Antitrust body secures majority to approve BRF-Marfrig merger

CADE’s tribunal leans toward unconditional approval despite SALIC dispute

 

 

08/21/2025

Brazil’s Administrative Council for Economic Defense (CADE) has reached a majority in favor of approving the merger between giant meatpackers BRF and Marfrig without restrictions, even though the final vote has been postponed after Counselor Carlos Jacques requested more time to review the case.

So far, four counselors have voted to approve the deal, diverging from the position of the case’s rapporteur, Counselor Gustavo Augusto, who also favored approval but proposed restrictions on the Saudi Agricultural and Livestock Investment Company (SALIC). Through its subsidiary Salic International Investment Company (SIIC), the Saudi fund holds shares in the merged company and could potentially exercise political rights. The majority, however, opted not to rule on this point.

The issue was brought forward by Minerva, a competitor in the beef market, which argued that SALIC’s shareholding structure could give the fund undue influence over direct competitors in the fresh beef segment. Minerva, in which SALIC also holds a stake, warned of possible competitive distortions.

Minerva’s attorney, former CADE counselor Luiz Hoffmann, stressed during Wednesday’s oral arguments that “SALIC will indeed have an active presence in the post-merger scenario.” He also raised concerns about the combined purchasing power of BRF and Marfrig and the strengthened brand portfolio, since the two companies together control 37 brands.

Mr. Hoffmann argued that the deal should have been filed as an incorporation rather than a simple acquisition, which would affect how Marfrig’s control over the new entity is assessed. The case had initially been approved by the CADE’s General Superintendence but was escalated to the tribunal following Minerva’s appeal.

Representing BRF and Marfrig, attorney Victor Rufino countered that SALIC’s permanence in the new company is not guaranteed, since the Saudi fund has a defined exit period. Should SALIC remain a shareholder, he said, its position would be duly reported to the CADE.

Mr. Rufino dismissed Minerva’s claims as being driven more by “a private vendetta against Marfrig” than by legitimate competition concerns, pointing to ongoing disputes between the companies, including a breach-of-contract lawsuit and an arbitration proceeding.

In his vote, Rapporteur Gustavo Augusto emphasized that the merger represents a complex corporate restructuring rather than a mere acquisition of equity. “This cannot be characterized as a simple purchase of shares by a controlling shareholder. It involves a far-reaching corporate reorganization that reshapes the competitive landscape,” he said.

Mr. Augusto argued that concerns over the combined portfolio of BRF and Marfrig were overstated, noting that competitors such as JBS and Minerva remain capable of challenging the merged company’s market power. However, he acknowledged lingering uncertainty over SALIC’s potential influence, stating that the fund’s notification on its role does not rule out the exercise of political rights.

Counselor Victor Fernandes opposed Mr. Augusto’s approach, voting to approve the merger without addressing SALIC’s participation. His position was supported by counselors Diogo Thomson, Camila Cabral Pires Alves, and José Levi, forming the current majority in favor of unconditional approval.

BRF and Marfrig declined to comment on the matter.

*By Beatriz Olivon and Guilherme Pimenta, Globo Rural — Brasília

Source: Valor International

https://valorinternational.globo.com/

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How Brazil can attract more international investors

Executives from global investment firms outline what the country must do to strengthen its business environment

08/21/2025 

“If you build it, they will come.” The line made famous by the 1989 film Field of Dreams is repeated several times during a lively conversation at the Nonno Ruggero restaurant in the Hotel Fasano, São Paulo. But this is not a gathering of film buffs or art critics. Organized exclusively for Valor by the team behind the mega innovation event SP2B, the lunch brought together executives from some of the world’s largest investment companies.

The guests were Michael Safdie of Springhill Ventures (Israel), Jason Tan of Jeneration Capital (Hong Kong, Asia), and Pogos Saiadian of Greyhound Capital (Europe). Brazilian host Bernardo Zamijovsky, of VR Investimentos and one of the curators of SP2B, welcomed the group. Later that evening, Ricardo Kanitz of Spectra Invest (Brazil) joined them for a debate at SPHall.

On both occasions, the executives discussed how Brazil can become more attractive to international investors, particularly those interested in digital transformation ventures.

In short, the country faces four main challenges: high interest rates, exchange rates that disadvantage start-ups, a shortage of engineers, and the absence of models and organizations that integrate government and private capital under a unified innovation strategy.

As in the film, in which a farmer builds a baseball field on his land after hearing a mysterious voice—ultimately drawing legendary, long-deceased players to a historic game—the perception is that if Brazil lays the necessary groundwork, investors will come.

Below are the main topics discussed at the meeting:

Shortage of professionals

Between 2015 and 2022, approximately 6,500 Brazilian scientists left the country to work abroad, according to the Center for Strategic Studies Management, affiliated with the Ministry of Science, Technology, and Innovation. The main reasons are a lack of investment and frozen scholarships. In information technology, particularly among engineers, training remains insufficient. An estimated 159,000 graduates are needed each year, but only 53,000 currently complete their studies. This gap could result in a shortage of 106,000 professionals by 2029.

“We are exporting engineers, even though there is a shortage in the local market,” says Mr. Zamijovsky. Many remain in Brazil but are under contract with Big Tech companies, he adds.

In Southeast Asia, the problem is similar. In Indonesia, for example, too few engineers graduate, says Mr. Tan. To avoid this risk, countries such as China, India, and Israel invested heavily in training programs—and succeeded, he notes.

In Hong Kong, talented professionals can even obtain citizenship in just one year through a government program. “You have to start with the people. Otherwise, the [investor’s] money comes into the country, but it doesn’t stay.”

Local or global?

Even with the war in the Middle East, geopolitical risk has not affected the investment environment in Israel, says Mr. Safdie. The reason? “All companies are created with an international focus, mainly on the U.S.,” he explains, both in terms of consumers and fundraising.

“In terms of raising capital for Israeli high-tech companies, in the first half of the year alone we reached $10 billion—the same as the United Kingdom, close to China, and above India,” says Mr. Safdie, who is the son of a Brazilian father and speaks Portuguese fluently.

Is it mandatory for entrepreneurs to have an international outlook from the outset? “It depends,” replies Mr. Safdie. “If it’s a B2C company, definitely not, because there is a huge consumer market in Brazil. But if you look at the B2B market, you still need to focus abroad.”

Entrepreneurial qualities

“We look for three things,” says Mr. Saiadian. “One is being customer-obsessed. We notice this when we talk to the entrepreneur and they mention the customer and the problem to be solved several times. The second is being product-obsessed, with a focus on details and quality. Finally, it’s being very execution-oriented and moving quickly.”

Brazil operates in cycles, with several funds arriving simultaneously and then departing. “It becomes a desert.” Execution, he stresses, is even more important in these periods.

Interest rates and currency

“The volatility of our exchange rate is one of the biggest obstacles to attracting foreign investment in Brazil. We have experienced one of the most extended cycles of the dollar’s appreciation against other currencies, which has lasted more than 15 years. Many investors believe it will last forever. This perception drives capital away from Brazil to other emerging markets,” says Mr. Kanitz.

For Brazilian investors, the challenge is the interest rate, says Mr. Zamijovsky. “Even though the return on venture capital is attractive, the interest rate is 15% per year.” By comparison, the rate is 4.5% in Israel and 3% in China.

Quantity and price

Brazil has an advantage in the volume of customer purchases provided by its vast population, but the same does not apply to prices, notes Mr. Saiadian. Digital banks, for example, already have hundreds of millions of customers, demonstrating their numerical strength, but there are limits to what they can charge.

Greyhound Capital invested in a Japanese company that added new features to its software to the point where some customers now pay $1,000 per month for the service. In Brazil, customers value new features, but the ceiling is typically around $35.

Public and private

The innovation chain in Brazil will only be complete when there are models that integrate government and the private sector. This is a consensus position.

In Israel, according to Mr. Safdie, the Office of the Chief Scientist acts as an intermediary with an annual budget of approximately $500 million. The United Arab Emirates and Saudi Arabia have created incentive programs for companies that set up operations in the country or hire local staff, says Mr. Tan.

“It is essential to establish an international hub, such as Silicon Valley in the U.S. That is what we are going to try to do. São Paulo meets these conditions,” emphasizes Mr. Zamijovsky.

*By João Luiz Rosa — São Paulo
Source: Valor International
https://valorinternational.globo.com/

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Supreme Court justices meet with bank representatives

Banks still unclear on full impact of Justice Dino’s ruling putting check on effects of Magnitsky sanctions

 

 

 

08/21/2025

Justices of Brazil’s Federal Supreme Court (STF) have resumed meetings with representatives of financial institutions following a ruling issued Monday (18) by Justice Flávio Dino against the immediate enforcement in Brazil of foreign laws, court rulings, administrative acts, and executive orders.

Justice Cristiano Zanin met Tuesday (19) at 6:30 p.m. with Rodrigo Maia, former speaker of the Chamber of Deputies and now president of the National Confederation of Financial Institutions (formerly CNF, now FIN). The two had already met earlier this month after Mr. Zanin was appointed rapporteur in a case seeking to prevent the STF from allowing the blocking of Justice Alexandre de Moraes’s bank accounts. Since Monday, other justices have also met with bank representatives.

According to reporting by Valor, banks remain uncertain about the full scope of Dino’s decision. On one hand, they fear sanctions from the United States; on the other, fines from the Supreme Court should they fail to comply with the Brazilian order.

The ruling has fueled uncertainty in the sector. On Tuesday (19), the day after Mr. Dino’s move, banks lost more than R$38 billion in market value amid concerns that the justice’s reaction could trigger stricter enforcement of the law by the Donald Trump administration. Shares partly recovered yesterday.

Bankers head to Brasília

Through industry associations, financial institutions have been lobbying in Brasília to defuse tensions as relations between Brazil and the U.S. escalate.

Mr. Zanin is handling a case filed by Federal Deputy Lindbergh Farias (Workers’ Party, PT, Rio de Janeiro), leader of the PT in the lower house, requesting that the STF prevent Brazilian banks from blocking Mr. Moraes’s accounts. The justice was sanctioned in July under the Magnitsky Act.

On August 1, Mr. Zanin referred the matter to the Office of the Prosecutor General (PGR) and is awaiting its opinion. He has signaled that he intends to hear all parties involved, including banks, before issuing any ruling.

Earlier this month, Justices Gilmar Mendes and Moraes also held meetings with bank representatives, with the consensus at the time being that no accounts would be blocked. Should moves in that direction occur, however, the STF could step in to stop the enforcement of the Magnitsky Act in Brazil—as Mr. Dino effectively did on Monday (18). His ruling, though, came in a case unrelated to U.S. sanctions, instead involving lawsuits filed by Brazilian municipalities in the United Kingdom over environmental disasters.

Dino pushes back with irony

Justice Dino on Wednesday (20) mocked the financial market’s reaction to his ruling against the immediate enforcement in Brazil of foreign laws, rulings, and administrative acts. “I issued a decision yesterday [Tuesday] and the day before [Monday]. The one they say crashed the markets. I didn’t know I was so powerful: R$42 billion in financial speculation. Fortunately, age teaches you not to be impressed by small things. Obviously one thing has nothing to do with the other.”

“We should not be swayed by foam. This was a ruling for a specific case. The first technical challenge is understanding. A decision on acts by the U.S. has nothing to do with a drop in the stock market,” he added.

“It was a decision among so many obvious points of the principle of territoriality. Nothing heterodox, just a repetition of concepts that are established worldwide,” Mr. Dino continued. “There are Brazilian companies with extensive operations in the U.S. Imagine if Brazil’s Superior Labor Court issued a ruling saying labor relations there must follow Brazilian law. I don’t think it would be very well received.”

*By Tiago Angelo and Maira Escardovelli — Brasília

Source: Valor International

https://valorinternational.globo.com/

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Supreme Court at odds over Justice Dino’s ruling on foreign law

Some justices call for merging case with another one specifically connected with Magnitsky Act; Dino decision involved UK courts and mining disaster in Brazil

 

 

08/20/2025

Supreme Federal Court (STF) justices consulted by Valor assess that the application of the Magnitsky Act by banks operating in Brazil should be better discussed in the case under Justice Cristiano Zanin’s jurisdiction that specifically addresses the effects of U.S. sanctions. There is divergence in the Court regarding Flávio Dino’s order that foreign laws, administrative acts, executive orders and judicial decisions should not be automatically applied in Brazil.

The disagreement, with some exceptions, is less about content and more about form: for part of the Supreme Court members, it would be better for the debate to occur in Mr. Zanin’s case because it addresses the Magnitsky Act. The process conducted by Mr. Dino, meanwhile, discusses lawsuits filed in UK courts by Brazilian municipalities affected by environmental disasters.

In the case with Mr. Zanin, Federal Deputy Lindbergh Farias, Workers’ Party (PT) leader in the Chamber, seeks to prevent banks operating in Brazil from blocking the accounts of Alexandre de Moraes, sanctioned by the U.S. under the Magnitsky Act in July. On August 1, Mr. Zanin sent the request to the Attorney General’s Office (PGR). He awaits the body’s opinion.

Some magistrates say Mr. Dino’s decision is too broad and may cause confusion about its effects. They also say it is necessary to better hear the actors affected by the order and know how Brazilian banks may be impacted by the decision.

Others defended Mr. Dino. For them, STF decisions can exceed the scope of a concrete case. They also affirm that their colleague defended the Supreme Court from external interference.

The Magnitsky Act can affect any company that operates in the United States or conducts transactions with the American currency. Earlier this month, justices met with bank representatives to discuss the effects of the sanction. Justices Moraes, Zanin and Gilmar Mendes participated.

Brazilian banks fear U.S. sanctions

On that occasion, financial institutions did not demonstrate intention to impede operations in Brazil on their own, but expressed concerns about how to act in case of U.S. sanction threats.

On Monday (18), Mr. Dino ruled that foreign laws and judicial orders do not automatically apply in Brazil, nor do they bind Brazilian companies or affect assets located in the country.

The decision was made in a case discussing lawsuits filed in UK courts by Brazilian municipalities that were affected by the Mariana and Brumadinho mining disasters in Minas Gerais.

Mr. Dino’s decision has binding effect. According to the justice, it applies to “the controversy depicted in these proceedings and in all others where foreign jurisdiction – or another foreign state body – intends to impose, on national territory, unilateral acts over the authority of Brazil’s sovereignty bodies.”

Mr. Dino also stated that presuming immediate effectiveness of foreign acts constitutes “an offense to national sovereignty, public order, and common morality.”

*By Tiago Angelo — Brasília

Source: Valor international

https://valorinternational.globo.com/

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Local assets fall as Brazil-U.S. tensions escalate

Ibovespa drops 2%, dollar nears R$5.50, and long-term rates rise sharply after Supreme Court ruling; poll rumor also weighs on prices

 

 

08/20/2025 

Brazilian markets reacted strongly to a fresh escalation in diplomatic tensions with the United States. Heightened risk perception fueled a sharp increase in future interest rates and sent the dollar close to R$5.50, while the Ibovespa took a hit from steep losses in bank stocks. The sell-off intensified after Washington toughened its rhetoric in response to a ruling by Federal Supreme Court (STF) Justice Flavio Dino, who determined that foreign laws have no immediate effect in Brazil, raising concerns about the potential impact of the Magnitsky Act on the domestic financial sector.

Risk aversion deepened in the afternoon as traders also began factoring in the political landscape. Rumors about new popularity polls for President Luiz Inácio Lula da Silva rattled markets further, particularly in currency and interest rate trading.

In just two sessions, the real erased all of its recent gains, with the dollar closing up 1.19% at R$5.4993, the highest level since August 5. In the rates market, intermediate maturities priced in significant risk premiums, with the January 2029 DI climbing from 13.235% to 13.48%, its highest since July 31.

The Ibovespa, which had avoided Monday’s risk-off mood, ended Tuesday down 2.10% at 134,432 points, dragged by heavy losses in bank shares.

Real interest rates, measured by NTN-Bs (inflation-linked government bonds), also moved higher. Yields rose more than 10 basis points across nearly all maturities, reflecting both market stress and a hefty R$1.3 million supply of NTN-Bs offered by the National Treasury on Tuesday.

According to SulAmérica Investimentos CIO Luís Garcia, the market had remained relatively calm when tensions were limited to trade frictions or sanctions against specific officials. “But the Supreme Court’s signal could prompt a counter-response from Washington and lead to a much more troubling scenario,” he said.

Mr. Garcia warned that the greatest risk would be U.S. sanctions affecting Brazil’s access to the Swift payment system, which connects financial institutions worldwide. Such a move, he said, could disrupt foreign capital inflows, push the dollar back toward R$6, and fuel inflation expectations, potentially jeopardizing the Central Bank’s rate-cutting cycle.

The worst-case scenario, he added, would involve measures affecting not just new flows but also existing investments in Brazil.

For now, SulAmérica is taking tactical positions in local markets rather than holding assets for long. If tensions ease, Mr. Garcia sees room for the real to strengthen further and for future rates to fall, supported by Brazil’s monetary easing cycle.

Still, he noted that long-term rates have remained stubbornly high, even during periods of market optimism. “The exchange rate is the most popular risk gauge, but it doesn’t reflect fiscal concerns as strongly as the long end of the curve,” he said.

Adding to the day’s volatility, traders circulated rumors that an upcoming poll would show improving electoral prospects for the government, prompting investors to demand higher risk premiums.

A foreign fund manager, who requested anonymity, said risks are far from benign, especially since U.S. sanctions are politically driven and likely to escalate tensions. “Under these circumstances, markets can quickly turn very volatile, with rumors surfacing and undermining investor confidence even when denied,” the manager said.

On the political front, he argued that polls should not yet carry such weight, given the time remaining before elections and uncertainty over candidates. “But something has broken in the positive momentum, and that will have a lasting effect on investor confidence,” he said. “I’ll be more cautious going forward, especially in FX, and this reinforces my view that the DI curve should steepen—with weaker growth requiring lower short rates, while shaken confidence drives outflows at the long end.”

But not all share this skeptical outlook for the real. Nelson Rocha Augusto, chief economist and president of BRP, projects the dollar closer to R$5.40 by year-end, despite short-term swings. “I see four factors supporting this view: the interest rate spread will remain wide; U.S. exceptionalism will erode; as inflation falls and rates come down, foreigners will have better visibility for calculations and direct investment should increase; and tensions with Washington are likely to ease after the trial of former president Jair Bolsonaro,” he said.

*By Gabriel Caldeira, Bruna Furlani, Maria Fernanda Salinet and Arthur Cagliari  — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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Brazil drafts big tech bills on content removal, child protection

Proposals require court orders for defamation takedowns, curb online fraud, and strengthen data protection authority

08/20/2025 

The bill will focus on content and the size of the companies
The bill will focus on content and the size of the companies — Photo: Pexels

The President Lula administration is preparing to submit to Congress, in the coming days, two bills aimed at regulating large technology companies. One will focus on competition, the other on online content.

According to government sources, the competition bill establishes annual revenue as a key criterion for defining which companies will be subject to the new rules. Firms with yearly revenues of around R$5 billion in Brazil and between R$40 billion and R$60 billion globally could fall within the scope of regulation.

Other qualitative factors will also be considered, such as data access and processing capacity, strategic importance for developing other businesses, and digital integration with adjacent markets. The government estimates that between five and ten companies operating in Brazil would meet these criteria.

By setting this “cutoff,” the Lula administration intends to focus regulation on the largest platforms, while providing a “safe harbor” for smaller firms. The aim, sources say, is to address digital monopolies in order to strengthen competition and level the playing field. The logic is to adopt preventive measures rather than corrective ones.

New powers for antitrust regulator

The competition bill would also grant new powers to Brazil’s antitrust watchdog, CADE, including the ability to curb the formation of oligopolies in the digital sector. To that end, it would create a new Digital Markets Superintendency within CADE to handle cases.

This body would be empowered to identify platforms and design customized measures for each. It would not, however, decide cases independently: all decisions would be submitted to CADE’s tribunal. According to officials, this reflects a concern with procedure and transparency. “The bill doesn’t bring a recipe, but rather a menu to guide CADE’s work,” said one source.

The government argues that regulation is needed to prevent tech companies from imposing exclusivity agreements or engaging in cross-market practices that could distort competition.

Social media and content rules

Alongside the competition bill, the government will submit another proposal focused on content regulation for digital platforms, particularly social media, with the goal of enhancing safety in the online environment. The scope would include services that intermediate products, services, and content.

According to officials, the principle is to address conduct that is already illegal offline, without creating a new digital penal code. The bill would impose administrative obligations on companies to tackle fraud and scams—described as an “epidemic”—and to improve protections for children and adolescents.

Because it involves content regulation, the proposal has drawn criticism from some civil society groups who warn of possible censorship. To defuse such concerns, the bill specifies that crimes against honor—such as defamation—could only be removed from platforms by court order. “If content could be removed merely by notification, it would trigger a war of notifications,” said one government source.

Exceptions are made for more serious crimes, such as terrorism and offenses against children and adolescents, which would allow immediate removal. Finally, the government plans to strengthen the National Data Protection Authority (ANPD), which would oversee platform compliance with these obligations.

*By Sofia Aguiar  and Renan Truffi  — Brasília

Source: Valor International

https://valorinternational.globo.com/

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Slow-moving Congress stalls reform decree for power sector

Delays installing committee to review decree could trigger expiration of electricity subsidies for low-income consumers

 

 

 

08/14/2025

The slow pace in Congress to set up the joint committee that will analyze Provisional Measure (MP) 1,300/2025 — the government’s proposal for reforming the electricity sector — has begun to cause concern within the Ministry of Mines and Energy, Valor has learned. The ministry’s main worry is the new model for the Social Tariff, which grants free electricity to low-income households.

Dubbed “Luz do Povo” (Light for the People), the new scheme offers free consumption of up to 80 kilowatt-hours (kWh) per month for beneficiaries. It has been in effect since July 5. The ministry believes the new rules are guaranteed for at least one tariff cycle — about a year. After that, one possibility would be to issue another MP next year to maintain the model.

At the National Electric Energy Agency (Aneel), however, the view is different. According to Valor’s sources, technical staff believe that if Congress fails to approve the MP, the new system would cease to exist immediately, as there would be no legal basis for the revised Social Tariff.

Lawyer Felipe Furcolin, a partner at Furcolin Mitidieri Advogados, says the continuation of the free allowance after the MP expires depends on how the relevant article of the Constitution governing MPs is interpreted. He notes that measures like the Social Tariff changes do not involve “established legal relationships” in the strict sense, which distinguishes them from cases recognized by previous Supreme Court rulings.

“Although actions have been taken, such as Aneel’s dispatch, the approval of the budget for the CDE [Energy Development Account], and even ordinary tariff reviews for certain distributors, these do not present the same level of individualization and bilateral obligations seen, for example, in an MP involving signed adhesion contracts and guarantee deposits,” Mr. Furcolin explained.

Similarly, lawyer Henrique Reis, a partner at Demarest, argues that while the subsidy is legitimate and socially justified, maintaining it after the MP’s lapse without conversion into law could face legal challenges.

“In principle, I understand that the discount from the MP would no longer apply. Just as the discount was applied immediately to the tariff in effect during Aneel’s approved cycle, the loss of effect of the provision that created the subsidy would have to be incorporated immediately into the current cycle,” he said.

The congressional committee’s installation had been scheduled for Tuesday (12), but the meeting was canceled for the second week in a row.

The government’s congressional leader, Senator Randolfe Rodrigues (Workers’ Party, PT, of Amapá), indicated that the decision to postpone came from Senator Eduardo Braga (Brazilian Democratic Movement, MDB, Amazonas), who was appointed by Senate President Davi Alcolumbre (Brazil Union of Amapá) to preside over the committee. Asked by Valor about concerns over deadlines, Mr. Braga said the government had not yet approached him about the matter.

Senate Infrastructure Committee Chair Marcos Rogério (Liberal Party, PL, of Roraima) said he sees no government effort to advance MPs in Congress. “The government should be the one in a hurry and get these committees working,” he said. “If there is no more careful and swift action, it will end up expiring.”

In a statement, the Brazilian Association of Electricity Distributors (Abradee) said it hopes deliberations begin as soon as possible, as the measures are both essential and urgent. “Abradee stresses that it is crucial for the MP to advance in its entirety, not just in the part concerning the social tariff. Without full review, the risk of further electricity bill increases is real.”

Aneel said in a note that it is monitoring the debate and awaiting the MP’s approval, and will assess the situation when called upon.

*By Marlla Sabino and Gabriela Guido, Valor — Brasília

Source: Valor International

https://valorinternational.globo.com/

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Monetary easing cycle expected to trigger Ibovespa rally

Study shows Ibovespa often rises in two waves when interest rates drop

08/14/2025

As market bets grow on when Brazil’s Central Bank (BC) will start cutting the Selic benchmark interest rate, the Ibovespa has been closely tracking market rate movements. That link could strengthen as some investors see room for a significant stock market rally, depending on the pace of monetary easing.

Historical data suggest the Ibovespa often experiences two upward movements during Brazil’s monetary easing cycles. The first, less pronounced, tends to occur before rate cuts begin, when markets are still gauging the scale of the cycle. The second, stronger surge typically happens well after the easing starts. The findings come from a Santander study commissioned by Valor, which examined 11 easing cycles in Brazil since 1999.

The bank noted that public services stocks—such as power and sanitation companies—listed in B3’s utilities index tend to post the biggest returns in the 12 months before a cycle starts, with gains averaging 35%. However, these stocks usually regain momentum only between 12 and 24 months after cuts begin. Real estate stocks, also tracked on B3, have shown even stronger performance one year into easing, with average returns of 51% over that period.

The expected cycle beginning in 2026 will mark the first time a rate-cutting process coincides with an election year. That could bring more volatility and affect returns, especially given the high Selic level of 15%.

“The Ibovespa does have a second leg up when rate cuts are prolonged,” said Ricardo Peretti, equity strategist at Santander Corretora.

The last time rates were at similar levels was in 2016, when they reached 14.25% a year. The BC began cutting in October that year, and the Ibovespa gained 20.0% in the six months before easing began, Mr. Peretti recalled. In the following six months, the increase was only 1.3%. But between 24 and 36 months after the 2016 cuts began, the index rose 21.2% and 35.6%, respectively—suggesting stronger long-term gains.

Median Ibovespa returns since 1999 show a 25% gain in the 12 months before a cycle, but a 6.4% drop in the six months before cuts begin. Three months ahead of easing, returns improve, turning positive at 9.3%. Performance 12 and 24 months after the start of a cycle shows gains of 12.3% and 29.4%, respectively.

“There’s always the perception that the market anticipates rate cuts—and it does. But there’s also a second leg if the Copom’s rate-cutting process is prolonged,” said Mr. Peretti.

With signs of slowing activity confirmed by July’s IPCA inflation reading coming in below median forecasts, asset managers point out how a restrictive monetary policy is weighing on the real economy. Many see now as the time to position in stocks likely to benefit from falling rates.

“We’re seeing a slowdown, especially in domestic retail and consumption. The impact of high Selic for a prolonged period is hitting consumers’ pockets,” said Christian Keleti, CEO of equity manager Alpha Key. “There’s a meaningful chance COPOM will cut by 300 basis points [3 percentage points] or more next year, given the scenario we’re seeing.”

Mr. Keleti said Alpha Key is starting to boost exposure to domestic sectors, but is focusing on companies that are neither stressed nor heavily leveraged, as this is not the time to take on such risks. Two key holdings are Assaí and C&A, which have been posting solid results for several quarters.

“Assaí is cutting investments to improve efficiency, reduce leverage, and fine-tune operations, aiming to boost sales when the market improves. C&A, the best ‘fast fashion’ company in the past two years, should benefit from potential rate cuts, as it’s managing risks well and could be more confident in boosting card sales,” Mr. Keleti said.

While consumer stocks in B3’s sector index posted returns of 7.8% in the 12 months before rate cuts, Santander’s study shows the sector delivered much stronger gains—39.0%—a year after easing began.

Another standout is smaller-cap companies. Santander found that since 1999, the highest small-cap index returns came between six and 12 months after cuts began, with median gains of 25.6% and 27.1%, respectively.

Among small caps, Brisanet, Intelbras, and Priner are key bets for Leblon Equities to ride the Selic downtrend. Leblon founding partner Pedro Rudge said falling rates tend to increase risk appetite and benefit companies with more limited access to credit, such as small caps.

Leblon is also assessing potential asymmetries in a scenario of possible political change in 2026. Recently, it added long positions in Petrobras and Banco do Brasil. “Looking at current prices, we don’t think the market is adequately pricing in a possible change of government in 2026,” Mr. Rudge said.

Although the short term could bring concerns about farm loan defaults at Banco do Brasil and higher Petrobras investment spending, Rudge sees a safety margin. “There’s cushion to work with, even under those assumptions. Combined, the positions should represent about 4% of the portfolio,” he said, adding that Leblon has a three-to-five-year investment horizon and avoids placing disproportionate weight on short-term views.

A Bank of America survey of 31 Latin American asset managers, with about $110 billion under management, showed a shift in expectations for when investors will start trading with an election focus.

In July, 57% of managers expected “electoral trade” moves to start in the last quarter of this year or earlier. This month, only 22% said those moves would begin by year-end, with most now betting on the first and second quarters of next year.

Michel Frankfurt, head of Scotiabank’s brokerage in Brazil, noted that elections traditionally had less impact on Brazilian assets, but that changed with the sharper polarization of recent races.

“We have diametrically opposed proposals. Polarization will bring volatility in a divided country,” Mr. Frankfurt said. “The president’s popularity was falling but has now recovered. Imagine the impact as the election nears,” he added.

* By Maria Fernanda Salinet  and Bruna Furlani  — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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Congress moves to curb Supreme Court after Lower House unrest

Lawmakers revive stalled proposals to expand protections for parliamentarians, citing political momentum and U.S. sanctions on justices

 

 

 

 

 

08/11/2025 

Lawmakers who took part in the meeting that brokered the deal to end the occupation of the Lower House floor last Wednesday (6) believe the current political climate is more favorable for challenging the Supreme Court. That was one of the key factors considered by leaders of the center-right bloc in giving the green light to a set of bills that would bolster parliamentary immunity.

Cited as a chief broker of the deal that dismantled the pro-Bolsonaro uprising, former Speaker Arthur Lira was involved in similar initiatives when he previously led the Lower House. The first proposals emerged in the wake of the 2021 arrest of former congressman Daniel Silveira.

One bill, introduced by pro-Bolsonaro lawmaker Soraya Santos, would have required that any lawmaker arrested be brought to the Lower House along with the arrest records. Both the records and the detainee would be held in custody by the Constitution and Justice Committee until the full House decided on the arrest. The proposal failed to advance and was shelved.

Around the same time, then-congresswoman Celina Leão, now the vice governor of the Federal District (Brasília), introduced a bill to prevent the same judge from overseeing both an investigation and the resulting criminal trial. “This seeks to give such proceedings the accusatory nature required by our Constitution, ensuring that the impartiality of the judge is not mere fiction,” she argued. That proposal also failed to advance.

In October of last year, under Mr. Lira’s leadership, the House attempted to revive what became known as the “anti-Supreme Court package,” which included two constitutional amendments. One would have allowed Congress to suspend Supreme Court rulings; the other would have limited the ability of justices to issue injunctions acting alone.

Both proposals cleared the Constitution and Justice Committee but stalled thereafter. At the time, Justice Gilmar Mendes called the initiatives “a disgrace.” Tensions between the branches of government had already been mounting, particularly amid demands for greater transparency in the execution of parliamentary budget allocations.

A lawmaker who attended the meeting that sealed the deal to vacate the House floor said the prevailing view was that the political environment had left the Supreme Court more vulnerable, creating a new opening to push measures that would shield legislators.

The U.S. government’s sanctions on the court—including the revocation of visas for eight justices and the application of the Magnitsky Act to Justice Alexandre de Moraes—are also seen as a sign of weakness. Added to that are criticisms from various sectors of society over what some view as Justice Moraes’s excesses in handling the investigation against former president Jair Bolsonaro.

“We have the word of five leaders, representing 261 lawmakers, that the House, united, will consider a proposal to restore the moral standing of the Brazilian parliament,” one participant said.

The immediate goal is to swiftly approve a constitutional amendment changing the rules on parliamentary immunity. The current draft, which could benefit dozens of lawmakers under Supreme Court investigation for irregularities in budget allocations, is expected to be amended on the floor, potentially ensuring that such cases are transferred not to lower courts but to the Federal Regional Courts, one level above.

Weakened by the uprising, Speaker Hugo Motta reiterated the widespread dissatisfaction among lawmakers with the Supreme Court, a sign he will back a renewed push for protective measures.

“Some invasions of prerogatives, interference of the judiciary in the legislature… Sometimes anti-Supreme and anti-judiciary measures gain reciprocal support because of this discontent,” Mr. Motta told the news website Metrópoles. “But it is also the duty of all those who set the agenda to focus on what is important to strengthen our prerogatives,” he added. Messrs. Motta and Lira declined to comment when contacted.

*By Beatriz Roscoe and Murillo Camarotto  — Brasília

Source: Valor International

https://valorinternational.globo.com/

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Lula bets on U.S. Treasury secretary to help reverse tariffs

Brazil pins hopes on Scott Bessent’s ties to Donald Trump to ease trade dispute

 

 

 

 

08/11/2025

After failed attempts to negotiate with various members of the U.S. government, President Luiz Lula’s administration has singled out Treasury Secretary Scott Bessent as one of the few figures capable of persuading U.S. President Donald Trump to back down on the new tariff hike. Officials believe Mr. Bessent is among the few persons with whom the Lula government has managed to build a working dialogue and who also has Mr. Trump’s ear. The hope is that he can carry President Lula’s proposals directly to the White House.

In the coming days, Mr. Bessent is expected to speak by phone with Finance Minister Fernando Haddad. The renewed contact is one of the Brazilian government’s last hopes for resolving the trade dispute.

In May, Mr. Haddad met Mr. Bessent in Los Angeles, but that meeting took place before Trump announced a 50% tariff on Brazilian goods. This week’s conversation will take place with the tax already in effect. According to Lula administration officials, Mr. Haddad will focus on the trade issue and attempt to keep politics out of the discussion.

Even so, while Mr. Bessent is seen as the best hope for getting Brazil’s counterproposals onto the president’s desk, President Lula’s aides have been warned that the Treasury secretary does not “buy into every battle” that comes his way, raising doubts about whether he will be willing to engage on the 50% tariff.

“The adult in the room who has the best chance of resolving this is Bessent. He’s the guy for this kind of thing—but he picks his battles,” said one source familiar with the talks. Behind the scenes, the Workers’ Party government acknowledges the negotiations are tough and that Brazilian officials need to “keep a cool head” in the debate. “The negotiation won’t happen on the schedule people expect,” the source added.

The focus on Mr. Bessent emerged after Lula’s government sought out several other Trump administration figures for discussions on Brazilian exports. Most of those envoys, however, proved unable to advance Brazil’s case — and, informally, some admitted they did not have the authority to negotiate such an impasse.

In recent weeks, Brazilian officials have spoken, for instance, with U.S. Secretary of State Marco Rubio and Commerce Secretary Howard Lutnick. Valor has learned that Mr. Rubio agreed on the importance of maintaining open channels of dialogue, noting the 200 years of diplomatic relations between Brazil and the United States. Nevertheless, none of these conversations resulted in a concrete avenue for talks, frustrating the Brazilian side.

Veteran diplomats at Brazil’s Foreign Ministry say the complexity of the situation has much to do with Trump’s management style. A case in point is the recent dismissal of U.S. Labor Department chief Erika McEntarfer, who was fired after the release of July’s payroll report showed far fewer jobs created than expected.

According to sources, such episodes help explain the “defensive” posture U.S. officials have adopted in talks with Brazil so far.

“As long as Trump doesn’t move the pieces on the chessboard, his officials will keep playing defense and holding the line. If any of them step out of line, their career is over. It’s no coincidence he fired the Labor Department official,” one source said.

*By Renan Truffi and Sofia Aguiar — Brasília

Source: Valor International

https://valorinternational.globo.com/

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