach,” he said.

Mills, a machinery and equipment rental firm, is also assessing alternatives to “ensure the best return for shareholders,” said CFO Renata Vaz, though she acknowledged a strategy has not yet been finalized.

At Plano&Plano, the change in tax rules “pushes the company to try to maximize dividends for shareholders,” said CFO João Luis Ramos Hopp. But he noted that the decision depends on factors such as the company’s growth appetite and compliance with debt covenants.

Mahle Metal Leve has already decided not to distribute dividends early, citing the financial cost. “We’ve studied the topic, including the investor base,” said CFO Claudio César Braga. “What I can say is that if the law stays as it is, we don’t intend to advance dividends.”

Porto’s vice president of finance, Celso Damadi, told analysts the insurer is also monitoring possible changes to the bill. “We’ll wait to see how it turns out before deciding,” he said, adding that paying additional dividends in 2025 is not in the company’s plans. “We expect to distribute 50% [of profit] this year. In the coming years, given our cash generation, there are some possibilities,” he said.

In late October, Vulcabras’s board approved a capital increase of up to R$597.6 million, to be allocated to the company’s capital account and capital reserves via share subscription premiums.

“We’re calling a capital increase and allocating R$598 million as part of tax planning in anticipation of the tax reform that will likely tax dividends,” said CFO Wagner Dantas at the time. “It’s a way to favor shareholders through tax strategy without placing unnecessary leverage on Vulcabras’s balance sheet.”

Debt on the table

Tax attorney Alamy Candido of Candido Martins Cukier said the topic has dominated legal work this month. “Everything we’re doing is focused on this,” he said.

He noted that options for adapting to the new tax regime are limited. One approach is capitalization: by using profit reserves to increase capital, companies can issue bonus shares to existing shareholders.

This is an internal accounting maneuver, where the new shares are distributed at no cost to shareholders. “But it’s not so simple for companies with complex ownership structures,” he said.

Companies with profits and sufficient cash on hand may simply opt to pay out dividends. Others lacking the resources might resort to borrowing, which could lead to increased demand for financing, though this may be constrained by high interest rates.

An intermediate strategy would be to reclassify a portion of equity as liabilities on the balance sheet, essentially recognizing a future obligation to shareholders without deciding yet how the funds will be used. “Everyone’s drafting minutes and calling meetings,” said Maito.

One lingering source of uncertainty, Candido added, is the possibility of President Lula vetoing the provision allowing payments through 2028. In the event of a veto, there are two possible interpretations: either companies could pay earnings from 2025 whenever they choose, or they would be required to pay by the end of this year.

“It would be better to enact the bill as it is,” Candido said. “We’ve already had a lot of discussions. If the president vetoes it, there’ll be a rush to distribute dividends and growing discomfort in the market.”

(Ana Luiza de Carvalho contributed reporting.)

* By Rodrigo Carro and Rita Azevedo — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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The night COP30 nearly collapsed

Belém summit could not deliver a roadmap to end fossil-fuel dependence, but its outcomes may shape climate politics for years

 

 

11/24/2025 

Like the historic United Nations Conference on Environment and Development in Rio de Janeiro in 1992, which led to the adoption of three environmental conventions addressing climate change, biodiversity loss, and desertification, COP30 will have a lasting impact. The first UN climate conference ever held in the Amazon rainforest—and the first at a moment when major ecosystems are nearing irreversible tipping points—was also the first to confront the fossil-fuel problem head-on and attempt to propose a way out: a global roadmap to phase out oil, gas, and coal. That effort ultimately failed, but after COP30 it will be hard for governments to speak only about the symptoms of climate breakdown.

COP30 nearly fell apart because of the ambition behind the proposal. On Wednesday night, in the final stretch of negotiations, shortly after President Lula and Environment Minister Marina Silva argued that the conference needed to create a mandate—a task force or any mechanism capable of planting the seeds for two roadmaps, one for ending fossil fuels and another for ending deforestation—the talks hit their most dramatic moment. Lula had met with representatives from key countries such as Saudi Arabia, China, and Egypt to discuss the possibility of mentioning fossil fuels directly in the negotiating text.

That move triggered a forceful reaction from a coalition of 82 countries. China, Egypt, and Saudi Arabia were joined by dozens of others—including India, Indonesia, Russia, Uganda, the United Arab Emirates, and Venezuela—in demanding an emergency meeting with COP30 President André Corrêa do Lago. They threatened to bring down the entire “mutirão” process if the next draft text mentioned fossil fuels at all. The Arab group, representing 22 countries including Saudi Arabia, went further: if any COP30 decision referenced fossil fuels, they warned, the entire conference would collapse.

On Thursday, Brazilian diplomats began drafting a new text to bring the process back on track. Then a fire broke out in the Blue Zone facilities. Once safety was restored, negotiators resumed work, producing pre-dawn drafts stripped of any reference to fossil fuels or roadmaps. It became clear that it was impossible to face the monster with only a few warriors on board.

Instead, the strategy shifted to securing outcomes that could resonate in the future. The “mutirão” text includes a strong affirmation of multilateralism and states unequivocally that the energy transition is irreversible—a unified message from 194 countries to U.S. President Donald Trump. In the fragmented geopolitical landscape of 2025, such consensus is far from trivial. Another important step: for the first time, there is a formal decision to move the climate regime from negotiation to implementation, acknowledging the urgency of the crisis and the need to accelerate action and cooperation.

The conference’s main deliverable is a global implementation accelerator, modeled on the existing action agenda. It is expected to serve as a platform to channel solutions and speed up the transition, buying time in the climate fight by cutting methane emissions and boosting carbon-removal initiatives such as forest restoration. The accelerator is also meant to trigger what negotiators call “positive tipping points,” cascading effects in which climate solutions reinforce each other. The presidents of COP30 and COP31 will guide how the mechanism will operate.

Another outcome was the decision to triple adaptation finance. Brazil’s presidency had to negotiate with the EU, which resisted making new commitments on its own. The compromise shifted the target year from 2030 to 2035 and stated that the $120 billion pledged by developed countries for developing nations would come from all sources.

COP30 also established a just-transition mechanism, a gender action plan, and global adaptation goals, although these will continue to be refined. Here, Brazil’s presidency faced an unexpected challenge: countries such as Colombia and Panama objected to the indicators for measuring adaptation progress, creating tension in the plenary. The dispute was resolved on the spot, but it set a troubling precedent. Colombia, insisting on referencing fossil fuels, threatened to block the texts. At a critical moment, Colombia and Panama demanded that no delegation ever be ignored again. The Saudi delegation immediately backed the idea of giving any country the power to veto decisions, a precedent that many fear could undermine the entire climate regime.

*By Daniela Chiaretti — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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Critical minerals industry at odds over incentives

Government, private sector, and experts discuss whether such promising market really requires any incentives

 

 

11/24/2025

As Brazil faces a historic opportunity to transform its reserves of critical minerals, strategic minerals, and rare earths into a high-value industry, the government, the productive sector, and specialists are still debating how to unlock this chain. Some defend the implementation of specific incentives to offset the high costs and long investment-return cycles, while others argue that global scarcity and strong demand already give the country sufficient leverage to negotiate local production without necessarily relying on broad subsidies. The consensus, however, is that Brazil now holds “bargaining power” to carve out space in this market.

This diagnosis comes amid growing recognition that the energy transition and geopolitical shifts have, for the first time, created an environment in which countries possessing these minerals can exercise real leverage over global supply chains. The combination of structurally rising demand and efforts by the U.S. and Europe to reduce dependence on China has opened an unprecedented window for Brazil to use its geological advantages as a platform for industrialization rather than merely supplying raw materials.

Behind the scenes, government officials say that in the case of critical minerals and rare earths, U.S. interest is focused on securing raw materials with no commitment to local value-added stage, something Brazil does not intend to accept. Some insiders also estimate that a more robust national proposal for the sector will only advance after the 2026 electoral cycle. The creation of an incentive policy remains a point of contention.

The interim president of the Brazilian Geological Survey (SGB), Valdir Silveira, says Brazil produces more than 90 mineral goods demanded worldwide but must recognize this window of opportunity and decide what type of mineral industry it wants to develop: extract and export raw materials as is done today; export only what exceeds domestic industry needs; or fully verticalize production.

According to him, the current trend is to sell raw materials to other countries, but he believes the intermediate option is the most suitable for now, as it fosters supply-chain development while generating trade surpluses, jobs, and income.

Starting from this approach, he says, it would later be possible to develop the entire chain and offer finished products. However, he stresses that beyond the materials themselves, Brazil will also need, and is in a position, to negotiate alongside other nations, since most technologies are dominated by foreign countries. “We must use mineral goods as bargaining chips. I supply them, but in return, technology must be brought in for developing the chain. That would be the most appropriate path.”

Echoing this view, Jorge Arbache, a economics professor at the University of Brasília (UnB), also highlights the unprecedented bargaining power of countries that hold these resources. He says Brazil, with strong potential and only 27% of its territory prospected, can condition access to deposits on the gradual addition of value within its borders, reducing reliance on raw-material exports.

“This bargaining power is increasingly visible and will become even more so in the coming years and decades. There is no reason for the government, Congress, and other leaders not to discuss an agenda that is entirely reasonable and far from new,” he told Valor.

According to Arbache, subsidies may accelerate certain processes in some chains but are not always essential, especially for highly attractive minerals. For this reason, such incentives should not be treated generically, he says. The greater the strategic value of the input and the fewer the alternative suppliers, the lower the need for government incentives.

He notes that projects involving critical minerals and rare earths tend to be profitable despite exploration risks, since expectations of strong price appreciation increase potential returns and justify long-term investments. In such cases, investors, and even governments like that of the U.S., are more willing to assume risks and pay premiums to secure access to reserves.

Brazil’s main gap today, according to Arbache, is the lack of a national strategy for mineral policy, one capable of distinguishing critical from strategic minerals and guiding decisions according to national interests. Each supply chain has its own dynamics and requires specific policies. “For example, demand for lithium is projected to grow significantly over the coming years and decades. We need to understand today’s nuances. What we need now is an intelligent, well-informed, medium- and long-term strategy,” he explains.

The debate is also gaining traction in Congress. In the Chamber of Deputies, congressman Arnaldo Jardim (Citizenship of São Paulo) is the rapporteur for a bill authored by deputy Zé Silva (Solidarity of Minas Gerais) that defines criteria for prioritizing minerals. The proposal foresees tax and regulatory incentives to attract investments and creates the Committee on Critical and Strategic Minerals (CMCE). The most sensitive point, which still is under negotiation, involves the chapter on tax incentives, which depends on discussions with the Ministry of Finance.

“We will set clear guidance in the legislation so that Brazil is not merely an exporter of commodities, but develops beneficiation and even transformation—higher stages in the mineral value-added process,” Jardim told Valor.

He says the bill will establish processing levels that scale up support as companies expand their activities domestically. In other words, the greater the value added domestically, the greater the incentive.

By Giordanna Neves and Marlla Sabino — Brasília

Source: Valor International

https://valorinternational.globo.com/

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War halts FIOL and completion of section delayed until 2031

The railway line crossing Bahia faces three stages of structural work; progress slowed by the impact of Russia’s invasion of Ukraine

 

 

11/24/2025 

Even from 18,000 kilometers away, the war between Russia and Ukraine has stalled construction of the West-East Integration Railway (FIOL) in Bahia. In April, Bahia Mineração (Bamin)—the company responsible for building the line—suspended work on Section 1, which connects Caetité to Ilhéus. The company, controlled by the Eurasian Resources Group (ERG) and headquartered in Kazakhstan, has been heavily affected by the war’s economic fallout.

“Unfortunately, Bamin faced a serious problem due to the war and ran out of resources to carry out [FIOL 1]. The government is treating this matter as a priority, and I believe it will be resolved,” said Jorge Bastos, president of Infra S.A., at a Valor event in late October.

Bamin declined to comment. However, at the end of October, company president Eduardo Ledsham addressed the issue during the opening of Exposibram, a mining congress held in Salvador. He confirmed that the company had been hit by the economic repercussions of the conflict and has since been seeking ways to raise the R$5.7 billion required to resume construction.

“We are working with three concrete proposals [from potential investors], all interested in an integrated project—the mine, railway, and port,” said Mr. Ledsham, noting that about R$4.8 billion is already secured through federal government credit lines. The remaining funds are expected to come from a new partner in the venture.

The linchpin of the plan is the completion of FIOL 1, which, although currently suspended, is 62% complete, according to Mr. Ledsham. The new investor should be confirmed by early next year. However, the partnership’s restructuring will require renegotiating the concession contract, as the company has requested an extension of the completion deadline from 2027 to 2031. “It’s a natural process. A project of this scale demands adjustments to timelines and responsibilities, always in dialogue with the Ministry of Transport and ANTT [National Land Transport Agency],” said the executive.

Both Bamin and the federal government view the integration of rail logistics, agribusiness, and mining as key to the Northeast’s economic transformation, linking the railway to other logistics corridors. Alongside FIOL, the Porto Sul project in Ilhéus, still on the drawing board, is seen as a strategic hub that could reduce freight costs by up to 40%, according to Mr. Ledsham’s estimates.

Bamin owns the Pedra de Ferro mine in Caetité, which has an annual production capacity of up to 2 million tonnes of high-grade iron ore (65% concentration)—a level that draws intense interest from international buyers. However, the company’s ability to export depends on the completion of the FIOL railway, the essential link between the mine and export terminals.

According to Infra S.A. president Jorge Bastos, completing FIOL is strategically important because it connects mineral and agricultural production to the port system. “FIOL 2 [Guanambi-Caetité] is now in full swing. We’ve resolved most of the bottlenecks and are putting nearly all sections out to tender to complete construction as quickly as possible,” Mr. Bastos said.

Despite this optimism, an audit by the Federal Accounting Court (TCU) has identified “significant delays” in project execution. “After nine months of work—out of a total contract term of 26 months—only 3% has been completed, with no executive project approved and no construction stages initiated. This represents delays of nine months for design and four months for construction,” the court reported in October.

The TCU cautioned Infra S.A. that failing to take action against contractors who are not meeting deadlines or contractual obligations could constitute an oversight by the agency itself. However, it also recommended that each case be assessed individually. Currently, half of the 485 kilometers that make up FIOL 2 already have tracks installed.

Meanwhile, FIOL 3, covering 840 kilometers between Mara Rosa (Goiás) and Correntina (Bahia), remains in the planning phase. All FIOL sections are part of the East-West Railway Corridor, a project deemed strategic by the Ministry of Transport. The plan is to link FIOL with the Midwest Integration Railway (FICO) to create a logistics corridor for grain and ethanol transport from the Midwest to the Northeast and to international markets.

The Ministry of Transport expects to launch the bidding process for the corridor’s concession in the first half of 2026.

*By Marina Lang — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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