Politicization of Banco Master case raises IMF concerns

Perception of meddling may lead International Monetary Fund and World Bank to downgrade Brazil’s financial soundness

 

 

 

12/30/2025 

Actions by the Supreme Court and the Federal Court of Accounts (TCU), Brazil’s public spending watchdog, to review the liquidation process of Banco Master are expected to negatively affect the International Monetary Fund (IMF) and the World Bank’s assessment of the Brazilian financial system’s soundness.

According to sources familiar with the technical consultations held in Brasília and Washington, the episode was raised during the visit by IMF and World Bank delegations to Brazil in mid-December, as part of the country’s Financial Sector Assessment Program (FSAP).

The report will be updated, sources say, to incorporate the effects on the Central Bank stemming from the Master investigations at the Supreme Court. On Monday (29), Justice Dias Toffoli ordered the Federal Police (PF) to question Banco Master owner Daniel Vorcaro, former BRB president Paulo Henrique Costa, and Central Bank Supervision Director Ailton de Aquino on Tuesday (30), ahead of a confrontation hearing also scheduled for this week. The move weakens the regulator’s position vis-à-vis the institutions it supervises.

The fragility of Brazil’s legal environment has long been a concern raised by IMF staff in discussions with Brazilian economic authorities. Historically, however, Brazil has argued that, although there is no explicit legal protection, the Central Bank is de facto independent in its banking supervision.

The actions to revisit the Master liquidation undermine that argument and are likely to lead IMF technicians to downgrade their assessment of Brazil’s financial soundness.

Conducted every five or six years by senior IMF staff, the FSAP is a highly visible report within the international financial community and carries weight in how markets assess Brazil’s risk profile.

A source with experience in Brazil’s interactions with Washington-based multilateral institutions says that, in practice, a negative assessment increases the risk premium investors demand for investing in Brazil.

A technician who has participated in talks with these institutions says Brazil has historically sought to demonstrate a world-class regulatory framework and has been moving quickly to implement all the principles of the Basel Accords.

During the 2018 visit to Brazil, authorities presented the bank resolution bill as an important step to address some of the IMF’s reservations. That bill has yet to be approved by Congress. Now, with the Master case, Brazil loses that argument.

Beyond assessing the existing framework, the IMF and the World Bank conduct in-depth studies and make recommendations to improve banking and financial system regulation.

One of the most frequently cited principles is that Central Bank executives and staff should have legal protection to avoid liability when acting in good faith. Another is that their technical decisions should not be subject to review by other branches of government or the judiciary.

Legal protections are intended to prevent supervisors from feeling intimidated and from refraining from taking necessary action against troubled banks, which often have political connections.

Decisions should not be overturned because doing so creates legal uncertainty and, in practice, undermines market confidence that the Central Bank can act swiftly and decisively in systemic crises.

*By Alex Ribeiro, Valor — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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Tax reform enters testing phase through 2026

Taxpayers begin to see first effects of changes through platform to check cashback and tax credits generated from IBS and CBS

12/29/2025 

After nearly 40 years of debate in Brazil’s National Congress, tax reform is moving off the drawing board and beginning to take effect. On January 12, a platform will go live allowing taxpayers to see the first impacts of the changes to the tax system. Individuals registered in CadÚnico will be able to check, based on their taxpayer number (CPF), the amount of “cashback” they will be entitled to. Companies, in turn, will be able to track the evolution of their tax debits and credits, according to Juliano Neves, undersecretary for Corporate Management at the Federal Revenue Service, who spoke to Valor.

The amounts will be small, however, because the new tax system will be in a testing phase. The Tax on Goods and Services (IBS) and the Contribution on Goods and Services (CBS), created by the reform, will not be collected in this first year of operation. They will only be calculated, based on a test rate of 1%, with 0.9% for the CBS and 0.1% for the IBS. “In 2026, it will be a test run,” Neves said. “The game starts in 2027.”

The test will mainly serve to adjust systems at companies and tax administrations. Especially at the beginning of the year, attention will be focused on the information technology involved in the change.

At the same time, companies and consumers will be able to get a sense of how the new tax system will affect them. The reform will make visible what today is largely unknown: how much is paid in taxes that are embedded in the prices of each product and service.

From 2026 through 2033, this portion will gradually be shown separately on invoices. Consumers will see the net price and the taxes clearly. This is not an increase in taxation, as it may appear, but rather a disclosure of the tax burden.

In the view of tax specialists, this is the main change that will be seen in the initial phase of the reform. By knowing how much each party pays in taxes and the volume of credits they will begin to receive, companies will start renegotiating prices and contracts.

Continuing with the soccer comparison, former Federal Revenue auditor and president of the Brazilian Tax Committee (CTB), Adriano Subirá, said the match will be the transformation of relationships between companies. “This is an economic reform with a tax last name,” he said. “The game is the economic reform, which for me will have an impact similar to that of the Real Plan.”

For tax expert Rubens Souza, president of the Tax Reform Study Group (Gert) and a partner at WFaria Advogados, “the period of 2026 has to be used to look at pricing, not only of your own product, but also that of your suppliers, and to renegotiate acquisition prices.”

Over time, prices will come to be expressed by their net value, with taxes separated and generating credits. “There are many costs that used to remain in the chain and will now become credits, which may ultimately reflect a reduction in the tax burden,” Souza said.

Companies need to pay close attention, because the pricing logic will change, said lawyer Daniel Loria, of Loria Advogados, who was director of the Special Secretariat for Tax Reform at the Ministry of Finance.

First, he said, the current consumption tax rate is charged “from the inside,” meaning the tax applies to the taxes that make up the price of the good or service. With the reform, it will be charged “from the outside.” In addition, it is necessary to understand the dynamics of credits. “All the upstream tax cost is recovered and, if your customer is a company, it also recovers all the tax cost. These are two factors that need to be well understood for companies to be able to renegotiate prices in a productive and technical way.”

The focus of company management will shift away from tax planning and toward the economic viability of the business, said Marcos Flores, manager of the Federal Revenue Service’s Consumption Tax Reform Project. “They will recalculate their costs and prices, but 2026 is just the beginning of this, because it is merely the highlighting of a very low rate.”

He offered some practical recommendations for companies for the year. The first is to adapt tax documents so that they already show the IBS and CBS separately. A large share has already completed this step, he said.

Companies should also check whether codes such as the Mercosur Common Nomenclature (NCM), the Brazilian Services Nomenclature (NBS) and the Tax Classification Code (cClasTrib) used to issue invoices are correct. This is important for when taxes begin to be collected, as rates differ depending on the product, the service and the purchaser.

It is already possible to integrate the IBS and CBS calculator into ERP (Enterprise Resource Planning) software, Flores noted. He also warned that as of January 1 all companies will have an electronic tax domicile, through which they will receive communications from the Federal Revenue Service. “The company needs to know that it will no longer receive letters or have someone knocking on the door to deliver them.”

Finally, systems must be adapted to operate with the alphanumeric CNPJ, which comes into effect on July 1. “The company’s CNPJ does not change, but new customers and new suppliers may have an alphanumeric CNPJ,” he said. “For it to be able to buy from and sell to these new companies, it is important that its system is already adapted.”

The testing phase will begin before the regulation of the reform is complete. Congress only approved on December16 Complementary Bill (PLP) 108, which creates the IBS Management Committee, the structure that will administer the new tax resulting from the merger of the Tax on the Circulation of Goods and Services (ICMS) and the Services Tax (ISS). The bill has not yet been sanctioned by President Lula, which is expected to happen in mid-January. Once the legislation is complete, the Federal Revenue Service and the Management Committee will issue regulations for the new taxes.

“From the taxpayers’ point of view, nothing prevents the start of the experimental phase,” Flávio Sérgio Mendes de Oliveira, president of the CGIBS and finance secretary of Mato Grosso do Sul, told Valor regarding the absence of the law. “The CBS and IBS platforms will begin operating in January 2026, exactly as planned.”

Because of the delay, the idea is to be lenient in requiring invoices that show the CBS and IBS separately in this initial phase. In a recent joint act, the Federal Revenue Service and the IBS Management Committee clarified that there will be no penalty for the absence of a declaration until the first day of the fourth month after the publication of the CBS and IBS regulation, which does not yet have a date.

Toward the end of the year, companies’ main concern was being unable to issue invoices showing the IBS and CBS amounts. In some municipalities, there is still debate over whether the ISS will be included in the calculation base of these new taxes.

“We are just days away from the testing period and there is still a lot of uncertainty, especially around the electronic services invoice,” Souza said. “There are municipalities that still have not stated how they will do these calculations, for example whether they will include CBS and IBS in the ISS base.”

“The government has been careful,” Loria said. “Technical notes were issued stating that invoices will not be rejected [if they do not show IBS and CBS separately], which addresses a major concern of companies that feared an economic freeze.” There was concern that suppliers would not be able to issue invoices, preventing them from receiving inputs.

With so many changes happening at the same time, there is concern about misinformation and “fake news.” One risk is that the test rate could be mistaken for an additional tax, Flores acknowledged. That is not true, he said, because for consumers nothing changes in this first year. “Could there be ‘fake news’ along the way? It’s possible, but transparency is better than the current system, in which no one knows how much they pay.”

*By Lu Aiko Otta — Brasília

Source: Valor International

https://valorinternational.globo.com/

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St. George targets up to R$2bn in niobium, rare earths

Australian mining company seeks combined production to balance costs, draws U.S. interest keen to reduce reliance on China

 

 

 

12/29/2025 

Australian mining company St. George may invest up to $350 million (R$1.94 billion at the current exchange rate) to develop its niobium and rare earths project in Araxá, the same city in Minas Gerais where Companhia Brasileira de Metalurgia e Mineração (CBMM) operates. The project is at the study stage, including metallurgical testing, among other analyses, but is expected to begin operations in 2028 for niobium and in 2029 for rare earths.

The first phase is expected to be completed in the first half of 2026 for niobium and by the end of the same year for rare earths.

“In the case of niobium, it is easier, since it has been produced in that area for more than 40 years and our team is highly experienced in production and mining,” CEO John Prineas told Valor. “Rare earth metallurgy is more complex,” he added.

The studies are expected to provide updated estimates of capital costs and mineral resources, but Prineas currently estimates capital expenditures of $100 million (R$551.5 million) for niobium and between $150 million (R$827.3 million) and $250 million (R$1.3 billion) for rare earths.

New Malha Oeste tender may feature scaled-down railway

St. George’s initial resource estimate points to 40.6 million tonnes of rare earths, with a grade of 4.13% rare earth oxides, and approximately 41.2 million tonnes of niobium, with 0.68% niobium oxide. The company believes the estimates could increase, as only 10% of its mining rights have been explored so far.

Developing both minerals is intended to make the project more economically sustainable. Rare earths are subject to volatile pricing, while niobium mining is comparatively more economical, which could help balance the overall operation, according to the company. Another objective is to process the minerals present instead of discarding some of them as waste. “We will be able to use part of the profits from the niobium business to fund capital investments in rare earths,” Prineas explained.

CBMM does not mine rare earths either, as they are not economically feasible. The global ferroniobium market is estimated at less than 128,000 tonnes, still relatively small when compared with other energy-transition minerals such as lithium. Codemig, the Minas Gerais Economic Development Company, owns the surface land of the project area and, if the project moves forward, will receive royalties, although St. George did not disclose amounts.

Recently, Codemig and CBMM signed a new contract extending niobium mining operations in Araxá for another 30 years, with the option of a further 15-year extension. The new agreement replaced a previous contract that would expire in 2032 and increased Codemig’s share in CBMM’s results, including 25% of profits from the sale of materials other than niobium, including rare earths, without requiring any additional investment from the Minas Gerais state-owned company. Contacted by Valor, Codemig declined to comment.

St. George’s executive said he does not view the relationship with CBMM as competitive and that the company’s entry into the market as a new player would help consolidate a stable, diversified supply chain.

“They hold about 80% of the market and are global leaders. They virtually created this market. So it is not competition,” Prineas noted. “What we see is enormous potential for niobium in new uses. And for any end user to test niobium and for this market to grow, there needs to be diversity of supply.”

In October, the Australian company met with the U.S. chargé d’affaires in Brazil, Gabriel Escobar, during Exposibram, a mining industry trade fair held in Salvador, Bahia. The meeting took place amid ongoing discussions about U.S. interest in Brazilian rare earth reserves—the largest after China’s—which could help reduce U.S. dependence on imports from that country. Another meeting was later held in Belo Horizonte (Minas Gerais), but, according to Prineas, no concrete agreements were reached, though there is an expectation of building a connection.

“They have the Mountain Pass mine, but it is only a tiny fraction of what they need in terms of raw rare earth supply,” Prineas said. “While they have many companies emerging with separation and metallization technologies, they lack a domestic supply of raw ore coming into operation. Therefore, they are interested in aligning with non-Chinese suppliers, and Brazil is among their favorite countries.”

While the company aims to supply other countries that may be interested, it said its priority is the Brazilian market. In Brazil, St. George’s final product in the case of rare earths is expected to be a high-purity mixed oxide, which will then be sold for subsequent stages such as separation, metallization, and magnet production.

Among key milestones to date, St. George highlights the delivery of its first rare earth products to the MagBras project, an initiative under the Mover Program led by the National Service of Industrial Learning (SENAI) and coordinated by the Federation of Industries of the State of Santa Catarina (FIESC). The project seeks to build a national rare earth permanent magnet supply chain, from ore to finished product, to reduce dependence on imports.

In October, the miner announced the raising of A$72.5 million (R$264.1 million) to accelerate the project. In September, it announced the signing of a memorandum of understanding with REAlloys, the leading supplier of magnets to the U.S. defense and technology industries, for a potential long-term offtake agreement covering up to 40% of its rare earth production. Prineas said the company has also signed a similar MoU with Chinese partners, but for niobium.

“Rare earths and niobium have different political dynamics. China has ample rare earths domestically and does not need to import. The U.S., on the other hand, does not,” Prineas noted. “So I think the U.S. is probably the preferred partner in this case. When it comes to niobium, however, neither the U.S. nor China has domestic production; both are interested in securing new supplies.”

*By Michael Esquer  and Robson Rodrigues — São Paulo

Source: Valor International

https://valorinternational.globo.com/

 
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Dividends still key to Brazil’s fiscal plan despite decline

Payouts from state-run companies may fall R$20 billion in 2025 but remain vital to primary target

 

 

 

12/22/2025 

The Brazilian federal government expects to receive R$52.4 billion in dividends and profit-sharing payments from state-owned and mixed-capital companies in 2025. While this is lower than last year’s total, it would still mark the third-largest figure in the historical series and is crucial to helping the economic team meet its primary fiscal target, within the tolerance band.

The government’s fiscal goal is a balanced primary result—revenues equal to expenses—with room for a deficit of up to R$31 billion.

In 2024, the government received R$72.4 billion, driven by extraordinary dividend payouts from Petrobras and the Brazilian Development Bank (BNDES). That figure, in nominal terms, is second only to the record R$87 billion in 2022, more than half of which came from the oil giant, based on National Treasury data tracked since 1997.

As of October 2025, the latest month with available data, the government had already received R$38.1 billion in dividends. It expects another R$14.3 billion to come in during the last two months of the year, reaching the R$52.4 billion target published in the latest Bimonthly Revenue and Expenditure Report, which updates the government’s fiscal projections.

Dividend revenues were higher in 2024 due to early and extraordinary distributions by state-owned firms, explained Alexandre Andrade, director at the Independent Fiscal Institution (IFI). “At the end of 2024, in November and December, Petrobras and BNDES paid R$29.1 billion in early and extraordinary dividends. Over the full year, those exceptional payments totaled R$38.1 billion,” he said. “In 2025, these are expected to reach just R$10.9 billion.”

Oil prices also played a role in the decrease in Petrobras payouts. The U.S. Energy Information Administration (EIA) reported an average barrel price of $80.52 in 2024, compared to $69.70 this year through November, affecting the company’s profit and thus its dividend distribution.

Banco do Brasil also paid less in dividends this year, in part due to weaker results. The government lowered its original revenue estimate from the bank by R$1.5 billion.

New record

Even with the drop, 2025 is set to deliver the third-largest dividend haul in the Treasury’s records. The main contributors remain BNDES and Petrobras.

So far in 2025, Petrobras has paid R$12.5 billion to the federal government. On Monday (22) the company said it would make another transfer of R$1.3 billion, related to second-quarter 2025 profits. This will bring the total for the year to R$13.8 billion, still below the R$29.7 billion paid in 2024.

BNDES, meanwhile, transferred R$16.1 billion in dividends through October 31. It has not disclosed whether additional payments were made in November or December. In 2024, the bank paid R$29.5 billion to its controlling shareholder, the federal government.

Next in line is Caixa Econômica Federal, which paid R$5.11 billion this year. These payments included interest on equity based on 2024 results, remuneration on hybrid capital and debt instruments (IHCD), and profit distribution from the first half of 2025. The bank said it does not expect further payments by year-end.

Banco do Brasil had paid R$3 billion through October, according to the Treasury. The bank did not confirm whether additional transfers were made in the final two months. Other contributions came from various smaller state-owned and mixed-capital enterprises.

GDP slowdown

These dividend transfers have helped the government offset a decline in tax revenue from administered taxes, which underperformed in the second half of the year as the economy began to slow. Administered taxes include revenues from taxes and social contributions.

Publicly, Finance Ministry Executive Secretary Dario Durigan has defended using dividends from state-owned banks to strengthen the federal fiscal position and avoid mandatory budget freezes.

“We have no issue using bank dividends to support the bimonthly report, as long as it’s done in a planned manner,” Durigan said in a press conference in September. “If needed, we will use dividends from public companies to deliver on fiscal policy,” he added.

“Undoubtedly, this revenue [from dividends] has been important to close the government’s accounts and meet fiscal targets. This was especially true in 2024 and is likely to happen again in 2026, though to a lesser extent given the fiscal consolidation required and adverse conditions such as economic slowdown and falling oil prices,” said Tiago Sbardelotto, a fiscal economist at XP Investimentos.

For 2026, the proposed Annual Budget Bill (PLOA) forecasts R$54.1 billion in revenue from dividends and profit-sharing, in line with 2025 projections. Sbardelotto expects Petrobras and Banco do Brasil to maintain similar payout levels next year, while BNDES may increase its transfers.

By Jéssica Sant’Ana — Brasília

Source: Valor International

https://valorinternational.globo.com/

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Kalshi eyes Brazil as part of global expansion plans

Brazilian founder Luana Lopes Lara, the world’s youngest self-made female billionaire, says the company aims to expand its regulated prediction markets internationally

 

 

 

12/22/2025

Luana Lopes Lara
Luana Lopes Lara — Photo: Reprodução/Instagram

Kalshi, the U.S.-based prediction market platform co-founded by 29-year-old Brazilian Luana Lopes Lara, who became the world’s youngest self-made female billionaire, is exploring expansion into Brazil. In an interview with Valor, Lara said the company, now valued at $11 billion after its latest funding round, is preparing to accelerate its international growth, with her home country among the top priorities, although plans remain in early stages.

Valor: How did the idea to start Kalshi come about?

Lara: We worked in finance for three years. I was at Bridgewater and Citadel; Tarek [Mansour, Kalshi’s co-founder] was at Goldman Sachs and Citadel. We realized that everything traded in financial markets reflects expectations about future events. If someone believed Brexit would happen, they’d short the pound or buy European stocks, building a portfolio based on that. But it was all an indirect way of expressing a view on an event.

Valor: Isn’t that how markets are supposed to work?

Lara: If you expect something to move, you position for it. But that’s not efficient. If a war breaks out at the same time as Brexit, for example, it’s hard to know which asset reacts to what. There are too many variables. What matters is the event itself. We wanted to create an exchange where people could directly buy or sell outcomes, instead of relying on proxies or indirect instruments.

Valor: Kalshi had to fight regulatory battles to launch and expand, especially on elections.

Lara: It was incredibly tough to start from scratch. Coming from finance, we were set on doing everything by the book because we wanted institutions like Goldman Sachs and Bridgewater to eventually use our products. That wouldn’t be possible without proper regulation.

We worked with U.S. regulators for three years to show them how this was similar to markets they already oversee. In other sectors, like Uber or Airbnb, the model has been “ask forgiveness later.” That doesn’t work in finance. There’s money involved, and you have to be right from day one. After launching, we faced another long battle for election-related markets, which took over two years, and we had to sue the government. That was a hard decision. Suing your regulator is extremely delicate; there’s always the risk of retaliation or delays. In that sense, the U.S. isn’t so different from Brazil.

Valor: A significant portion of Kalshi’s revenue now comes from sports. How is that different from betting?

Lara: Sports are a massive industry with real economic exposure. We’re especially focused on helping companies hedge against those risks. For example, there are markets about where the NBA Finals will be held. Depending on how many games the series goes, hotels can see huge swings in occupancy. That’s real financial exposure. Sports and entertainment face risks that historically haven’t had the same risk-management tools as sectors like agriculture.

Valor: But how does a single game outcome fit into this?

Lara: There’s also the “price discovery” aspect. Even if an event doesn’t have direct economic consequences, the information embedded in the market price is valuable. If a candidate is trading at 70% odds, that says something. Same with sports: publicly traded clubs, for example, see their stock prices move based on game results. That’s why we draw a clear line between what we do and traditional gaming. We focus on hedging, trading, risk, and price signals, none of which exist in poker or slot machines.

Valor: What about the risk of insider trading, like someone betting on the next Time cover?

Lara: It works like insider trading in equity markets. But since we’re regulated, we’re required to know who’s behind every transaction, where they work, who they are. Our compliance team monitors everything. If someone manipulates the market or breaks the law, they can be prosecuted, just like in equity markets.

Valor: Has that been enough to prevent abuse?

Lara: Of course, no system is perfect. Misconduct can happen, as it does in stock markets. But we have mechanisms to investigate and act. Notably, all known insider trading cases in prediction markets happened at Polymarket, which operates offshore. They don’t use KYC rules. One person can use multiple wallets. There’s no accountability.

Valor: Are there any records of insider trading at Kalshi?

Lara: There are no records of this type of case in regulated markets in the United States, such as Kalshi. In addition, all trades executed on Kalshi are reported to the government. Authorities independently analyze the data to ensure that we are fulfilling our role properly and to identify any potential irregularities.

Valor: After raising $1 billion, what’s next for Kalshi?

Lara: We’re just getting started. One of the first things we announced after the round was our plan to expand internationally. Brazil means a lot to me. I really want us to operate there. We’re still studying how to do it, but I hope we can announce something in early 2026. We also want to grow in other countries. We envision something similar to CME, where you can access U.S. products from Brazil. In addition, we want to gradually develop other structures, such as margin and leverage, though that’s more of a longer-term plan. It would help us move toward a more institutional trading profile.

Valor: How do you see your entry into the Brazilian market?

Lara: We’re just beginning to explore. There’s nothing like Kalshi in Brazil today, just betting platforms or derivative markets, which is where the U.S. was before Kalshi. We want to find a way to bring our model to Brazil, using what we’ve learned in the U.S. But it’ll depend on our lawyers and regulatory review. Nothing has been finalized yet.

Valor: Are institutions already using Kalshi?

Lara: Absolutely. On the market-making side, major funds like Susquehanna and Jump Trading are active. On the hedging side, there are funds, family offices, and companies buying contracts to manage risk. We even offer request-for-quote (RFQ) trading for large orders, say, someone wants to buy $10 million worth. That’s common in institutional environments and already works on our platform.

Valor: Any public examples?

Lara: Yes. Underdog, a fantasy sports company, publicly said they use Kalshi to hedge their exposure. Another is Arrived, in the mortgage sector. They used Kalshi to hedge against a possible U.S. government shutdown, buying over $1 million in contracts, essentially like buying insurance.

Valor: Any plans to go public?

Lara: Listing the company is important, but not now. We don’t know when. For now, the focus is on building the best product, growing as much as we can, both in the U.S. and globally, launching more products, and scaling on all fronts.

Valor: Was bringing Donald Trump Jr. on as a strategic advisor due to regulatory concerns?

Lara: Kalshi is highly regulated. Since we operate in elections and politics, we need to engage with Congress, the Senate, and the White House. That’s the nature of our business. We need people who understand how Washington works, how to explain our model to both sides of the aisle.

Valor: Isn’t Trump Jr. too politically charged?

Lara: He’s not in office, and we don’t view him as a politician. We’re close to leaders across the political spectrum: Senate, House, White House, and even state governments. Our advisory board includes people from both sides, and we look for the best individuals to help us navigate the regulatory landscape.

*By Gabriel Roca, Valor — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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China signals long-term interest in Mercosur trade deal

Beijing keeps talks on the table despite current hurdles, as global trade realigns

12/22/2025 

China, the world’s second-largest economy, continues to signal to Mercosur diplomats its interest in negotiating a free trade agreement with the South American bloc, even while acknowledging that such a deal remains out of reach for now.

People familiar with the matter told Valor that Beijing has communicated flexibility and a willingness to keep the issue on the agenda, even though it does not expect progress in the short term. The Chinese government appears to be patiently laying the groundwork for a future agreement.

The current context is one of global trade realignment, with countries increasingly seeking preferential arrangements as a way to diversify exports and shield themselves from the effects of unilateral policies by the United States.

Amid global instability, ideas that once seemed unrealistic are now at least being taken seriously. Mercosur, for its part, is showing signs of frustration with the European Union’s repeated delays in concluding the long-awaited bi-regional agreement.

Uruguay had for years attempted to negotiate a bilateral deal with China. While Chinese officials expressed interest, they eventually made it clear that such a move would be diplomatically unfeasible, as it could offend Brazil and undermine Mercosur cohesion. A deal with Montevideo alone would strike at the heart of the bloc’s unity.

Even before, a preferential agreement between China and Mercosur was seen as complex. Now it may prove even more challenging, as Chinese exports continue to surge. In 2024, Brazil saw the highest percentage increase in Chinese exports among global partners, up 22%.

This year, China’s shipments to Brazil are still growing faster than Brazilian exports to China, eroding Brazil’s trade surplus in the bilateral relationship. Most of Brazil’s active anti-dumping measures target Chinese products.

Political factors within Mercosur also pose challenges, particularly Argentina’s close alignment with the United States. Washington has adopted a new, more assertive version of the Monroe Doctrine and is seeking to curb China’s influence in the region.

Despite ongoing U.S. opposition, China’s export performance continues to unsettle trading partners. In November, the country posted a $1 trillion trade surplus, a sign of its success in diversifying export markets with competitively priced, high-quality products.

At the same time, however, Beijing is beginning to restrict access to its own market. One emerging concern among partners is an ongoing investigation that may result in import quotas on beef. If confirmed, Brazil would be one of the countries hardest hit.

Brazil’s manufacturing sector has long expressed unease about trade flows with China. Still, back in 2023, when China first hinted at its interest in a deal with Mercosur, representatives from the National Confederation of Industry (CNI) said negotiations didn’t need to start with a full-fledged free trade agreement. They suggested exploring alternatives, such as a deal focused on trade facilitation.

China’s strategic position in global trade has been built in part through a network of free trade agreements, which provide mutual tariff preferences for Chinese companies and their partners.

Beijing currently has 23 free trade agreements in effect, covering 30 countries and regional blocs such as ASEAN (Association of Southeast Asian Nations), which includes 11 fast-growing economies. Another 10 deals are under negotiation and eight are in the study phase.

In Latin America, China already has trade agreements with Chile, Peru, Costa Rica, and Ecuador. Talks are underway with Honduras and Panama, and a feasibility study is ongoing with Colombia.

Despite the current obstacles, China is moving steadily into the Mercosur orbit—with the patience that an authoritarian regime allows—keeping the door open for a preferential trade deal in the future.

*By Assis Moreira — Geneva

Source: Valor International

https://valorinternational.globo.com/

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Enel São Paulo crisis fuels takeover interest in concession

Market points to Âmbar, Equatorial Energia, CPFL as potential buyers

 

 

 

12/18/2025 

Retail businesses without power in São Paulo: recurring problems at Enel are drawing interest from potential buyers — Foto: Paulo Pinto/Agência Brasil
Retail businesses without power in São Paulo: recurring problems at Enel are drawing interest from potential buyers — Photo: Paulo Pinto/Agência Brasil

After the government decided to initiate the process to terminate the Enel São Paulo power distribution concession, names of companies reportedly interested in taking over the utility’s operations began circulating behind the scenes, in a potential change-of-control scenario. Market participants point to Âmbar, the energy arm of the J&F group owned by brothers Joesley and Wesley Batista, Equatorial Energia, and CPFL Energia as possible candidates.

Contacted by Valor, Âmbar declined to comment. CPFL said it does not comment on market speculation. Equatorial had not responded by the time this edition closed. For market sources, declaring forfeiture is seen as a more lengthy route, while a change of operator could be a simpler solution. The companies are eyeing what is considered one of the country’s most complex concessions, characterized by high population density and strong cash flow generation. Enel São Paulo serves 24 municipalities in the metropolitan region, covering about 8.5 million properties, including the city of São Paulo, and holds a contract running through 2028. It is the largest power distribution concession in Latin America.

Last week, more than 2.2 million properties in the metropolitan area were left without electricity after an extratropical cyclone brought winds of nearly 100 km/h. It is the third consecutive year in which extreme weather events disrupted service and triggered criticism over delays in restoring power.

In a statement, Enel said it has fully complied with all regulatory indicators and delivered “consistent improvements” across all service quality metrics, “as evidenced by inspections recently conducted by the regulator.” The company also said that climate change has made Greater São Paulo increasingly exposed to extreme weather events.

“This measure requires a structured plan coordinated with public authorities, defining the most appropriate modalities for adequate compensation of this investment. The company is willing to make these investments as part of a strategy shared with all involved institutions,” the statement reads.

Enel added that it reaffirms its confidence in Brazil’s legal and regulatory framework to ensure security and stability for investors with long-term commitments in the country.

Âmbar has financial capacity and has recently taken on complex assets, such as the Amazonas Energia and Roraima Energia distribution utilities, as well as generation projects. Its most recent acquisitions include a minority stake in Eletronuclear and the Norte Fluminense gas-fired power plant from France’s EDF. On the other hand, the company lacks a significant track record in power distribution in large urban centers, which could weigh on a regulatory review.

Equatorial Energia is another potential candidate. The group is recognized for strong operational expertise in distribution and a track record of turning around troubled concessions. Holder of concessions in northern and northeastern states, Equatorial is also a shareholder in the São Paulo water utility Sabesp, which could, in theory, create synergies between services, according to people familiar with the matter. However, the company is currently highly leveraged due to its recent acquisition of a stake in Sabesp as a primary shareholder, which could constrain its financial capacity, according the sources. Third-quarter 2025 financial statements indicate leverage of 3.3 times.

CPFL Energia is seen by many as the most obvious candidate in a potential reshuffle. The company already operates in São Paulo state, has an established operating structure, low leverage, and financial backing from the owner, the Chinese company State Grid. CPFL has also shown historical interest in Enel assets, having previously attempted to acquire Enel Ceará (formerly Coelce).

Specialists interviewed by Valor caution, however, that it is too early to predict an outcome for Enel, which has made significant investments in the grid in recent years and is unlikely to relinquish the concession easily. Some see the possibility of litigation if forfeiture proceeds, especially if the utility’s quality indicators or economic-financial balance remain within the limits set by the Brazilian Electricity Regulatory Agency (ANEEL).

Forfeiture occurs when a distributor fails to comply with obligations established by the regulator in the concession contract. In the case of power distributors, the measure can generally be applied when service quality indicators that track power outages exceed ANEEL’s limits. The main metrics are duration (DEC) and frequency (FEC) of power outages. Financial issues that could impair service provision can also trigger forfeiture.

On Wednesday (17), Mines and Energy Minister Alexandre Silveira formally requested that ANEEL initiate the process to declare Enel’s São Paulo concession forfeited—the first step toward terminating the contract.

The agency said its inspection unit will assess the recurrence of service failures related to the December 10 blackout. The company is already being monitored by the regulator due to outages in October 2024, also caused by storms.

In November 2023, Enel São Paulo took a week to restore power to about 3 million consumer units following heavy rainfall and winds exceeding 100 km/h.

*By Fábio Couto, Robson Rodrigues and Marlla Sabino — Rio de Janeiro, São Paulo, Brasília

Source: Valor International

https://valorinternational.globo.com/

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Supreme Court forms majority against cutoff for Indigenous land claims

Six justices have already found temporal milestone thesis unconstitutional; trial set to end today

 

 

12/18/2025 

A majority of justices of Brazil’s Supreme Court have voted to strike down provisions of the so-called temporal milestone law on the demarcation of Indigenous lands, which states that tribes would only be entitled to lands they occupied or that were under dispute on the date the Constitution was enacted: October 5, 1988.

The majority was secured with the vote of Justice Alexandre de Moraes, who sided with the rapporteur, Justice Gilmar Mendes. He was also joined, with some specific reservations, by justices Flávio Dino, Cristiano Zanin, Luiz Fux and Dias Toffoli. Still to vote are Justices Cármen Lúcia, Kassio Nunes Marques, André Mendonça and Edson Fachin.

The case is being heard in the court’s virtual plenary and is scheduled to conclude at 11:59 p.m. on Thursday (18). Justices may still change their votes, request that the case be moved to an in-person session, or ask for more time to review the matter.

Casting the final vote so far, Moraes reiterated the position he took in the 2023 ruling, when he was one of nine justices who voted to overturn the time-limit doctrine. At the time, he said the date of the Constitution’s enactment should be seen as an “x-ray plate” of territorial occupation to strike a balance between the rights of Indigenous peoples and private property.

Moraes also agreed with Mendes’s argument that Congress cannot enact legislation contrary to the Supreme Court’s interpretation, but only regulate demarcation procedures. Like Dino, Moraes said this understanding could not be changed even through the approval of a proposed constitutional amendment (PEC).

“The fundamental nature of the right at issue, which elevates the matter to the status of an entrenchment clause, part of the Constitution’s rigid and immutable core, would prevent any attempt to alter this understanding through a constitutional amendment, since adopting the time limit would amount to distorting Article 231 of the Constitution and violating the principle prohibiting social regression,” Moraes said.

The ruling comes after the Senate last week approved a PEC seeking to reinstate the so-called temporal doctrine. The proposal had been shelved pending a decision by the Supreme Court, but was rushed through as a reaction to a decision by Justice Mendes that tightened rules for the impeachment of Supreme Court justices. The amendment still needs to be approved by the Chamber of Deputies, which is not expected to happen this year.

Toffoli also sided with the court’s most senior justice, but added reservations to ensure that good-faith improvements made by non-Indigenous occupants can be compensated until the demarcation process is concluded. He also said existing rules governing the role of anthropologists, experts, and other specialists in demarcation proceedings are sufficient.

In addition, he voted to reject compensation claims based on administrative documents without valid legal titles and, regarding state omission, stressed that conciliation is possible at any stage of the dispute and that review is part of the demarcation process.

Mendes’s vote opened the trial on Monday (15). He said the time-limit doctrine represents “a situation that is difficult to prove for Indigenous communities that were historically dehumanized through state or private practices of forced removal, killings and persecution.”

He also acknowledged a historical failure by the Brazilian state to conclude demarcation processes and set a 10-year deadline for the federal government to complete pending procedures.

Mendes further voted to allow Indigenous territories to be used for economic purposes, provided that the benefits accrue to the entire community and land possession is preserved.

Finally, he found unconstitutional the ban on expanding the boundaries of already demarcated Indigenous lands, arguing that the Constitution guarantees the correction of administrative acts with “serious and irremediable” errors.

In 2023, the Supreme Court struck down the time-limit doctrine by a 9-2 vote. In response, Congress passed a bill validating the doctrine. As a result, different parties and organizations took the matter to the Supreme Court, some seeking to uphold the law and others calling for it to be overturned.

The cases were assigned to Mendes, who set up a conciliation panel among the parties to seek consensus. In June 2025, the commission presented an agreement signed by the federal government, Congress, Indigenous peoples, and farmers, after 23 hearings held by the group.

Prior Supreme Court trial of the temporal milestone thesis in 2023, when it was struck down for the first time — Foto: Carlos Moura/SCO/STF
Prior Supreme Court trial of the temporal milestone thesis in 2023, when it was struck down for the first time — Photo: Carlos Moura/SCO/STF

*By Giullia Colombo — Brasília
Source: Valor International
https://valorinternational.globo.com/

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