Lula seeks U.S. rapprochement ahead of 2026 election

Brazil aims to enter next year without new sanctions and, if possible, with softer stance from Trump

 

 

 

10/13/2025

The Lula administration will kick off trade negotiations with the United States this week, keeping a close eye on Brazil’s electoral calendar. According to sources in the presidential palace, one of the government’s main goals is to reach 2026 without new sanctions on Brazilian products or institutions—and ideally, with some degree of goodwill or retreat from U.S. President Donald Trump following recent signs of rapprochement between the two leaders.

The strategy assumes that the fewer sanctions the United States imposes on Brazil, the fewer doubts there will be internationally about the legitimacy of Brazil’s upcoming elections.

Advisers close to Mr. Lula say the move is partly motivated by concerns that Jair Bolsonaro’s political movement aims to push Mr. Trump to reject the results of Brazil’s 2026 election—an outcome that could weaken the country’s democracy in the eyes of the world. Congressman Eduardo Bolsonaro (PL of São Paulo), the former president’s son, publicly acknowledged this possibility months ago.

“I can easily foresee the United States not recognizing a Brazilian election. That would make Brazil, the entire country, subject to international sanctions. And when the U.S. imposes such sanctions, they’re often followed by the European Union, Canada, and others. I hope that doesn’t happen,” said Eduardo in March.

Until recently, officials in Brasília were convinced that Mr. Trump would use his political leverage to undermine Mr. Lula’s reelection bid. Now, however, they believe the government has managed to shift the dynamic and must handle ongoing talks “with caution” to preserve the positive momentum in bilateral relations through next year.

The diplomatic effort is being coordinated by Foreign Minister Mauro Vieira, Finance Minister Fernando Haddad, and Vice President Geraldo Alckmin. Mr. Vieira is expected to meet personally with U.S. Secretary of State Marco Rubio in the coming days. Mr. Haddad was also scheduled to travel to Washington but canceled the trip to focus on alternatives to a provisional presidential decree overturned last week—an event that removed more than R$40 billion from next year’s federal budget.

For now, the presidential palace is focused on damage control. Officials are wary of Mr. Trump’s unpredictable behavior, given his sudden policy shifts in cases such as the Russia-Ukraine conflict. “There’s no guarantee,” said one government insider, “that the U.S. president will maintain his friendly tone toward Brazil through the election period.”

Meanwhile, little has changed in practical terms: Brazilian goods remain subject to 50% tariffs, and national institutions continue to face sanctions under the Magnitsky Act.

“At this point, the Lula administration is celebrating the fact that it received a positive initial response, even though no concrete discussion of sanctions or concessions has taken place. We must remember that trade relations with the United States remain very poor,” said Benny Spiewak, an international law expert with a master’s degree from George Washington University and partner at SPLAW Advogados. “If the election were held tomorrow, the tone of the U.S. statement would clearly be critical of Lula’s potential reelection,” Mt. Spiewak added. “The Itamaraty [Brazil’s Foreign Ministry] will have to work hard to resolve—or at least give the impression it is resolving—these issues before then.”

Other analysts share this view. “Entering 2026 without any political or economic sanctions from the United States will depend on how pragmatically the Lula administration handles foreign policy,” said Carla Junqueira, an international trade lawyer at CJA Trade Law. “The Brazilian government must act cautiously, negotiating potential reversals while showing voters that it is defending national sovereignty against external pressure. That would reduce the risk of foreign questioning of the election’s legitimacy.”

*By Renan Truffi and Sofia Aguiar — Brasília

Source: Valor International

https://valorinternational.globo.com/

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Brazil redirects tariffed goods to other markets, lifts sales

Higher coffee and beef prices help offset losses from Trump’s tariff hike

 

 

 

 

10/13/2025 

By redirecting shipments in August and September, Brazil managed to offset the drop in export revenue for major products hit by U.S. President Donald Trump’s new tariffs. Of the 20 most-exported Brazilian goods affected by the tariff hike in those two months, nine saw a decline in sales to the United States but either increased exports to the rest of the world or saw smaller declines compared to the same period in 2024.

Although exports of those nine products to the U.S. fell by $375.5 million, shipments to other countries rose by a combined $1.25 billion in August and September compared to the same months last year.

This rebound was driven primarily by shipments of unroasted coffee and frozen boneless beef to alternative markets. Export revenues also benefited from higher prices for both products.

Foreign Trade Secretariat (SECEX) data show that coffee exports were redirected mainly to European countries such as Germany and the Netherlands, as well as Japan. Beef exports increased sharply to China and the Philippines.

Exports of both products also surged to Mexico, a U.S. neighbor that could be serving as a gateway to the American market. In August and September, Brazil’s frozen beef exports to Mexico nearly quadrupled (up 292.6%), while coffee exports rose 90% compared to the same months of 2024.

The analysis of the 20 top export products was conducted by Lia Valls, an economist and professor at Rio de Janeiro State University (UERJ) and a researcher at the Brazilian Institute of Economics at Fundação Getulio Vargas (FGV IBRE), in collaboration with Valor, using SECEX data. The list includes items affected by both Mr. Trump’s 50% tariff and Section 232 tariffs, which target steel and aluminum, based on research by the Institute for Industrial Development Studies (IEDI).

These 20 products accounted for 29.3% of all Brazilian exports to the U.S. in August and September, including those not subject to the new tariffs.

Varying impacts

Ms. Valls noted that the tariff hike had a wide range of effects on different goods. “The data show a reconfiguration of markets, but some products are still facing more complex situations,” she said.

Among the 20 main products hit by the tariffs, Brazil increased exports of six to the U.S., though at a slower pace than to other markets. For the remaining five, exports to the U.S. rose while shipments to other countries grew less or fell. As a result, the U.S. share of Brazil’s exports of these 20 products dropped from 28% in August and September 2024 to 21.4% this year.

The U.S. share of Brazil’s overall exports also fell, from 11.6% to 9% in the same comparison.

However, not all redirected exports were able to fully recover lost revenue, said Rafael Cagnin, chief economist at IEDI. He pointed to one of the most important items affected by the tariffs: semi-manufactured iron or steel products. Shipments of these items to the U.S. totaled $360.5 million in August and September, down 19.4% from a year earlier, a $86.7 million drop in revenue.

Meanwhile, exports of the same items to other countries rose 36%, totaling $127.2 million—a $31.5 million increase that was not enough to offset the losses in the U.S. market.

Revenue gains were also only partial for other major export categories to the U.S., such as prepared foods and preserved beef, and electric transformers.

Coffee and beef lead gains

Among the 20 products analyzed, unroasted coffee and frozen boneless beef stood out for more than offsetting the drop in U.S. exports.

Brazil’s frozen boneless beef exports to the U.S. fell 58%, a $90.9 million loss in revenue. But shipments to other countries soared 70% in the period, generating an additional $1.16 billion.

Unroasted coffee exports to the U.S. dropped 11.3%, or $27.52 million, while exports to other countries rose 9.1%, generating an additional $155.3 million in revenue. The comparisons cover August and September of 2025 versus the same months in 2024.

Coffee and beef are among Brazil’s key exports to the U.S., but they were less affected by the tariff hike, said Mr. Cagnin. “That’s because these products are not heavily dependent on the U.S. market, making it easier to redirect shipments and still exceed what was needed to make up for the losses,” he said. “And both products are benefiting from favorable pricing trends—coffee prices are rising, and so are beef prices.” That, he added, gives exporters more leverage in price negotiations even as they adjust their destinations.

China stood out as the top alternative market for frozen beef. After the tariffs were imposed, the U.S. share of Brazil’s beef exports dropped from 8.6% in August–September 2024 to 2.3% in the same months of 2025. China’s share rose from 58.8% to 67.2%, with a sales increase of 81.8%. Exports to Mexico grew even more—up 292.7%—though from a smaller base. Mexico’s share rose from 1.5% to 3.6%.

“Exporters are exploring new markets beyond the U.S., and China is capitalizing on this,” said José Augusto de Castro, president of Brazil’s Foreign Trade Association (AEB). “While Brazil looks to diversify its exports due to the tariff hike, China is expanding its share of global imports. We’re hitting export records for meat, and China is taking that in, just as it did with soybeans in the past.”

Rising China dependence

Mr. Cagnin warned that increasing dependence on China, especially for meat exports, is a concern. “Brazil is already highly reliant on the Chinese market when you look at overall exports,” he said.

He also pointed to products that saw export declines both to the U.S. and to other countries, including diesel engine parts, plywood from other wood types, and alternative cane and beet sugars.

“These trends highlight the need to reduce dependency on the U.S. and expand to new markets, such as the European Union and South America,” he said. “The deeper shift brought by the tariff hike is that the U.S. can no longer be seen as a reliable partner.”

Interestingly, some tariffed products still saw growth in U.S. exports. Ms. Valls highlighted rubber tires used in buses and trucks, which surged 417.3%. Exports of bulldozers and angledozers rose 66.2% and 707%, respectively.

For Mr. Castro, this could be due to Brazil’s role in supply chains or intra-company trade. Ms. Valls added that some items were listed under specific codes in the U.S. exemption decree, which may allow room for classification debates and open up opportunities to continue exporting those products.

*By Marta Watanabe — São Paulo

Source: Valor International

https://valorinternational.globo.com

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Jurists expect a younger replacement for Justice Barroso

Justice’s early retirement gives President Lula another opportunity to appoint an ally to Brazil’s Supreme Court

 

 

 

10/10/2025

The three frontrunners to succeed Justice Luís Roberto Barroso on Brazil’s Supreme Court—Bruno Dantas, minister at the Federal Court of Accounts (TCU); Attorney General Jorge Messias; and Senator Rodrigo Pacheco (Social Democratic Party, PSD, of Minas Gerais)—are all considered well qualified for the position, according to jurists and lawyers interviewed by Valor. Mr. Barroso announced on Thursday (9) that he will leave the court after 12 years.

Constitutional law professor and attorney Lênio Streck said Mr. Barroso’s retirement opens the way for President Lula to nominate someone who could remain on the court for roughly two decades. “One key factor is appointing someone younger, and that’s exactly what Lula will do—I have no doubt. The president will choose a highly aligned, organic candidate,” Mr. Streck said, pointing to Mr. Messias as the favorite.

According to Mr. Streck, naming either Mr. Pacheco or Mr. Dantas would steer the choice toward a more political discussion, something the government is likely to avoid.

For Roberto Dias, a professor of law at FGV Direito SP, the ideal profile to replace Mr. Barroso would resemble that of current Chief Justice Edson Fachin: “A justice who speaks primarily through court opinions, avoids political circles, and reinforces the perception of impartiality at the Supreme Court, especially at a time when the court continues to face fierce criticism.”

Mr. Dias noted that while the leading contenders meet constitutional requirements of “impeccable reputation and distinguished legal expertise,” they are closely tied to politics. He argued that Mr. Lula should instead consider appointing a woman, preferably a Black woman, to promote greater representation on the court.

“In the Supreme Court’s composition, people with diverse perspectives are essential to forming more consistent decisions that reflect the diversity and pluralism enshrined in the Federal Constitution,” he said.

Criminal law expert and PUC-SP professor Conrado Gontijo agreed that Mr. Messias, Mr. Pacheco, and Mr. Dantas possess undeniable legal credentials, having held important positions throughout their careers.

Mr. Gontijo said Mr. Barroso played a central role in key democratic debates during his tenure at the Supreme Court, fulfilling with “absolute rigor” the constitutional mission entrusted to the court’s justices. During Mr. Barroso’s tenure as chief justice, he added, the court faced enormous and unprecedented challenges, including “serious and unfounded attacks.” “His unwavering defense of the Constitution and all it represents was vital to preserving Brazil’s institutional framework,” Mr. Gontijo said.

Attorney Antônio Carlos de Almeida Castro, known as Kakay, praised Mr. Barroso’s performance as both justice and president of the Supreme Court, as well as his leadership of the Superior Electoral Court (TSE). “The open confrontation initiated by [then-President] Bolsonaro, who insulted and vilified him, shows that Barroso was on the right side and that he clearly unsettled the far-right faction in power at the time,” Mr. Castro said.

Mr. Streck divided Mr. Barroso’s Supreme Court stint into two distinct phases. In the first, the justice supported Car Wash Operation, the now questioned anti-corruption task force, adopting a more “punitive” stance. In the second, particularly over the past two years, during his presidency, Mr. Barroso became a key defender of democracy as the Supreme Court came under attack from the Bolsonarist movement.

Throughout his tenure, Mr. Streck emphasized, Mr. Barroso consistently acted in defense of the Constitution and individual rights. He cast votes advancing social rights for minorities, Indigenous peoples, racial quotas, and same-sex marriage, even while maintaining a more liberal stance on labor reform.

“This duality defined Mr. Barroso’s legacy on the court, as a justice who, while once punitive in criminal matters, will be remembered for his steadfast defense of minorities and fundamental rights,” Mr. Streck concluded.

*By Rafael Rosas and Jessica Alexandra — Rio de Janeiro

Source: Valor International

https://valorinternational.globo.com/

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Payment of Dividends: Changes in Taxation.

Payment of Dividends: Changes in Taxation.

 

By Edmo Colnaghi Neves (PhD).

 

The taxation of dividend payments is about to change. Currently, dividend distributions are exempt from income tax; however, earlier this month (October 2025), the Brazilian House of Representatives approved a bill that introduces taxation on such payments.

This change may significantly impact foreign capital invested in Brazil.

Brazil adopts a bicameral legislative system; therefore, the bill must also be approved by the Federal Senate.

Under the constitutional principle of anterioridade (non-retroactivity and prior notice of tax laws), in order for the new rules to take effect in 2026, the bill must be approved by both Houses of Congress and sanctioned by the President of the Republic by December 31, 2025.

The proposed legislation is part of the same bill that establishes income tax exemption for individuals earning up to BRL 5,000.00 per month, among several other measures, and has therefore drawn the attention of the entire nation at the close of this year.

According to the bill, as of 2026, dividend payments made by the same legal entity to the same individual in any given month exceeding BRL 50,000.00 will be subject to a 10% withholding tax at source. The tax will also apply when the total annual amount of such income — including dividends, interest, and rental income — exceeds BRL 600,000.00.

This represents a major shift in the Brazilian tax framework, which is expected to be approved by Congress and to take effect as of 2026. It will require affected parties to gain an in-depth understanding of the proposed changes, consider alternative provisions of the bill, and engage in careful tax, corporate, and estate planning.

October 2025

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Federal Police say methanol crisis could be linked to fuel fraud

Director-General Andrei Rodrigues says probe entered phase of interagency cooperation with state forensic units

 

 

10/09/2025 

The director-general of Brazil’s Federal Police, Andrei Rodrigues, said on Wednesday (8) that the ongoing investigation into the contamination of alcoholic beverages with methanol may be connected to a major fuel fraud uncovered recently by the Federal Police.

“There is a possible connection with the previous operation on fuel adulteration, especially since the methanol’s port of entry was Paranaguá. It probably involved some criminal organization,” Mr. Rodrigues told reporters at the Ministry of Justice and Public Security headquarters.

He added that the investigation is now in a “phase of cooperation,” particularly in the forensic area, through a national integrated system that brings together Federal Police experts and state forensic police.

“We are combining efforts to gain access to materials seized by other police agencies, as well as to our own seizures, so that everything can be sent for forensic analysis,” he explained.

On September 29, the Federal Police started investigating a series of methanol poisoning cases in São Paulo. The move followed suspicions that the incidents could be linked to organized crime groups and to the recent fuel fraud probes.

The investigation was launched at the request of Justice and Public Security Minister Ricardo Lewandowski, who said Tuesday (7) that the Federal Police joined the case because authorities cannot rule out the possibility that the contamination represents a “national problem.”

According to the minister, the suspected criminal involvement may not necessarily involve the country’s well-known prison factions, but rather an organization operating specifically in the illicit alcohol production and beverage falsification trades.

*By Maira Escardovelli — Brasília

Source: Valor International

https://valorinternational.globo.com/

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Congress kills financial tax bill amid early 2026 election clash

Government accuses São Paulo governor of pushing centrist parties to block measure; lawmakers remove it from agenda

 

 

 

10/09/2025

Just a week after a major win with the approval of the income tax reform, the Brazilian government suffered a significant setback in Congress on Wednesday (9) as lawmakers rejected a provisional presidential decree that sought to tax financial investments and tighten spending.

Throughout the day, leaders from the powerful centrist bloc known as the Centrão—including state governors—mobilized to rally opposition to the bill, which the government had expected would raise R$31.5 billion in revenue and generate R$15 billion in savings by 2026. The presidential palace attempted to mount a response but was ultimately defeated in an unusual manner.

The measure was effectively shelved when the Lower House passed, by 251 votes to 193, a motion to remove the bill from the agenda. This type of procedural motion is voted on before discussion of the bill’s content and, if approved, delays the vote. Because the provisional decree was set to expire on Wednesday, it was permanently dropped.

President Luiz Inácio Lula da Silva reacted on social media, arguing that the measure aimed to correct tax distortions. “Blocking this correction is a vote against balanced public finances and tax fairness. What’s behind this decision is a bet that Brazil will collect less revenue to restrict public policies and social programs that benefit millions. It’s a move against Brazil,” he wrote.

The likelihood of defeat had become clearer the day before, when Congressman Carlos Zarattini of the Workers’ Party (São Paulo) struggled to get his report approved by a joint congressional committee. After intense negotiations and revisions, which cost the government an estimated R$3 billion in revenue, the report was approved by just one vote. Citing the razor-thin result, Mr. Zarattini accused centrist parties of breaking a deal, singling out the Republicans, Brazil Union, the Progressive Party (PP), and the agribusiness caucus for voting against the bill.

House Speaker Hugo Motta (Republicans Party, Paraíba) tried to broker an agreement to pass the measure, but ran into resistance from key centrist leaders. The figure most strongly accused of working against the measure was São Paulo Governor Tarcísio de Freitas (Republicans), who denied any involvement.

“We felt very strongly the interference, purely political and electoral, of the São Paulo governor, who mobilized party presidents to change their stance on the provisional decree. Those of us who work for the best solution in each case and for meeting fiscal targets regret that a governor would use his position solely to prepare for an election campaign,” Mr. Zarattini said on the House floor.

Following controversy over the “shielding bill”, the Centrão and opposition lawmakers resumed strong anti-tax rhetoric to justify their rejection of the measure. Despite holding federal cabinet positions, parties like Brazil Union, the Progressive, and the Republicans ordered their members to vote against the bill. The Social Democratic Party (PSD), which had considered letting lawmakers vote freely, also instructed its members to oppose it.

Facing this unfavorable scenario, President Lula called a lunch meeting with leaders from the government’s congressional base, joined by Finance Minister Fernando Haddad and Institutional Relations Minister Gleisi Hoffmann. After the meeting, the government’s leader in the Lower House, José Guimarães (Workers’ Party, Ceará), said the administration might issue new decrees to make up for the revenue lost from the bill’s defeat.

Mr. Lula urged Congress to show “maturity” and criticized the use of the provisional decree for electoral purposes, in a clear jab at Mr. de Freitas. “If someone wants to turn this into an election issue, I can only say that it shows a staggering level of pettiness. Anyone can claim the proposal as their own. Any lawmaker can take credit for having voted in favor,” the president said.

Mr. de Freitas denied the accusation in comments to Valor. “I don’t interfere in these matters. We’re very focused on a number of issues here [in São Paulo],” he said.

In an effort to rally support, the government temporarily removed three ministers from their posts so they could vote in the Chamber: Tourism Minister Celso Sabino (Brazil Union, Pará), Sports Minister André Fufuca (Progressive Party, Maranhão), and Ports and Airports Minister Silvio Costa Filho (Republicans, Pernambuco). Ms. Hoffmann also sent messages to the Centrão parties controlling those ministries.

“If this bill fails, it will reveal a lack of public spirit [among lawmakers]. I appeal to all parliamentarians to walk with us in Congress today because this country is on the path to building social justice,” Ms. Hoffmann said.

Another strategy was to draw a comparison to the recent approval of the “shielding amendment,” when centrist parties and pro-Bolsonaro opposition lawmakers joined forces in a vote. The idea was to pressure opponents by labeling them as “enemies of the people,” but the tactic failed. Even after voting down the measure, most Centrão leaders refrained from making speeches, limiting themselves to brief, generic instructions.

Only Liberal Party leader Sóstenes Cavalcante (Rio de Janeiro) spoke forcefully. He congratulated the presidents of the main Centrão parties individually for voting against the bill. He said the move “shows, contrary to what many thought, that the center-right will be united in 2026” around whoever former President Jair Bolsonaro chooses to face Mr. Lula.

Tensions between the executive branch and Congress had already been mounting before the measure was introduced. President Lula issued it in June after lawmakers overturned a presidential decree setting new rates for the IOF (Tax on Financial Transactions). The original goal was to offset the revenue loss caused by that repeal.

*By Murillo Camarotto, Giordanna Neves, Beatriz Roscoe and Renan Truffi, Valor — Brasília

Source: Valor International

https://valorinternational.globo.com/

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Brazilian Amazon residents complain about heat, pollution

Climate crisis should already be treated as a public health and social crisis, survey shows

 

 

 

10/09/2025

In the Brazilian Amazon, the climate crisis should already be treated as a public health and social crisis, especially for traditional and Indigenous communities. This is what shows a new survey released this Wednesday (8), in which a third of the more than 4,000 respondents claim to be directly affected by global warming—whether through rising living costs, food insecurity, or heat-related chronic diseases.

The increase in electricity prices was the most common impact mentioned by the Amazonians who responded to a survey by Umane and Vital Strategies, with support from the Devive Institute. In total, 83.4% complained about higher electricity bills.

Other problems included rising average temperatures (82.4%), increased air pollution (75%), more frequent environmental disasters (74.4%), and rising food prices (73%). All of these factors cause and exacerbate health problems, says Luciana Vasconcelos Sardinha, deputy director of chronic non-communicable diseases at Vital Strategies.

Indigenous peoples, quilombolas, riverside communities, and rubber tappers are among the most affected, representing 42.2% of respondents who claim to be directly impacted by the climate crisis. These groups report worsening water quality and food production, increased vulnerability to extreme events, and dependence on natural resources for survival. Most depend on the Brazilian Unified Health System (SUS) for healthcare.

“The environmental agenda is directly related to public health, especially for more vulnerable populations who, in addition, are farther from urban centers and feel the consequences of drought more acutely, for example. These people also have a more acute perception of what is happening because they depend on natural resources that are under threat,” says Ms. Sardinha.

She emphasizes that exposure to climate change is also greater due to the accumulated deforestation over the last 20 years.

Regardless of the respondents’ income, the survey’s technical manager emphasizes that environmental problems weigh financially on households because they are unable to produce or collect enough of their own food and raw materials. As a result, in addition to food insecurity, households are in the red.

In the Brazilian Amazon, the main economic activity is agriculture. It covers over 5.1 million km2 of land distributed across nine states—Acre, Amapá, Amazonas, Mato Grosso, Pará, Rondônia, Roraima, Tocantins, and part of Maranhão. On the map, deforestation is a historical reality, Ms. Sardinha points out, and makes extreme droughts trigger even more serious consequences, for example.

Of the total respondents, 53.3% say they have reduced practices they believe worsen the crisis, and 38.4% say they feel guilty about wasting energy. According to Ms. Sardinha, this feeling reflects a mental health issue, specifically climate anxiety.

There is widespread evidence of health damage caused by intense heat throughout Brazil, says Ana Valério de Araújo, executive director of the Brazil Fund for Human Rights. With poorer health, the population is unable to work, worsening economic activity in regions affected by climate disasters, she says.

“Some groups have their rights violated more than others because they are already experiencing structural changes, in addition to those caused by climate change. For example, Indigenous peoples, who simultaneously fight for their right to land and against the impacts of extreme weather events, which tend to be much greater than for those living in urban areas,” she explains. The trend, she adds, is for climate change to deepen social inequalities if there are no governance and preparedness in the public and private sectors.

*By Isadora Camargo — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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RESOLUÇÃO SESP Nº 21, DE 08 DE SETEMBRO DE 2025

*Por meio de Resolução SESP no. 21, publicada no Diário Oficial do Estado em 06 de outubro de 2.025, foi criado o Memorial Olímpico, Paralímpico e do Esporte do Estado de São Paulo Major Sylvio de Magalhães Padilha. Cabendo a Alberto Murray Neto o posto de coordenador da comissão de trabalho para instituição do Memorial.*

 

 

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Tariffs, strong real and rising costs slash exporters’ margins

Brazil’s export profitability drops 7.7% in August as 2025 outlook turns negative

 

 

 

 

10/06/2025 

A stronger real against the dollar, new U.S. tariffs, falling average export prices, and rising production costs, especially wages and services, dealt a broad blow to Brazilian exporters’ profit margins in August. The hit spanned across industry, extractive sectors, and agribusiness.

Brazil’s overall export profitability dropped 7.7% from August 2024, according to the Foreign Trade Studies Foundation (Funcex). While year-to-date profitability remains slightly positive at 0.9%, it is slowing sharply. In the year through July, the increase stood at 2.2%. Funcex now expects the cumulative margin to flip into negative territory and close 2025 with a 1% loss compared to 2024.

The drop in August was widespread, affecting 24 of the 29 sectors tracked by Funcex.

Daiane Santos, economist at Funcex and professor at the Rio de Janeiro State University (UERJ), said the margin decline reflected a combination of three pressures: a nominal 1.9% appreciation of the real, a 3.3% drop in average export prices, and a 2.7% increase in production costs.

Services and wages were the main contributors to higher production costs, rising 5.2% in August year over year. Domestic inputs rose 1.9%, while imported inputs dropped 2.6%, but not enough to offset the broader cost increases.

The rea’’s appreciation already impacted margins in July, though to a lesser degree. That month, the real rose 0.2% compared to July 2024, contributing to a 4.4% margin drop.

Ms. Santos said the appreciation trend continued in September, likely further squeezing profitability. By the end of September, she projects margins could be flat year to date. From October onward, the cumulative figure is expected to turn negative, ending 2025 down about 1%.

The real’s strength hurts profit margins across all export segments. Sectors with the steepest margin declines in August included fishing and aquaculture; pulp, paper, and paper products; and oil and gas extraction.

Of the 29 segments tracked by Funcex, 15 still posted year-to-date margin gains but saw drops in August compared to a year earlier. These include food products, textiles, wood products, furniture, metallurgy, electrical machinery, and motor vehicles.

Pharmaceuticals and chemicals, computer equipment, and other transportation equipment were among the few with gains both in August and year-to-date. Aircraft, which fall under “other transport equipment,” were exempted from the new tariffs.

Commodities and global trade headwinds

The exchange rate isn’t the only factor weighing on margins. Export prices also show no sign of recovering, said José Augusto de Castro, head of the Brazilian Foreign Trade Association. “Commodity prices are likely to hold steady or fall a bit further. I see no drivers for an increase right now,” he said.

Mr. Castro expects average prices for soybeans, oil, and iron ore in 2025 to be lower than in 2024. As many commodities are used as inputs for manufactured goods, falling prices also drag down prices for industrial products.

He also pointed to weaker global trade, driven in part by uncertainty surrounding tariff policies under U.S. President Donald Trump.

The World Trade Organization now forecasts global goods trade to grow just 0.9% in 2025, down from the 2.7% previously projected before the recent wave of tariff hikes. In 2024, goods trade grew 2.9%.

Mr. Castro said uncertainty will likely persist, especially around Mr. Trump. He noted that the U.S. president signed a new executive order last week imposing 10% tariffs on wood products and 25% on some types of furniture.

Lower prices

Funcex data show that the pace of decline in average export prices accelerated in August, down by 1.5 percentage points compared to July, year over year. Ms. Santos attributed the sharper fall in part to President Trump’s tariffs, which pushed Brazilian exporters to renegotiate prices with U.S. buyers.

The footwear sector was one of the hardest hit, said Priscila Linck, economist and market intelligence coordinator at Abicalçados, Brazil’s footwear industry association.

From January to August, export profitability for footwear, travel goods, leather, and related products dropped 3.9% compared to the same period in 2024. In August alone, the margin fell 11%, driven by a 6.1% drop in average export prices.

Ms. Linck noted that leather and footwear have different market dynamics, but both are being impacted by international trends and U.S. tariffs. “When the real appreciates, companies have less room to offer discounts in dollars without compromising profitability. But sometimes dollar discounts are the only way to maintain volume in international markets,” she said.

She described the current global landscape as uncertain, with intensifying competition—particularly from Asia in key markets for Brazilian footwear. “There was a significant export loss in August due to the tariffs,” she said.

Footwear shipments to the U.S. fell in August, contributing to a 0.5% drop in Brazil’s overall footwear export volume and a decline in average prices. Footwear sold to the U.S. typically has higher added value, Ms. Linck said.

Even so, some shipments went ahead, absorbing part of the new tariffs. “Brazilian companies maintained some volumes, partly absorbing the tariff. In some cases, the U.S. importers also absorbed part of the cost to preserve long-standing relationships,” she said. However, she warned this is a short-term fix and unsustainable in the long run, underscoring the need to revisit the tariff measures.

Export redirection

Ms. Santos said exporters in other sectors also had to cut prices in August to redirect shipments originally bound for the U.S. to other markets. “Exporters had to lower prices to ensure their goods were absorbed elsewhere. They lost bargaining power, which pushed prices down,” she said.

A report from the Foreign Trade Indicator (Icomex), published by the Brazilian Institute of Economics at Getulio Vargas Foundation (FGV Ibre), shows that of the 15 main products Brazil exported to the U.S. that were hit by tariffs, nine saw U.S. sales decline in August. Meanwhile, sales to the rest of the world rose or fell less sharply.

For instance, exports of semi-manufactured iron or steel products fell 28.3% to the U.S. but surged 99.7% to other destinations. Boneless frozen beef exports dropped 47.4% to the U.S. but rose 67.9% elsewhere. Coffee exports climbed 16.4% to the U.S., while falling 0.7% to other markets.

Still, the reallocation of exports may be more complex than it appears. Lia Valls, a professor at UERJ and associate researcher at FGV Ibre, said the data do not necessarily mean that Brazilian exporters have found alternative markets.

“Some of these shipments may still be aimed at the U.S. market, even if routed through other countries,” she explained. Some multinational companies are using facilities in other countries to ship to the U.S., replacing direct exports from Brazil. “There may be a reconfiguration happening that the data aren’t capturing yet,” she said.

*By Marta Watanabe — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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Sugarcane processor Colorado makes offer for Raízen mill in São Paulo

Raízen, owned by Cosan and Shell, is also negotiating sale of three other units

 

 

 

10/03/2025

Brazilian sugarcane processing company Grupo Colorado, the owner of two mills in Brazil’s Center-South region, has made an offer for Raízen’s Usina Continental, two sources familiar with the matter told Valor. The sources requested anonymity. Raízen declined to comment. Valor reached out to Colorado but did not receive a response before publication.

Located in Colômbia, a city in the far north of São Paulo near the Triângulo Mineiro region, the Continental mill has the capacity to process more than 2.5 million tonnes of sugarcane per harvest.

According to the sources, this is the deal closest to being finalized among the Raízen mills currently under negotiation. One source added that the company, owned by Cosan and Shell, has also begun discussions to sell its mills in Jataí (Goiás), Lagoa da Prata (Minas Gerais), and Igarapava (São Paulo). Another source said that the Jataí mill had received a proposal from Atvos, which was not accepted. Atvos declined to comment.

Continental has been on the market at least since June, as Valor previously reported. At that time, Raízen was still negotiating the sale of assets from Santa Elisa, in Sertãozinho (São Paulo), as well as Rio Brilhante and Passatempo, in Mato Grosso do Sul, which were eventually sold.

If confirmed, the sale of Continental would be the fourth unit Raízen acquired from Biosev in 2021 to be divested under its current asset disposal plan. In the case of the Santa Elisa mill, only the sugarcane fields were sold to a group of six industry companies, while the processing facility was put into hibernation. The mills in Mato Grosso do Sul were sold to Cocal.

The sale of these three assets has generated R$1.345 billion for Raízen. In the Santa Elisa fields transaction, sugarcane production capacity was sold at a multiple of $46 per tonne of raw material. In the sale of the mills located in Mato Grosso do Sul to Cocal—which included both industrial assets and crops—the multiple was $40 per tonne.

Selling mills has proven to be a more immediate way for Raízen to raise cash and reduce debt while its corporate restructuring remains unresolved. Pressured by high leverage, Raízen’s shares have fallen sharply, closing the Thursday (2) session at a record low of R$1.01. Cosan has already indicated it is willing to be diluted in the business.

The company reportedly discussed a potential capital increase in Raízen with Shell, but there were no developments. A source close to Shell said the recent decline in interest from major oil companies in clean energy reduces the likelihood of such a capital injection.

In its most recent financial statement, Raízen disclosed that its two partners were also exploring alternatives with a third investor. Bloomberg reported talks with Japanese firms Mitsui and Mitsubishi, while Valor’s business website Pipeline revealed interest from BTG Pactual and Itaúsa.

*By Camila Souza Ramos, Globo Rural — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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