Brazil’s financial elite is struggling to accept Lula’s election victory and its implications

There's a reason Brazil's financial markets aren't so fond of the election results. The downward trends in stock and government bond prices, along with currency fluctuations, aren't normal market movements. There's an evident disparity between democratic will and the interests of the elite. 

It is unwise to refer to the financial market as a monolithic entity. There are countless investors and strategies that go into the market at any given time. I believe what we’re seeing is a market collective, in which each player anticipates and adjusts for their competitors’ decisions and in doing so, accelerates the effects of the market. 

There were plenty of market participants who took their positions with the belief that a candidate on the far right, Flávio Bolsonaro, would take the presidency, which ultimately didn’t happen — Flávio even went so far as to say he would amend the Constitution, and he even appointed some ministers after the first round, actions that alarmed many Brazilian voters. This caused some participants to take positions that ultimately resulted in losses, and for some others, gains. All this caused the market to take a specific path due to the collective actions of its participants.

In short: many people in the financial sector bet heavily on Flávio’s victory and the implementation of draconian cuts to public spending. They made the wrong bet, as the candidate who won did not advocate for such economic policies. 

This isn’t something completely new for the markets in Brazil, as similar behaviors were present during past elections. In 2018, there was an initial feeling of optimism in the markets, as the nomination of Bolsonaro first caused expectations of future improvements, but later resulted in a more negative perception of future market prospects. Ultimately, in 2018, it took some time for expectations to adjust, and in the end, there was better market performance during the administration of Lula as compared to the presidency of Bolsonaro. 

A point to remember is that there's a big difference between an economy’s performance and short-term market fluctuations.

However, there is more to the picture than meets the eye. Many individuals in the banking sector are overtly pushing Lula to follow the fiscal policy outlined during Flávio Bolsonaro's election campaign. 

While campaigning, Bolsonaro advocated the adoption of austerity measures that would eliminate various social programs and social welfare benefits, as well as the indexing of social benefits, among other things, that would result in the overall diminution of social welfare for low income earners.

Such austerity measures, in addition to negatively impacting lower income individuals and pensioners, would impact the general economy of Brazil since such individuals would have more money to spend which would contribute to the economy.

Now, after the undeniable and irrevocable defeat of Flávio Bolsonaro, many in the banking sector are arguing that Lula adopted the same policies rejected by the electorate in Brazil and that he, Lula, promised during the campaign that he would not do so.

In my view, the issue is not that Brazil does not have fiscal issues, but how best to address the issues consistent with the mandate the electorate gave to the new government. This mandate is for overall economic development to increase income, the quality of jobs, and social welfare programs in the interest of all of Brazil's citizens.

The question of fiscal policy should be debated along those lines rather than what seems to be a closed discussion among those who advocate a failed set of policies that were politically rejected in Brazil.

How financial markets hold governments hostage

The effect of financial markets on governments cannot be summed up in terms of disgruntled wealthy individuals. Financial markets affect governments due to the very nature of modern finance and the linkages of financial markets to the rest of the economy.

Two of the most significant channels, as I will term them, are interest rates and the exchange rate.

One consequence of government overspending, especially for irresponsible fiscal policies, is that government bondholders may decide to sell. As a result, the yields on public bonds go up. The government, when attempting to borrow, will end up paying a higher interest rate.

These are significant costs. Each time a government tries to pay down existing debt or tries to borrow in order to fund spending on public infrastructure, it will have to pay a higher rate. And, frankly, the rates in Brazil are already too high.

The second channel is the exchange rate. When investors leave, the real loses value against the dollar. Not only do imports become more expensive, but the impacts reach far beyond a shopper buying imported goods. Manufacturers need imported machinery, parts, and other production inputs.

A currency that loses value will lead to an increase in inflation, leading to more difficult economic times. And as the excellent economist Laura Carvalho has stated, Brazil is caught in a "high-interest-rate trap," in which "high interest rates beget more high interest rates. Brazil attracts a great deal of short-term capital, drawn by the interest rate differential." 

Today, Brazil leads the global ranking for real interest rates, ahead of countries such as Russia, which is at war, and Argentina, where more than 32,000 businesses have closed during the Milei administration.

However, even governments that disagree with the goals of financial markets still cannot afford to completely ignore them. Financial markets can shape entire economic programs. It is a balancing act governments must try to avoid losing.

But, it is important to make clear that this is not the economic agenda that Brazilian voters want, nor the one they voted for. If the government embraces the ideas of the financial market, it could look like a form of electoral fraud or a betrayal of the voters' mandate.

Furthermore, in the case of Brazil, the country is an example of an open economy that can be hit by rapid movements of international capital. In many cases, financial investments by foreign entities do not link to genuine development in an economy. They are speculative.

Distinctions must be made between this type of capital and speculative investment, as foreign investment in an economy can create productive capacity.

Take BYD of China. BYD's construction of a factory in Camaçari, Bahia, is the type of foreign investment Brazil must encourage. Investment that generates jobs and development of domestic industry must be encouraged.

Brazil's interest-rate trap

The problems Brazil's economy faces cannot be discussed without discussing the levels of the country’s real interest rates. Brazil’s real interest rates are very high —the highest interest rates in the world —,  and I disagree with the claim that it is all because of too much government spending and too much government debt.

The economist André Lara Resende, who was part of the group of economists who were instrumental in creating the Real Plan in the 90s, the goal of which was to stabilize Brazil’s currency, came up with a way to look at this problem differently. He proposed the gradual reduction of the benchmark interest rate over the next year until it is approximately 7.5% — the Selic rate (the Brazilian economy's base interest rate) stands at 13.75% per year.

I think there are good reasons to consider what he says, particularly given that when it comes to the fiscal debate in Brazil, most of the discussion tends to focus on the primary budget deficit, with little attention being paid to the cost of servicing public debt.

The primary deficit is government revenue less government spending excluding interest payments. At roughly 0.6% of GDP, Brazil’s expected primary deficit is relatively low in comparison with other countries. On the other hand, the cost of servicing accumulated public debt in Brazil is almost 9% of GDP.

This distinction is extremely important. In my opinion, the available data is not enough to attribute Brazil’s high interest rates solely to public debt. International interest rates, international economic shocks, and the volatility of the Brazilian real all play an important role as well.

There have been a series of shocks to the world economy, from the COVID-19 pandemic and the conflict in Ukraine to the disorganization of the supply chain of both energy and food products, and recently, increasing political and military instability around the globe has led to rising energy and food prices.

When global capital begins to flow away from less developed nations towards wealthier ones, Brazil's currency is sensitive. When capital leaves Brazil, the Central Bank usually responds by raising interest rates. Doing this discourages capital from leaving Brazil, while simultaneously curbing inflation. 

This causes a paradox for the Central Bank. Raising interest rates to slow down inflation and encourage capital to remain in Brazil only encourages speculative capital, as Brazil is reliant on these investors, and the world is always shifting. I believe this is Brazil’s interest rate trap. However, I agree with the diagnosis from Lara Resende but not the solution.

If the Central Bank decides to rapidly and substantially cut interest rates, regardless of the world's economy, there is a risk that speculative capital will rapidly leave the country.

One effect would be a quick devaluation of the currency. The cost of imports would then be high and that would create inflationary pressure which would force the Central Bank to increase interest rates and essentially reverse course.

Brazil’s international reserves are an estimated $370bn, but in the case of a sustained speculative attack, these reserves would probably not be sufficient. 

Rather than trying to stop Brazil's capital flows by fighting against market conditions, I think we need to understand Brazil's dependency on foreign capital and how to structure incentives for foreign direct investment that supports economic development, while addressing the need to lower interest rates through policy.

This means we have to reconsider what kinds of regulation of capital flows we need. We have to reconsider what kinds of international capital flows are actually useful to Brazil. It will likely mean that we have to change the terms on which Brazil participates in international capital markets, even at the cost of short-term capital.

Fiscal adjustment should not come at the expense of the poorest

Many people think the only option Brazil has for fiscal adjustment is cutting spending on things like pensions and welfare. I think that's the wrong way to think about it.

I can think of several ways that are probably more worth Brazil's time and consideration. Brazil could lower salaries for the judiciary, figure out a better way to distribute and use parliamentary amendments, reconsider its tax exemption laws, and figure out how to more effectively tax wealth and income.

I'm all for improving the country's fiscal situation, but why should pensioners and low-income workers be the first ones to take a hit? 

Reducing pensions can have a negative impact on the economy as retirees support local businesses and stimulate domestic consumption. Fiscal responsibility shouldn’t mean always supporting budget cuts. 

What it really should mean is finding ways to make public investment possible, and finding ways to equitably distribute the financial burden. Fiscal adjustment should further economic development. Not become the main objective.

Brazil needs industrial development, not just individual entrepreneurship

In my opinion, beyond Brazil’s short term problems with interest rates and the way it runs its economy, there is a large need for a long term plan for economic development. Quality of work in Brazil is a concern.

While there has been significant progress in lowering unemployment rates, many of the jobs that are being created continue to pay poorly.  

The concern is heightened considering the increase in Brazil’s population who have acquired education. As Brazil has been more successful in increasing higher education access, many of the people that have the access to higher education continue to experience the problem of being under employed, and some of the population continue to turn to entrepreneurship because self-employed individuals have the potential to make more than someone employed with a low paying job.

The increase of individual entrepreneurship should not be mistaken for economic growth. Herem, it is crucial to clarify that, historically, there are no records of any country that has achieved socio-economic development based solely on individual entrepreneurship, yet this is precisely what the far-right was offering voters. Flávio  Bolsonaro even claimed he would create a "Ministry of Prosperity," through which these individual entrepreneurs would transform the Brazilian economy — a proposal that is not only ridiculous but also entirely unsupported by any historical evidence in economic literature.

A sophisticated economy cannot be achieved by having everyone turn to being self employed, as there is the need to develop strategic industries that create jobs with good wages, develop domestic demand and increase supply. Industrial policy and increase the country's economic complexity is necessary in these instances.

Brazil is endowed with minerals such as rare earths and critical minerals as well as a great potential for high technology manufacturing and development. Instead of only being an exporter of raw materials, Brazil needs to process the materials further to move up the global value chain.

We already have a robust industry here for ethanol, biogas, and biomethane, and we have the potential for further growth through SAF (sustainable aviation fuel), hydrogen, and biodiesel, derived from sources like the macaúba palm, along with many other opportunities that the Brazilian landscape offers.

The focus of this activity needs to be building the capacity to produce goods and services with the skills that Brazil has to decrease the country’s reliance on foreign technology.

Clear objectives with clear and quantifiable results need to be laid out for an effective industrial policy. Government subsidies for industries needs to be tied to clear and concrete results of the industrialization policy, specifically employment, the development of new technology and improved productivity. We need to strengthen initiatives like the NIB, led by Uallace Moreira, Secretary for Industrial Development, Innovation, Trade and Services at the MDIC.

In addition to building a growth strategy, development policy should have the ability to evaluate itself and the programs that do not provide the intended outcomes.

The implementation of a successful development policy is a goal that goes beyond the term of any president. Development policy requires coordination of the instruments that the state has and sustained and systematic implementation over a number of presidencies.

The gap between economic indicators and people's lives

I also believe we should acknowledge the difference between macroeconomic indicators and the day to day life of typical citizens.

The economic indicators under Lula, were all very positive. The economy grew faster than predicted, inflation was lower than when Bolsonaro was President and there was historically very low unemployment.

These are significant accomplishments. However, a country's economic indicators are not a one-to-one measurement of the economic welfare of its people.

After 2015, the purchasing power of wages in Brazil essentially flatlined for a decade, and it was only in 2014 that the wage levels fully recovered their lost purchasing power.

For the majority of families, these economic metrics have not yet had a positive effect on their standard of living.

Inflation is a good case study of the rift between macro economic metrics and the actual welfare of the citizens.

When economists state that inflation has gone down, they mean that prices are not rising as quickly as before. It is important to realize that economists do not mean that prices have returned to the previous levels.

It is still too costly to buy an item for 50 reais even if the item stops becoming more expensive.

In order to understand why it is possible for people to become dissatisfied, even in a situation of positive macroeconomic indicators, it is important to be aware of the distinction mentioned above.

There are no easy answers. The best course of action is not to promise low prices to everyone, because low prices typically occur when a country is in a bad economy with very high unemployment, high inflation, and low wage levels.

Instead, a positive economy, investment, and more good jobs are the ways to improve a country’s economic conditions and purchasing power.

Economic growth should focus on good jobs that have a positive effect on people, rather than low-paid, dead end jobs.

The struggle over Brazil's economic future

Brazil’s economic issues go beyond disagreements about budgets or interest rates. What’s truly at risk is the opportunity to define what the priorities of Brazil’s economy should be. 

The most recent election confirmed that many Brazilian voters are opposed to the economic proposals that suggested reduced social programs and the need to limit public spending. The financial sector still holds a significant amount of influence in Brazil’s economy and continues to use economic forecasts and predictions, in addition to bond and currency exchange market volatility, to put pressure on Brazil’s government. 

This brings to light a problem inherent in Brazilian democracy. Voters decide what government to support and what policies that government should follow. However, those policies can only be implemented if financial interests that have not been democratically held to account agree with the policies.

This should not be an excuse to dismiss the economic uncertainty or the volatility of the global financial markets. There must be a wider interpretation of economic uncertainty. 

Instability in a nation can only be alleviated through improving income levels, increasing job opportunities, and creating a more equal distribution of economic wealth and social opportunity.

Lula’s administration now has the opportunity to shift the focus from the constant economic arguments regarding budget adjustments and interest rates, and focus instead on more long-term solutions. 

The difficult part will be using the vote that was recently cast to bring a halt to existing inequality and to redirect the public resources toward improving the standard of living for Brazilian citizens.

There is no necessity for Brazil to balance its fiscal policy just for the sake of balance. It should adopt a policy that improves the living standards for its people.

And that is a choice that should ultimately belong to its citizens, not to the financial markets.

Brazil's Ceará State Aims to Become South America's First e-SAF Hub for Europe

The Brazilian state of Ceará wants to be the first in South America to set up a production hub to supply Sustainable Aviation Fuels to the European market. As new and more stringent emissions regulations become standard around the globe, countries and airlines will be forced to move toward low carbon fuel alternatives.

The Ceará branch of the National Service for Industrial Training (SENAI/CE) signed an international partnership agreement with several European companies and organizations on Oct. 27. The agreement aims to assess the possibility of setting up an electro-sustainable aviation fuel (e-SAF) hub in Northeast Brazil. 

This partnership is part of the NedBraSAF project and brings together SENAI Ceará, the Port of Pecém, the Port of Rotterdam, and Green Energy Park, among others. The project also received support and co-funding from the European Union and Germany’s Ministry of Economic Affairs and Energy (BMWE).

While this project is promising, the timeline for the project, as well as production levels and facility construction details, remain undisclosed.

The goal behind the NedBraSAF project is to help countries, including those in the EU, meet the ReFuelEU Aviation mandate which aims to have sustainable aviation fuels represent at least 1.2% of the total aviation fuel supply in 2030, with an additional 5% and 35% being added in 2035 and 2050, respectively. 

E-SAF is a type of sustainable aviation fuel. To be competitive in the fuel market, it is necessary to produce a low-cost, low-impact sustainable aviation fuel. This will require the investment in renewable electricity, electrolyzers, and certification of sustainable sources for fuel and feedstocks, along with an integrated logistics chain for the transport of sustainable feedstocks and products to the end user.

Brazil’s abundant, low-cost energy could give it an advantage in the production of green hydrogen and synthetic fuels for export.

Pecém strengthens European connections

Brazil’s Port of Pecém is a joint venture between the Ceará State government and the Port of Rotterdam with a 30% / 70% split in ownership respectively.

In May of 2016, an agreement was announced between the Port of Pecém, the Port of Rotterdam and Duisport of Germany to transport green molecules (e.g. green hydrogen) from Brazil to Europe by 2029.

NedBraSAF goes further than that with the supply chain of synthetic aviation fuels, taking in everything from production and storage, to handling at port, and distribution for sales.

Logistics and energy infrastructure are already getting an boost with Brazil’s Congress approving $123.5 million of external credit, $90 million of which is earmarked for the Pecém Energy Transition Program, and $33.5 million for additional spending under the Pecém Verde program. Although these programs will certainly benefit the green hydrogen sector, they are not strictly tied to the NedBraSAF initiative.

SENAI Ceará plans to address technological and human resource needs as the sustainable aviation fuel (SAF) market grows.

“To go beyond the ability to generate energy, we need to create the ability to transform it, technology and qualified personnel,” says energy transition consultant Isabela Maciel of SENAI.

Brazilian market creates additional opportunities

The domestic market is larger than the export market. Brazil’s Fuel of the Future law has instituted the National Sustainable Aviation Fuel Program, ProBioQAV, that requires airlines to cut their domestic flight emissions. 

ProBioQAV establishes reduction targets for 2027 of 1%, 2030 of 3% and 2037 of 10%. While the European regulations mandate the exclusive use of synthetic fuels, the Brazilian regulations enable a variety of SAF production technologies. 

SAF production is likely to positively impact the market for Hydrotreated Vegetable Oil, HVO, or renewable diesel. As the fuels share some production methods and raw materials, innovations and investments in SAF may also benefit HVO supply.

However, the lack of scale in the production of renewable diesel remains the biggest bottleneck to making it competitive in the Brazilian market. 

Olímpio Alvares, the environmental committee coordinator of Brazil's National Association of Public Transport (ANTP), said expanding production of HVO at the regional level can make its price comparable to that of conventional biodiesel in the near future.

Alvares said mandate mixing renewable diesel and regular biodiesel will provide more stable demand, spurring more investment in biodiesel production, which was also done for the biodiesel program in Brazil.

Using HVO over regular biodiesel means not having to modify engines and transport infrastructure to use biodiesel.

Pure HVO lowers diesel transport fossil fuel related emissions. It has less particles and is less toxic than conventional biodiesel.

While HVO is more beneficial, it requires a larger production, and the price needs to be more competitive to gain larger market share.

The development of the Brazilian SAF industry will increase renewable fuels diversity. Although more support of this industry is still necessary to make HVO more cost competitive compared to fossil diesel.

Brazil Eyes $1.5 Trillion Sustainable Aviation Fuel (SAF) Market Opportunity

Investing between $1 trillion and $1.5 trillion in the Sustainable Aviation Fuel (SAF) market will create a large market that Brazil could take advantage of to become a major player. But in order for production to grow, investment will need to meet production, feed stock availability will need to meet the demand of airlines to buy low carbon fuel, and the cost of the fuel will need to be at a price point that makes it worth the trade off.

These points were the focus of discussion during the 26th DATAGRO International Sugar and Ethanol Conference that was held in São Paulo, where the Brazilian Ministry of Mines and Energy (MME) met with KPMG, a consulting firm, to look at the opportunities for investing in the growing industry and to address the hurdles that still stand in the way.

As one of the representatives of MME at the conference, Darlan Silva dos Santos said that world SAF production is still at a point where it accounts for less than 1% of the demand of what is expected for the market in the coming years.

Other barriers to growing the market still include high production costs, low supply, and the demand to build a market to meet the price.

Santos explained that SAF production facility construction is 20 times the capital expenditure of building a standard ethanol production plant. Because of the combination of high construction cost and the volatility in future demand, investors find it hard to predict project feasibility and find ways to finance. 

Brazil prepares emissions targets to boost SAF demand

The increased scale of production is going to require more reliable feedstock and fuel procurement contracts, which will help reduce the overall project risk for all involved stakeholders. 

Brazil is working to help grow the supply and demand of SAF in the region. There is a planned 1% reduction of aviation emissions for Brazil that will come into effect in 2027. There will be a gradual increase in the reduction of emissions by 1% a year until 2037 when the reduction will reach 10%.

The regulation will give an indication of demand to producers and investors, but the demand will rely on the expansion of supply of the fuel to levels where the airlines can afford to purchase it.

Petrobras renews international certification for SAF

Petrobras’ Duque de Caxias refinery (Reduc) has received its international sustainability certification for producing sustainable aviation fuel (SAF) for another year.

The certification confirms the sustainability criteria set forth in the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), created by the International Civil Aviation Organization (ICAO).

Petrobras first received this certification in October 2025. It now enables the company to sell its Reduc SAF that it makes by co-processing soybean oil and corn ethanol’s byproduct.

Improvements in managing the hydrogen source has allowed Petrobras to reduce its SAF’s carbon intensity by 29%, as a result of a 23.8% reduction in the carbon intensity of the corn oil input. 

Petrobras said the achievement proves that reduction in carbon emissions is not solely the result of feedstocks that have been certified. It is a result of improved production processes that help reduce the input’s carbon footprint.

“We don’t stop at finding feedstocks that come with the appropriate certification. We look for innovative and cost-effective processes to reduce the production impact of the materials we use,” commented França.

“Certifying this feedstock adds even more value to the renewable fuel sector,” he noted, and emphasized how certification strengthens Petrobras’ position to provide solutions for airlines committed to international mandates for the transition of air transportation.

Petrobras expands refinery utilization

Petrobras is operating refineries at nearly 98% of installed capacity. The expansion in processing crude oil is in response to the growing demand for diesel and the effort to reduce Brazil’s imports. 

Petrobras expects that imports of diesel will drop almost to zero by the end of December, based on the data that has been made available. 

Brazil is looking at refining facilities to address the country’s reliance on foreign fuel imports. However, refining facilities are only one aspect, and production, demand and infrastructure must be addressed. 

Brazil’s potential to play a leading role in the SAF industry depends on its established biofuel and agriculture sectors. However, to convert that potential to actual production on a significant scale will require an investment in capital, a secure market, and clear and stable regulations.

Pemex and Petrobras (PETR3; PETR4) Renew Deepwater Oil Partnership

After the win by Brazilian President Luiz Inácio Lula da Silva in the elections, Mexico's Pemex and Brazil's Petrobras plan to work together on the exploration and production of oil, Mexico's President Claudia Sheinbaum stated on Monday. 

According to Brazil's electoral court, Lula was elected with 51.8 percent of the votes against the 48.2 percent achieved by Flávio Bolsonaro, a Senator. Lula will return for his fourth term of office on January 5, 2027. 

Sheinbaum congratulated Lula and Brazil and stated that Mexico would reactivate the country's joint ventures, especially the Pemex and Petrobras joint venture.

"All of the joint venture projects on various topics will be resumed, including the partnership between Pemex and Petrobras," said Sheinbaum at her daily news conference in Mexico City.

Both companies previously entered into a Memorandum of Understanding on June 23 in Rio de Janeiro to study potential projects in the Mexican part of the Gulf of Mexico.

Areas that the contract will touch upon include development of both new deep and ultra-deep offshore fields as well as old fields. There will also be cooperation between the two on technologies that help improve the efficiency of using energy resources as well as development of low-carbon fuel technologies.

Petrobras and Mexico are looking to combine their resources and explore deepwater opportunities, in hopes that Petrobras' expertise in deepwater exploration and development will enable Mexico to better exploit the oil potential of the Gulf of Mexico. Sheinbaum has publicly commented that the deal was to better utilize Petrobras’ expertise and to work with the Brazilian state company. Petrobras also has expertise in both deep and shallow waters.

Pemex has significant financial and operational problems. As production was halved, with oil output reaching 1.6 million barrels per day compared with the 2004 peak of 3.4 million barrels per day, there was significant strain on Pemex to fund new projects. At $77.5 billion in June, Pemex financial debt puts a significant strain on funding new projects, especially deep water fields. As of today, Pemex has no production from any deep water fields.

Petrobras has production growth to account for, thanks to production from the Pre-salt offshore fields. As production in Q2 was 3.34 million barrels of oil equivalent per day, up 14.1% over last year, the Pre-salt fields were a huge factor, as they provided 2.78 million of the 3.34 million barrels per day of production.

Petrobras CEO Magda Chambriard commented that she believes both nations will benefit greatly in the long run. Pemex CEO Juan Carlos Carpio commented that this partnership signifies the start of a new collaborative relationship between the two companies. This relationship will involve working on future projects together and sharing knowledge.

The partnership also shows the broader efforts of Latin American state-owned energy companies to collaborate in order to grow their presence and capabilities in the international energy market.

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.