Beyond Market Panic: Brazil’s Real Economic Challenge Under Lula

Luiz Inácio Lula da Silva’s victory in the Brazilian presidential elections has roiled financial markets. Brazil’s stock index fell sharply, as did the currency. In the aftermath of the election, some market participants learned the hard way about the potential for loss after taking positions expecting a far-right leaning Bolsonaro victory.

While the election-driven selloff and its impact on the stock market is concerning, the bigger problem Brazil’s next government faces is how the country will break out of its ongoing economic problems of slow growth and inflationary pressures.

Lula’s win in Brazil’s elections has caused a renewed flurry of concern from the financial sector. However, the reasons behind the concern run deeper than simple political affiliation, as it is possible to attribute Brazil’s economic struggles to things other than a left-leaning government.

There are structural issues at play in Brazil. For some time, Brazil’s investment has remained weak, causing a dependence on consumption and a struggle for the country to reach sustainable, rapid growth.

The reaction was intense and indicated an unexpected outcome on the part of market players who had likely bet on a proposed significant reduction in public expenditure. 

Some market players seemed to be trading on their anticipation of the likely details of the proposed public expenditure cuts, of which Flávio Bolsonaro himself hadn't really been explicit with the voters.

As a result, a massive selling order dominated the market. In a very short time, the Ibovespa index had collapsed and the currency had lost approximately 10% of its value according to data of that time.

The most critical concern is whether prolonged inflation will eventually reach consumers, thus triggering an increase in interest rates by the Central Bank (Banco Central). 

The consequences for Brazilian households and businesses will be particularly detrimental as most are already heavily indebted. 

Although a market collapse often draws the attention of many people, historical data offer a much more complex interpretation of market crashes than that which is typically expected.

According to a study conducted by economist Cleiton Silva on BOVA11 exchange traded funds, the average returns realized one year after Brazil’s last six circuit breakers was 46.1 percent. In all the cases, returns were positive and ranged from 29.4 to 71.7 percent.

Although the numbers do not promise the same recovery this time, they show the possibility of strong recoveries after massive market crashes. It also illustrates how market responses often disregard the fundamentals of the economy due to political affiliation, ideology and complete disregard for simple investment rules.

That being said, it's also important to point out that the growth model in Brazil needs to change, this is the most critical argument in the area. 

During Lula’s 3rd administration, unemployment decreased and Brazil benefited from strong consumption in the households, along with an expansion of social programs and income support programs, including Bolsa Família, which strengthened Brazil’s food, income security and improved health and employment indicators, as well as reduced hospital costs. The labor market was able to rebound after the extreme economic shock from the COVID-19 pandemic. 

Though positive, this will not lead to sustained economic growth. Brazil’s rate of investment is at about 17% of their gross domestic product, a rate which is far below what is found in Asian economies which have high economic growth. For example, India and Vietnam’s rates of investment are at around 30% of their gross domestic product and China has an investment rate of about 40%. 

Differences in the investment rates is not just based on the difference in the size of the wealth in each nation. When considering an investment in terms of the economy, it means increasing the productive capacity of a nation. This would include constructing productive assets such as factories, transport and energy systems, ports and rail lines, and technology and research and development infrastructure. 

Without the capacity to produce the goods and services for which consumption is increasing, countries will eventually meet a wall. Production fails to meet demand. Inflationary pressures increase along with the need for imports and there is increasing pressure on the country's currency. Central Banks respond by raising interest rates which stifle demand and investment.

There have been many cycles like this in Brazil. Rapid expansion is followed by inflation and then stagnation as the Central Bank increases interest rates. Brazil’s next Lula government will have to make the decision to avoid this vicious cycle.

Although investment is the basis of all development strategies, China, India, and Vietnam have different approaches. 

While the first has a state-led approach and focus on industrialization and investment, the latter two are oriented towards exports and industrial zones respectively, although all use productive capacity to fuel development. All of their economies have sustained a productive capacity that is continuously expanding.

Although the numbers Brazil's real GDP shows to be double its size from before 1995, China's shows a 10 times increase. Both India and Vietnam show a 6 times increase. These numbers illustrate the complexity of the problem Brazil faces. 

While investment remains at a lower percentage of the GDP than 20%, sustainable economic growth of 3%, 4%, and even 5% will continue to be unrealistic.

The solution does not involve stopping the social programs, and it is also not to deliberately limit consumption of households. 

The focus of this argument is to show that productive capacity can be created through an imbalance in the growth of investment and the growth of consumption.

The Brazilian state is vital. Private investment doesn't usually go to infrastructure, research or industry unless there is a very good return on investment (high risk). In some cases, private businesses will come to public-private partnerships to fill gaps in investment.

When looking at priority areas, Brazil needs to focus on transport, infrastructure, energy, technology, industry and research and development (R&D) to help grow Brazil’s businesses.

Brazil’s infrastructure deficit is incredibly apparent. Brazil has one of the world’s most underdeveloped road networks, with only about 15% of its roads being paved. To give you an idea of just how bad it is, about 95% of roads in the United States are paved. 

What this means for a lot of Brazil’s industrial centres is that they can’t actually reach the main markets because the roads are in such poor condition. You may have a really good business, but if your road networks are bad, it is just as difficult to transport and sell your goods. 

This isn’t just a frustration. It hinders growth and development.

In addition to roads and railways, ports and energy infrastructure are crucial in helping an economy to develop in the long term, and increasing production capacity for many years to come. Industrial investment also fits into this category. 

Better machines result in higher worker productivity and more goods and services produced in less time. Productivity, at least in large part, isn't about working harder; it’s about having the right machines, the right technology and the capital to do so.

From commodities to complex industries

Brazil will also have to think of new ways to fit itself in international supply chains. The economy is heavily dependent on the export of raw materials, with the biggest importer being China, and the country also has to import many of the modern production goods and technologies.

With its Nova Indústria Brasil policy, the government tried to counter this issue with industrial policy and subsidised loans. In the first 4 years of his new term, Lula has directed over BRL 750 billion in credit, which accounts for around 5.7% of GDP.

Only 12.6% of the new formal jobs created, post-launch, have been in the manufacturing sector. The rest of the jobs were in services. Credit is clearly not enough. What’s needed is to focus state funds and subsidies on more advanced, high-tech manufacturing, that supports employment that’s more rewarding.

The trap for Brazil will be the assembly of products or the export of raw materials and the subsequent import of technologies. There needs to be an element of trade that includes technology transfer, the creation of value and development of the manufacturing sector.

Lula's challenges 

There are going to be two competing tensions for the new administration. On the one hand, poverty and inequality can only be curtailed through social programs, and they need to be improved and expanded. But with consumption growing more rapidly than investment, there's going to be a need for measures to counter inflation. 

At the same time, aggressive fiscal tightening aimed at reducing public spending can result in eroding the foundation of sustained future growth. The challenge will be to align a fiscally credible approach with a strategy that places a greater emphasis on development-focused investment.

This will necessitate collaboration between the Finance Ministry and the Central Bank, as well as a stable environment for financing over a long horizon.

Real interest rates in Brazil continue to be high, which makes investment more costly. Public expenditures are constrained, exchange rates are volatile, and there is a deficit of affordable credit with long maturity.

Brazil’s government will have to resolve these difficulties without risking further instability in the economy.

The original analysis proposed a set of six wide-ranging goals including lower real interest rates, a competitive exchange rate, greater public investment, long-term loans, an effective industrial policy, and clear, enforceable, and predictable regulations.

None of these proposals will be effective on its own, but all proposals together would improve the investment climate.

Beyond the politics of panic

The financial markets' reaction to Lula’s victory reawakened an old and familiar debate concerning the intersection of democracy and the economy. Market participants are free to interpret the effects of government policies. On the other hand, the financial markets also lose protection when the results of elections deviate from market participants' forecasts. Now, once again, as happens every time the PT wins a presidential election in Brazil, financial market participants are applying pressure to the new administration.

That claim is separate from a much broader and legitimate debate concerning the best course of fiscal policy. It is essential for governments to show that the economic policy that they have designed is plausible and feasible and for market participants to acknowledge that the outcome of elections is something that cannot be reduced to the preferences of market participants.

The recent economic history of Brazil is also at odds with the conventional wisdom of market participants regarding the economic policies of the left. The Lula administration’s first steps after election victory will likely be scrutinized for clues to how they plan to address Brazil’s sluggish economy, low productivity and the growing dominance of speculative finance.

Financial volatility ensued immediately upon Lula’s election win. Both the country’s benchmark stock index and the currency were impacted as well. Some market players held positions assuming a victory for Flávio Bolsonaro (rightwing candidate) would mean the results would be followed by an strong and broad economic program of cutting social expenditures. The ensuing results and the corresponding selling in the markets demonstrated more than just the risks associated with speculative market activity.

Rather, this demonstrated a more important problem that Brazil’s upcoming administration needs to solve: what should be the approach to overcoming low growth, the possibility of high inflation and recurring economic crisis?

For most of the establishment in finance, Lula’s return signaled more of the same. However, looking at the recent history of the country shows the economic difficulties of the country can not be ascribed to the presence of a leftist administration.

The issue of the economy has always been of a more systemic nature. With the slow development of productive resources, Brazil’s economy is reliant on the consumption of households, while the country’s investments remain stagnant.

Panic in the Markets with Political Implications

Investors had predicted the opposite result and invested heavily on an aggressive schedule of public spending reductions. Some players on the market seemed to have already anticipated the particulars of the proposal.

Source materials discuss the tactics employed by certain financial stakeholders to utilize the economic climate and sway the incoming administration to align with their interests before it formally begins.

These arguments should be differentiated from broader discussions of fiscal policy. In any country, economic policies must be able to demonstrate a sufficient level of credibility. Similarly, voters and policy makers must learn that market dynamics cannot dictate all outcomes in politics. 

The first of Lula's terms saw a sustained reduction in unemployment, a corresponding increase in real income, and a period of rapid economic growth. However, all these achievements were sustained at the expense of an increase in government investment. 

The first of Lula’s terms did, however, achieve a sustained period of low productivity. Brazil should not be asked to make the choice between economic development and social welfare. A productive economy is the prerequisite of social welfare, and an economy, when created, is able to meet the twin challenges of welfare and development.

Brazil must rethink the nature of the economic challenge. It is not about whether to increase or reduce the overall volume of public expenditure, but to think of effective methods of increasing the capital invested and creating productive capacities and industries capable of competing with the economies of other nations. 

The issue of the incoming government led by Lula goes far beyond the current instability in the market. The true question for Brazil is whether it will succeed in transforming economic growth into development of the country.

The important thing to realize is that financial market movements over the coming weeks mean nothing regarding the economy in 2027. It is necessary to wait for the market flow to settle and for positions involving options and leverage to be cleared out.

Yesterday’s stock market circuit breaker and the broader financial market downturn are the result of irresponsible investments by financial actors who, gripped by ideology, bet everything —and then some more— on a far-right candidate.

Serious investors in the financial market know that this situation is not here to stay. The decline is a consequence of the ideological folly of a group that, following their electoral defeat, now seeks to stoke despair.

Brazil and its new government have more serious issues to address than this whining from a financier who’s infatuated with a far-right and militia-linked candidate. Among these are increasing the productivity and complexity of its economy, and transforming the country into a more developed nation with a higher per capita income.

Brazil's Agribusiness Bets on Flávio Bolsonaro, the Candidate Who Could Dry Up Its Own Rain

Lula da Silva's environmental policies were on display as Inpe (Brazil's national institute for space research) reported the lowest recorded annual rate of deforestation in the Brazilian Amazon at 3,335 sq km in the period ending July 2026. This was 42% lower than the 2024-2025 rate.

“It is a monumental decline,” said Environment Minister Joao Paulo Capobianco, describing the record low as the latest of several milestones that show the correlation between rain and farm production in southern Brazil.

Prodes reports the deforestation has decreased every year since 2022. For a cumulative decrease of 71.2% in four years.

In the Cerrado savannah, losses of native vegetation also fell to its lowest levels at 5,517 sq km, 23.8% below 2001 levels. The current rate puts Brazil on pace to hit Lula's goal of net-zero illegal deforestation by 2030.

UFPR Research

Federal University of Parana (UFPR) researchers published their findings on how the Amazon region’s activities have consequences for southern parts of Brazil in the form of rainfall, agriculture, and hydroelectricity.

For their research, which appeared in the July 2017 edition of the Brazilian Journal of Biology, the study analyzed the Iguaçu River basin’s rainfall data. Researchers correlated this data, which spanned from 2011 through the end of 2023, with data on forest losses that occurred in the Amazon region over the same period, sourced from INPE and Imazon.

Researchers identified a positive correlation between higher levels of forest loss in the Amazon and decreased rainfall in the Iguaçu River basin.

They said the findings were a correlation and that droughts in the region can also be explained by factors outside of forest loss in the Amazon. These factors include other atmospheric phenomena, as well as El Niño and La Niña.

Acording to study co-author Ana Carolina da Silva, up to 40% of the rainfall in Parana originates from the Amazon, owing to moisture from the forest region that is then transported over that region. 

“It is not correct to view the Amazon as something isolated in the country’s north. Its impact stretches as far as all of South America, including Parana,” she told G1.

Trees draw water and release it as vapors. Low-level jets take those vapors, also called flying rivers, over the continents. Once they meet the Andes, the air flow goes partly south, then southeast. 

Flying rivers over Brazil provide water for agriculture, hydropower generation, and other uses. Flying rivers, in essence, provide a transportation system to transfer rain to different regions. 

Flying rivers bring moisture, which can come from lakes or other land sources, and from the Amazon region of Brazil. There, vegetation transports and releases significant moisture into the atmosphere. Then, low-level atmospheric jets transfer this moisture across the country in the form of flying rivers, which bring rain to the Midwest, South and Southeast regions of Brazil.

For example, there are areas of the South and Southeast where flying rivers bring essential moisture to agriculture and hydropower production, especially for the generation of energy.

The study's concluded that Amazon deforestation is not a problem confined to the north of Brazil: by altering the moisture flows that reach the south, forest clearing amplifies risks for farmers, consumers, reservoirs and the power system.

Politics of Environmental Catastrophe

Paradoxically, the Brazilian agribusiness sector supports the candidacy of Flávio Bolsonaro, who served as the rapporteur for the “beach privatization” constitutional amendment (PEC), and who has backed the abolition of legal reserves, the reduction of protected areas, the dismantling of environmental licensing, and more. Flávio’s father — currently imprisoned for an attempted coup d’état — revoked 401 executive branch acts that provided environmental protection.

All these instances of deregulation championed by Bolsonarism place Brazilian agribusiness at extreme risk, as they profoundly alter rainfall patterns, and are a major concern for organizations involved in environmental protection. In a sense, a portion of the Brazilian agribusiness sector supports the very candidate who poses the greatest risk to that same sector.

Acelen raises diesel capacity at Brazil’s Mataripe refinery by 25%

Acelen purchased Mataripe refinery in 2021 and has since grown diesel production capacity by 25%. This was largely in response to domestic and global diesel needs. 

The hydrotreater at the facility is now capable of processing 13,700 cubic metres of diesel a day, an increase of 2,700 cubic metres a day. This most recent expansion project, which was completed and authorized for operation in September 2022, raised production from 12,400 cubic metres. According to Acelen, the total increase will allow for 100 million litres more fuel over that time period at full production capacity. 

With 20% to 30% of diesel demand in Brazil coming from imports, it provides opportunities for domestic producers. This is in spite of Petrobras diesel pricing that is lower than the cost of importing.

According to Acelen’s Vice President of Operations, Celso Ferreira, this expansion will cost 71.5 million reais (~$14.3 million USD). Acelen purchased Mataripe refinery from Petrobras in 2021 for an estimated 4 billion reais.

The modifications replaced catalyst beds, increased the capacity for handling heat, reduced hydrogen gas leaks, and improved the efficiency of the facility's steam systems. Acelen said it has the ability to boost output and break production bottlenecks without constructing an additional plant. To optimize catalyst lifespan, the firm said it is using an artificial intelligence system that supports real-time operating decisions.

Jet fuel, gasoline, lubricants and paraffin production has also been expanded at Acelen’s refinery. Ferreira said middle distillate output at the facility has jumped from 35 percent to approximately 42 to 43 percent. 

Mataripe processes 301,000 barrels per day of crude oil and represents 14 percent of Brazil’s total refinery capacity. The Mataripe refinery is also responsible for more than 80 percent of the fuel supply to the state of Bahia, and covers 42 percent of the fuel requirements for Brazil's entire northeastern region. 

Acelen estimates that its additional production will remain within Bahia. However, the company is leaving space to meet any occasional requirements from other parts of Brazil, should it become necessary.

JetBio’s $2 Billion Biofuel Bet in Brazil

JetBio, a U.S. company, says it will build a $2 billion plant in Paulinia, in São Paulo state, to make renewable diesel from ethanol. The project starts from an earlier plan aimed at producing sustainable aviation fuel, or SAF. JetBio is now trying to lower its risk as growth in aviation biofuel demand has been slower than hoped.

The company is run by Summit Agricultural Group. JetBio will use technology it will license from Honeywell UOP. That know-how will let the plant change output. It can make either renewable diesel or SAF. The choice will depend on what buyers want and on the deals JetBio signs.

JetBio expects to take in 1.8 billion liters of ethanol each year. If it stays on track, the company could become the biggest single ethanol buyer in Brazil.

In an interview with The AgriBiz, Chief Executive William Moore said the plant can be set up for different product mixes. He said the company could sell 100% SAF or 100% renewable diesel, based on contract terms.

Moore also noted that this setup may open another lane for Brazil’s ethanol industry. This matters as ethanol makers look for fresh uses for corn-based ethanol. They also expect more pressure on regular fuel demand as more vehicles use electric power.

Financing and construction timeline

JetBio says it will fund a $2 billion project using a mix of debt and equity that is close to even. The company started talking with Brazil’s BNDES in May. JetBio believes the development bank will be a key part of the deal.

Moore added that BNDES may be able to back the project with about $500 million. Still, this is not a firm loan yet and is not a signed agreement. JetBio is also in talks with other Brazilian lenders. It is weighing another $500 million from U.S. debt financing.

JetBio expects to lock in the full financing plan by March 2027. After that, building is expected to last about 30 to 36 months. The firm says production should start in 2030.

During construction, the project is set to support roughly 3,000 jobs. After the plant opens, it expects around 400 jobs once operations begin.

Ethanol demand and export markets

The plant plans to get ethanol from FS, a Brazilian corn ethanol business where Summit has a 43% share. Amaggi, an agricultural group, holds 40%. The last 17% sits with other agribusiness backers in Brazil.

FS will send ethanol made at its own sites. It will also buy extra quantities from outside producers to fill gaps. JetBio said talks were underway with 22 possible suppliers.

JetBio expects to ship close to 80% of what the plant makes. This would be for SAF or renewable diesel. The rest would be sold inside Brazil. The firm also wants the site to be named an Export Processing Zone. If it gets that status, it may receive tax help. The condition is that exports must be at least 80% of output.

For renewable diesel, the focus will be on areas that are hard to electrify. That includes shipping, mining, heavy industry, farming, and trucks that run on heavy routes.

Moore added that the renewable diesel market is roughly five times the size of the aviation fuel market. He said this could mean a wider set of buyers as SAF demand grows.

Lower emissions, higher costs

JetBio says its renewable diesel will look similar at the molecular level to regular petroleum diesel. The company adds that it can run in current diesel engines without any blending. It also says this fuel is not the same as biodiesel. In Brazil, biodiesel is mainly made from soybean oil and from animal fats.

JetBio puts the greenhouse gas cut at about 65% to 95% versus fossil diesel. The result depends on what ethanol source is used and how the refinery makes its energy.

Moore noted that renewable diesel is still likely to cost more than conventional diesel. JetBio wants to keep costs in check. At the same time, it is trying to lock in ethanol that has a low carbon intensity score.

Moore also pointed to an edge over SAF. He said renewable diesel may benefit from using regular ethanol. He noted that SAF can need pricier inputs to satisfy sustainability certification rules.

The effort started as a plan for a dedicated SAF plant. The early goal was over 770,000 metric tons each year. JetBio later changed the plan. The same site could make either fuel. The blend would then depend on what the market needs.

Moore said the next six months matter a lot. During that time, the firm will push ahead on talks for financing. It will also work toward a final investment decision.

Copa Energia Eyes Biomethane and Natural Gas to Fuel Brazil’s Booming Data Centers

Brazil plans to add biomethane to its yearly greenhouse gas goal for the natural gas sector starting in 2027. This could open doors for renewable gas producers. At the same time, it may raise doubts about how plants will be verified.

The idea comes from a draft rule from the Ministry of Mines and Energy. Firms that fall under the federal program for natural gas decarbonization would reach the goal by using biomethane when they consume natural gas.

The draft sets a first step of 1% for 2027. That would mean buying around 3.63 million Certificates of Guarantee of Origin for Biomethane, or CGOBs. That figure points to about 363.2 million cubic meters of biomethane. After that, the draft shows a gradual rise to 3% in 2028. It then moves to 4% in 2029 and 5% in 2030.

The plan may raise demand for renewable gas made from waste tied to Brazil’s bioenergy sector.

Abiogás, the Brazilian Biogas and Biomethane Association, says makers are running out of time. They must get their plants certified through Brazil’s National Agency of Petroleum, Natural Gas and Biofuels, known as ANP.

In the draft rules, producers that finish certification by late 2026 can rely on invoices dated from Jan. 1. That would be used to set the ground for CGOBs.

ABiogás also noted that the calendar is tight. It said that because the year is almost over and the regulatory guidance was only recently released, the audit work and approval steps may not finish in time.

“If the plant certification is finished only in 2027, biomethane sold in 2026 might not lead to CGOBs,” said ABiogás CEO Josiani Napolitano in a statement.

She added that this could squeeze producers' income. It may also lower the first wave of certificate supply. Napolitano said the group is talking with the ANP about the matter.

The timing of the first CGOBs will also hinge on a digital system. The ANP is building this tool with Serpro, a federal data processing firm. The platform will bring in data from market players. It will check the production details that must be in place before certificates can be issued and traded.

Data centers

Brazilian energy firms are looking at new ways to fuel the country’s data centers, and biomethane is part of that push. The sector is growing fast, so cleaner options matter.

Copa Energia, which is the biggest liquefied petroleum gas bottler, marketer, and distributor in Latin America, is now looking at biomethane and also natural gas for use in Brazilian data centers. Chief Information Officer Claudia Marquesani said this.

Right now, about 90% of Copa Energia’s income comes from LPG. The product is sold under the Copagaz and Liquigás brands.

Even so, the firm is trying to shift more attention toward energy-transition plans. It is also checking possible projects linked to ReData, a federal tax incentive program for data centers.

Marquesani added that the company has already spotted several options to pursue. Still, a lot of the finer points are not set yet.

The program’s rules on low emission power are still under review. Officials are expected to spell out which energy sources can be used by data centers to get tax breaks.

At the Data Center World Brazil event in São Paulo, Marquesani said, “Data centers are the biggest orchestration task I have seen. You cannot focus on only one step. You have to check the whole chain.”

She also noted problems in Brazil’s power network. In a few areas, electricity supply is strong, but power lines and related transmission systems are not built out enough.

New businesses

Copa Energia set up a new unit for alternative energy goods. The plan covers biomethane. It may also reach other areas, like data centers.

Marquesani said the firm is working on 38 AI efforts. They run from agentic AI work to orchestration tools.

In April 2024, Copa grew its natural gas side. It bought Companhia de Transporte de Gás, known as CTG. CTG is a compressed natural gas distributor that started in 2002. CTG serves places that do not have regular pipeline access. It does this with a “virtual pipeline” setup. The deal price was not shared.

Then, in June 2025, Copa bought a 36% share in GNLink. GNLink makes liquefied natural gas. It has liquefaction plants in Barra Bonita in Paraná state and in Itabuna in Bahia. It is also building a third plant in Carnaúba, in Rio Grande do Norte. Lorinvest, run by the Lorentzen family, still holds 64%.

Amazon on Alert: Flávio Bolsonaro’s Victory Could Reverse Historic Drops in Deforestation

Over the past three years, Brazil has cut deforestation in the Amazon by half. In 2025, there was an 11.08% drop. These figures stem from the commitment made by the Luiz Inácio Lula da Silva administration and Environment Minister Marina Silva to eliminate deforestation nationwide by 2030. All of this is now at risk due to Flávio Bolsonaro's victory in the first round of the 2026 presidential election. If Bolsonaro wins, Brazil will almost certainly revert to the kind of environmental destruction seen during the administration of his father Jair Bolsonaro — who is currently imprisoned for attempting a coup d'état.

It is crucial to point out that the Amazon lost 690,000 more trees per day under Bolsonaro than under Lula. The current PT administration, with Marina Silva heading the Ministry of the Environment, has driven a drastic drop in deforestation figures. According to the website O Eco, the rate of deforestation fell by 62% during Lula’s first two terms, rose by 54% during the Bolsonaro administration, and dropped by 51% during Lula’s third term compared to 2022.

The PT administration has restored environmental governance by reviving the Action Plan for the Prevention and Control of Deforestation in the Amazon and creating similar plans for the Cerrado and other Brazilian biomes. All these plans face criticism from Bolsonaro supporters. Consequently, all these protection mechanisms would likely be dismantled under a Flávio Bolsonaro administration.

Other services expected to be severely impacted include enforcement and monitoring operations carried out by Ibama and ICMBio, with support from agencies such as INPE, the Federal Police, the Federal Highway Police, and Funai. During the first Bolsonaro administration, there was a concerted effort to dismantle these services and bolster support for illegal logging and illegal mining activities that reached record levels under his government, which ended its term with historic highs in deforestation within protected areas and a surge of up to 90% in illegal mining operations in those same regions.

The current government has stepped up enforcement and monitoring efforts through Ibama and ICMBio, with the support of other agencies such as INPE, the Federal Police (PF), the Federal Highway Police (PRF), and Funai.

In addition to command-and-control measures, the ministry led by Marina Silva has reactivated financial mechanisms, such as the Amazon Fund, that strengthen federal, state, and municipal agencies and drive sustainable development in the Amazon biome.

Paradoxically, the agribusiness sector, which largely supports Bolsonarism, will be the most affected by further deforestation in the Amazon. According to environmental activist Bruno Brezenski, 85% of Brazilian agricultural production currently depends on Amazonian rainfall.

Soybeans in the Center-West, cotton in São Paulo, and corn in the South rely on standing trees in the Amazon.

According to the journal Nature, every square meter of intact forest releases 300 liters of water into the atmosphere annually. This creates the famous "flying rivers" that irrigate the entire country.

Therefore, a far-right government would harm the economic sector that most strongly supports it and would effectively give the green light to countless illegal activities in the Amazon rainforest, such as wildcat mining and illegal deforestation. It is worth recalling that Ricardo Salles, Jair Bolsonaro’s then-Minister of the Environment, became a defendant in a case involving the illegal export of timber.

The election of Flávio Bolsonaro (PL) could therefore cause Amazon deforestation to return, in the coming years, to the worst levels observed since monitoring began in 1988 — exactly as happened during Jair Bolsonaro's administration.

Petrobras (PETR3; PETR4) Discovers Oil in Ultra-Deepwater Equatorial Margin Off Amapá

Petrobras said today (02/10) that it found oil in ultra-deepwater off the coast of Amapá state. It is in Brazil’s Equatorial Margin.

The company said the well sits about 175 to 180 km from shore, or roughly 109 to 112 miles. It is in water that is around 2.9 km deep.

Petrobras added that the results back up that oil is present. Still, it said there is not enough data yet to judge how big the potential reserve could be or what the quality is like.

Next, the firm plans to finish the drilling. After that, it will review the rock layers it identified. It will also follow its safety rules and environmental procedures.

This came after a prior oil discovery in the same area. Petrobras noted that early checks at that time pointed to oil that was of good quality.

The company says this work supports Petrobras as it looks for fresh spots to drill, since output from Brazil’s pre-salt area is expected to fall sometime between 2030 and 2035.  

At the start of the day, Petrobras stock on the New York exchange was down by almost 2% as world oil prices slid. After the update was released, the shares moved nearer to even.  

Big international oil firms are taking a closer look at offshore options in Brazil. Exxon Mobil said it will put about $3 billion into its operations there, with a focus on pre-salt. Other outside players are also watching the Equatorial Margin, an area that includes neighboring Guyana, which has reported several major oil finds.

From Farm Waste to Fuel: Brazil’s Sugar Industry Pushes Biomethane Expansion

Brazil’s sugar and ethanol sector is testing biomethane made from farm and factory leftovers. The goal is to find another low carbon fuel option for trucks, cars, and industry.

Some call this idea a “home grown pre-salt” path. The biomethane can be built using vinasse and filter cake, which come out of sugar and ethanol production. If it expands, mills could add new lines of income. It could also grow renewable power use in Brazil’s interior. Even so, new projects still need customers, better links for delivery, and business plans that can last.

Brazil could reach about 120 million cubic meters of biomethane each day, using several types of inputs, ABiogás says. The group added that 21 plants are already cleared to run. It also said 47 more facilities are waiting for sign off. This wait is with the National Petroleum, Natural Gas and Biofuels Agency (ANP). Josiani Napolitano, president of ABiogás, shared these points at the Nova Cana conference.

Biomethane starts with bacteria that digest plant and waste materials in the absence of oxygen. That process produces biogas. Biogas contains mostly methane and carbon dioxide. Next, the gas is cleaned to raise the methane level. After purification, it can be used instead of natural gas in multiple settings.

Sugar and ethanol makers can use leftovers from their own plants. That same waste can be turned into biogas. Some producers can then run power systems with that biogas right away. They do not need to upgrade it into biomethane first.

Napolitano noted that heavy trucks and city travel are already places where biomethane can hold its own versus diesel. He also said some factories are buying compressed biomethane. The goal is to swap out oil-based fuels on site. In the longer run, ships and planes may add more demand too. This would depend on better production paths and new infrastructure.

Growing the business will take joint work across several areas. That includes feedstock supply, plant output, delivery networks, deals, and checks for environmental rules. A central issue is how to price the cuts in emissions from the renewable fuel. This matters because biomethane often costs more than fossil options.

Brazil’s Future Fuel Law is likely to help boost demand. For 2026, the National Energy Policy Council wants producers and importers in the natural gas market to cut greenhouse gas output by 0.5% via biomethane use.  

This goal sits under the legal minimum of 1%. The council linked that choice to today’s supply and demand situation.  

Still, the target can be reached in two ways. One option is to buy biomethane, with Biomethane Guarantee of Origin Certificates as part of the plan. Another option is to buy only the certificates. 

From Denial to Disaster: The Bolsonaro Legacy and Brazil’s Climate Vulnerability

Flávio Bolsonaro, the far-right Brazilian presidential candidate, could pose a risk to the rest of the world regarding the fight against global warming and the protection of the Amazon rainforest.

During an interview with Jornal Nacional, one of the most watched TV news programs in Brazil, Flávio Bolsonaro argued that during his government he would deal with global warming expanding "basic sanitation".

During the program, journalist Renata Vasconcellos recalled that, in a 2019 article, Flávio stated that global warming did not exist and described the topic as "apocalyptic rhetoric" intended to halt progress. When asked if he maintained that position in light of scientific evidence, Flávio Bolsonaro said there are "cyclical periods that are hotter" and others "that are colder."

By treating climate change as mere cyclical events — with periods when the planet warms and others when it cools — Flávio Bolsonaro chose to ignore decades of evidence and the consensus established by the global scientific community.

Climate change and the 2026 El Niño are already affecting how people live. They are showing up in public health. They also change how cities work. The natural world is being hit too. This is not just a simple sanitation problem.

Jair Bolsonaro, Flávio’s father, served as president of Brazil (2019-2023) and is currently imprisoned for attempting a coup d'état. His administration was marked by constant attacks on the Amazon rainforest and the institutions dedicated to environmental preservation in Brazil. It is worth recalling a meeting — which later became public —, during Bolsonaro’s term, in which the then-Minister of the Environment, Ricardo Salles, argued that the government should take advantage of the fact that media and public attention was focused on the COVID-19 pandemic to push through sub-legal deregulation reforms, thereby increasing deforestation and timber sales; today, Salles faces criminal charges before the Supreme Federal Court (STF) for allegedly facilitating the smuggling of illegal timber.

2026 forecasts say a new El Niño pattern may grow stronger starting in October, the month of the presidencial election in Brazil. The El Niño could bring worse drought, more flooding, and higher wildfire risk in Brazil. It may also raise public-health problems.

In the Amazon region and the Northeast, rainfall usually drops during the El Niño. That can mean longer dry spells and more fires. In the South, cold fronts may move more slowly. When that happens, heavy rain can hang on for longer than normal.

The impact has been harsh in recent years. In 2023 and 2024, the effects were especially strong. In September 2023, water in an Amazon lake warmed from around 32°C to 40°C. The lake had shrunk during a major drought, and then the heat spiked.

Researchers also reported the deaths of 70 river dolphins in one day. They linked the deaths to the extreme heat. 

Southern Brazil had a spell of very heavy rain. In Rio Grande do Sul, September 2023 brought about three times the usual rainfall amount, and it all happened in 19 days. At the same time, the Rio Negro dropped to the lowest level ever seen in Manaus. The gap made it clear that the same broad weather setup can bring dry conditions to one place and big floods to another.

In May 2024, water rose fast in Rio Grande do Sul. The Guaíba River reached 5.37 metres, and that number beat the prior high set in 1941. Eldorado do Sul was left almost fully submerged, and much of Canoas was also flooded. The disaster took 184 lives. It also caused damage worth billions of reais and impacted the lives of 5.5 million people.

Climate change is a danger to the Amazon ecosystem. The forest sends a lot of water back to the air through evaporation. That helps support rain over parts of central and southern Brazil. When trees are cut and fires burn, that cycle can weaken. Then the ground and plants dry out more, and fires can spread more easily.

Smoke from the fires can harm people’s health fast. Tiny particles can get far into the lungs. Kids face the biggest risk. In the height of the 2024 fire season 3.7 million health appointments were tied to drought and smoke in just one month. Later, the smoke moved into southeastern Brazil. In São Paulo, air quality readings were among the worst seen around the world for days in a row.

Furhermore, Brazil’s danger is not only from climate pressures. The country has early warning systems and disaster prevention rules. But money has often gone to rebuilding after damage is done. It rarely covers prevention early. Before the Rio Grande do Sul floods, CEMADEN, the National Centre for Monitoring and Alerting of Natural Disasters, reportedly sent out many warnings. Still, only a small part of the disaster prevention budget was used before the floods reached nearby communities.

To make matters worse, the next El Niño may rank among the strongest since routine records started in the 1950s. It claims that how bad things get will not be set by Pacific Ocean heat alone. It also hinges on how ready Brazil is. That includes protecting forests, setting up plans to evacuate early, and putting money into prevention.

Those are public policies in which Jair Bolsonaro — and now Flávio Bolsonaro — simply do not believe and do not invest. On the contrary, if Flávio Bolsonaro comes to power, all indications are that he will weaken and defund these policies and the public agencies that implement them.

Brazil has already seen what can happen when leaders deny reality during a crisis, as was the case with Jair Bolsonaro. During the COVID-19 pandemic, this type of leadership led to more than 700,000 deaths. Now, the country could be hit by the worst El Niño on record. This threat emerges at a time when the Brazilian government could once again be led by someone who does not accept that the planet is warming. Flávio Bolsonaro treats the issue as if it were merely a matter of basic sanitation.

Deutsche Welle says Brazil and allies launch multilateralism push amid record global military spending and 65 active conflicts

Brazil, the European Union, Canada, and Kenya have started a diplomatic effort to back multilateralism, according to Deutsche Welle. They also want changes to how the United Nations works. This comes as the world grows more split and as violence between armed groups and states keeps rising.

On Sunday, the plan was unveiled in a statement printed in the Financial Times. The initiative is called “Partners for Multilateralism,” or P4M. It was signed by Brazilian President Luiz Inácio Lula da Silva. It also bears the signatures of European Council President António Costa, Canadian Prime Minister Mark Carney, and Kenyan President William Ruto. The signers did this ahead of the United Nations General Assembly in New York.

In the statement, the group warned that politics is becoming more divided. They also said countries are using economic ties as pressure. The manifesto pointed to new figures on conflict and spending. It said world military spending is at a record level of $2.9 trillion. It also said 65 armed conflicts between states were counted in 2025. That would be the most since 1946.

The document said the case for working together across borders is still strong. It noted that people do criticize the system that came after World War Two. Still, it argued that the core idea of global cooperation is clearer now than before. The group said it will push for reforms. They want the U.N. and other international bodies to be “more representative, legitimate, effective, and trustworthy.”

This push is being made while trust in international alliances is shaky. Some of that is linked to U.S. President Donald Trump’s trade tariffs. Others point to doubts about whether the U.N., the World Trade Organization, and NATO still matter. At the same time, changes inside the United Nations have stalled for years. The five permanent members of the Security Council can block action with their veto power. On top of that, the G20 has also become more fragmented since the 2022 invasion of Ukraine.

European Council President Costa described the P4M as an "open platform" designed for practical cooperation and bridge-building across different regions.

Therefore, P4M leaders say we are in a strange bind. According to them, the world is more closely connected than before. Trade crosses borders in more ways, and technology spreads rapidly. Yet politics is moving in the opposite direction. There are more wars than at any time since World War II. Tensions are also pulling people apart. Even institutions meant to maintain order, such as the UN, face growing strain.

Brazil Considers Raising Ethanol in Gasoline to 35% Amid Global Oil Pressures

The Brazilian government is considering raising the ethanol content in gasoline from 32% to 35% (E35) to reduce reliance on imports and boost biofuels, but it has sparked debate regarding prices, fuel consumption, and the impact on engines. Technical assessments will determine whether the change is adopted or not. 

The policy is an obvious response to the crisis triggered by the war between Iran and the United States, which drove up oil prices and makes inflation an increasingly difficult danger to manage. 

Although these test blends are not ready for pumps yet. Gas stations will not sell them until more rules are finished. Even so, some mechanics are already warning drivers.

They say a car built only for gasoline may use more fuel than before. They also expect a shorter driving range. Another concern is that the engine may burn fuel less efficiently if the mix changes.

Older vehicles face the bigger risk. A lot of them still have carburetors. Those systems do not adjust the air to fuel mix on their own. Specialists cited by the Brazilian site G1 say more ethanol may cut engine output and may also speed up wear and rust on carburetor pieces.

Older cars with metal fuel tanks may need to be swapped out too. That is partly due to the stronger ethanol mix. Newer plastic tanks, which show up on many vehicles made since the early 2000s, are often seen as less likely to run into the same issue.  

Specialists said the risks could look much like what people already see with the current 32% blend. Still, the harm may be worse.  

Engines made for ethanol or flex-fuel use are built with higher compression. They also run at heat levels that fit ethanol burning better. Gas-only engines are not set up for that same kind of operation.