Brazil’s Inflation Hits Six-Year Low as Public Perception Remains Deeply Split, New Data Shows

Brazil posted its lowest November inflation rate since 2018, signaling positive momentum for the economy, but new survey data reveals a country sharply divided between optimism and financial stress.

Brazil’s official inflation index (IPCA) rose 0.18% in November, slightly below market expectations and marking the lowest figure for the month in six years. Year-to-date inflation reached 3.92%, while the 12-month rate stood at 4.46%, safely under the central bank’s 4.50% upper target. Economists view the result as one of the most encouraging signs for price stability in 2024.

The main drivers of inflation remain non-tradable services, such as education, health care, haircuts, and parking, sectors heated by a historically tight labor market. Brazil’s unemployment rate is now 5.4%, its lowest level in years. Meanwhile, inflation for tradable goods continues to ease, supported by a stronger Brazilian real earlier in the year and six consecutive months of falling in-home food prices.

Still, political volatility has weighed on financial assets. Discussions around a potential presidential bid by Flávio Bolsonaro triggered a sharp reaction in markets: the exchange rate jumped from R$5.30 to R$5.50, and long-term interest rates spiked. A weaker currency increases the cost of imported goods, potentially pressuring inflation in 2025.

Upcoming decisions from the Brazilian central bank’s COPOM and the U.S. Federal Reserve add more uncertainty. A possible Fed rate cut, expected at 0.25 percentage points, may weaken the U.S. dollar and reduce the massive interest rate gap between the two countries, a shift widely viewed as favorable for Brazil.

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Survey Reveals a Country Split Between Anxiety and Optimism

New findings from the Ipsos Cost of Living Monitor 2025 highlight the paradox of Brazilian public sentiment.

According to the survey, 35% of Brazilians say they are in a difficult or very difficult financial situation, well above the global average of 27%. Yet the same 35% believe their income will increase next year, making Brazilians more optimistic than most of the world.

The divergence between perception and economic indicators is striking. Brazil is the only country among the 30 surveyed where the population blames high interest rates, not global conditions or national policies, for personal financial hardship. This reflects a cultural reality: Brazilians strongly associate financial pressure with the cost of installment plans and consumer credit.

Confusion over broader economic conditions is also clear. 36% of Brazilians believe the country is in a recession, even though Brazil has not entered a technical recession since 2020. Meanwhile, 66% expect interest rates to rise next year, despite forecasts showing the opposite.

Brazil’s unemployment rate stood at 5.6% in the three-month period ending in September, according to the IBGE’s continuous household survey. This marks the third consecutive quarter at 5.6%, matching the lowest rate ever recorded since the indicator began in 2002. A year earlier, the rate was 6.4%.

In total, 6.45 million people were unemployed, the lowest level in the historical series. This represents a 3.3% drop compared to the previous quarter and an 11.8% decrease relative to the same period in 2024. The IBGE also reported a record number of formal jobs, with 39.2 million workers holding signed work contracts.

Total real income reached R$ 354.6 billion, another record, with 5.5% annual growth.

These record lows in unemployment levels, record income, and record formal employment contrasts with earlier predictions that Brazil was heading toward an economic “abyss.” Those predictions, made by economists mostly linked to the Brazilian financial market and also to the country's right-wing candidates, especially those who want Tarcísio de Freitas as president in 2027, have been getting their predictions about the country wrong for years. In this case, 2025 was no different.

The year of 2025 in Brazil was marked by stock market highs, a stable exchange rate, and criticism of political narratives that predict national collapse of an economy that is functioning reasonably well.

Thus, the Ipsos survey indicates that this blend of caution and hope reveals a deeper pattern: Brazilians often expect the macroeconomy to worsen — perhaps because they spend the entire year listening to catastrophic predictions for the national economy in the mainstream media —, even as they believe their own lives will improve. But until lower interest rates and tax changes show up — the country implemented a major tax reform this year — in household budgets, the gap between perception and economic data is likely to persist. 

Brazil’s Deindustrialization Is Not What It Seems: New Data Reveals a Highly Concentrated and Uneven Decline

For years, the narrative around Brazil’s economic decline has pointed to a single culprit: deindustrialization. The story often sounds straightforward, the industrial sector shrank, and that’s it. But recent data tells a far more complex and revealing story, one that challenges long-held assumptions about what really happened to Brazilian industry.

Brazil’s deindustrialization is portrayed as a deep and long-term process that has weakened key sectors such as agribusiness and the automotive industry, leading to widespread job losses. This decline is linked not only to recent political events like the Lava Jato operation, which dismantled major value chains connected to Petrobras and large construction firms like Odebrecht — who led the construction sector in Africa, for example —, but also to earlier policies dating back to the late 1980s and 1990s. Market liberalization under the Collor Plan and the FHC administration opened the Brazilian economy without protecting national industries, accelerating the dismantling of sectors such as electronics, defense, and automotive.

To face this process it is necessary emphasizes the central role of the state in reversing deindustrialization, contrasting Brazil’s limited intervention with the strong state-driven strategies of the United States and China. In the U.S., government investment through institutions like DARPA and massive military-industrial funding has historically created the foundation for technologies later commercialized by private companies — illustrated by examples such as the internet, GPS, and Elon Musk’s reliance on public contracts for SpaceX. This dynamic reinforces the classic “center and periphery” structure described by Celso Furtado, where developed nations concentrate high value-added production and extract wealth from developing economies, maintaining their dominance through economic pressure and strategic intervention.

Infortnately to Brazil, it joined the neoliberal policies of the Washington Consensus further weakened its industrial capacity, limiting monetary autonomy and suppressing domestic industry through high interest rates and a floating exchange rate. Meanwhile, China achieved rapid growth by rejecting this policy model and adopting long-term state-led industrial planning. Reindustrializing Brazil requires a 50-year national project centered on strong state action, strategic investment, and rule changes that enable industrial development.

If you look at the data, a little more than 20 years ago, industry represented 22% of Brazil’s GDP. Today it’s around 11–12%. 

Today, in Brazil, people say: “Why should I open a company? I’d have to hire workers, face risks, and families aren’t buying much. And if I need a loan, I’ll end up drowning in debt. Why bother, if I can simply buy government bonds?” And this, in my view, it simply kills any industrialization processis practically criminal. The fact that Brazil have one of the highest interest rates (the Selic rate) in the world.

Look at Japan, just for comparison. There’s been an uproar there because they doubled their interest rate on public debt. It went from 0.25% per year to 0.50% per year, and the Japanese were shocked. In Brazil, the Selic it’s already above 15%. 

A Dramatic National Decline, but Not the Whole Story

Between 1986 and 2022, the share of industry in Brazil’s formal employment plunged from nearly 28% to just over 15%. The drop signals a massive economic transformation. And it wasn’t just a cyclical dip.

A 2025 study went further, labeling Brazil “the world’s most severe case of premature deindustrialization.” In other words, the country lost its industrial base before becoming rich, a trajectory very different from that of developed nations.

At first glance, the data paints a bleak picture. But a deeper look reveals that this national average hides a far more uneven and surprising reality.

The Regional Puzzle: Deindustrialization Has an Address

One of the most striking findings is that the decline was not evenly distributed across Brazil. In fact, it was overwhelmingly concentrated in a handful of states.

More than 90% of all industrial job losses between 1985 and 2022 came from only three states:

• São Paulo

• Rio de Janeiro

• Rio Grande do Sul

And the biggest shock:

São Paulo alone accounted for 70% of the total decline.

This means Brazil is not facing a nationwide industrial collapse, but rather a localized crisis in former industrial powerhouses. While traditional hubs were losing strength, other states moved in the opposite direction.

Mato Grosso, for example, saw its industrial employment increase eightfold during the same period.

Brazil today is, in practice, two very different industrial countries: one declining, one expanding.

Sector-by-Sector: What Brazil Actually Lost

The sectoral breakdown is equally revealing. In São Paulo, the epicenter of industrial decline, the process did not happen all at once. It came in waves:

• 1990s: textiles and metallurgy were hit hardest.

• 2000s: automotive and electronics sectors suffered major setbacks.

Each decade claimed different victims, showing that the structural shift was not uniform but fragmented and progressive.

This distinction matters because not all industrial jobs are equal. Losing low-tech sectors is one thing; losing the industries that drive innovation is another.

And that is exactly what happened.

High-Tech Industries Were the Most Affected

Studies divide manufacturing into two groups:

• High-technology industries: electronics, chemicals, automotive, machinery

• Low-technology industries: food, textiles, clothing, footwear

The data shows a troubling pattern: the sharpest declines occurred in the high-tech group.

The electrical and electronics sector, for instance, saw its share of employment collapse by nearly 66%.

These are precisely the industries that foster productivity, innovation, and long-term development, the backbone of a modern economy.

The Human Impact: A “Malignant Structural Shift”

Beyond maps and charts, the consequences fall on workers. The study uses a term that sounds technical, “malignant structural change”, but its meaning is simple and alarming.

Workers left industries with higher wages and ended up in sectors with lower pay.

A chart from the study shows that while wages rose slightly for those who remained in certain sectors, these gains were completely offset by the mass migration into worse-paying jobs.

In practice:

• The labor market deteriorated.

• Household incomes fell.

• The shift from industry to services translated into lower living standards for millions of workers.

The Verdict: Deindustrialization Has Three Faces in Brazil

After analyzing geography, sectors, wages, and long-term data, researchers describe Brazil’s deindustrialization as having three defining characteristics:

1. It is highly concentrated: not a nationwide phenomenon, but one rooted in a few key states;

2. It is heterogeneous: each region and each industry tells a different story;

3. It is malignant: the country is losing high-tech sectors while pushing workers into lower-quality jobs.

These findings raise a crucial question for policymakers:

If the problem is not the same everywhere, can a single national strategy solve it?

The answer may shape the future of Brazil’s economy, and determine whether the country can rebuild a modern, competitive industrial base or remain trapped in a cycle of premature decline.

The central argument is that Brazil must focus on producing goods and services that the world wants to buy, regardless of the price, following the model of companies like Apple, which sells an identity and an experience (the iPhone), and not just a product.

A developed country reaches a point where industrialization gives way to the production of sophisticated, high value-added services, such as Engineering, Finance, Robotics, Insurance, and smart home technologies. 

There is a concrete opportunity to reverse Brazilian deindustrialization by focusing on the Health Industrial Complex:

The Federal Government alone annually imports US$ 18 billion in health products from India, China, and Europe.

It is estimated that 80% of these imports are for products with expired patents.

By adding the spending of states, municipalities, and the private sector, the total imports reach about US$ 40 billion (approximately R$ 200 billion).

All of this government spending would be able to could be used to generate a national industrial park through mechanisms such as:

• Copying and pasting technologies from expired patents;
• Business incubators;
• Government purchases protected by WTO rules, guaranteeing a market for local production.

The entire reindustrialization process could therefore begin with the Unified Health System (SUS), the Brazilian public healthcare system. Strengthening and equipping SUS would expand domestic production of medical supplies and technologies, create large numbers of care-related jobs, and meet a massive unmet demand, since seven out of ten health appointments in Brazil occur through SUS. Because demand far exceeds supply, any expansion of the system would immediately generate its own economic activity.

A second priority is the defense sector, which is currently underfunded and technologically weakened. Additional key areas include agro-industry, through the domestic development of fertilizers, agricultural chemicals, machinery, and patented technologies currently imported from foreign monopolies; and bioenergy, viewed as the most important sector for Brazil’s future. Developing bioenergy would allow the country to use its natural resources sustainably while positioning itself at the technological frontier. Furthermore, if we think about the Amazon, which can be seen as a “natural library” rich in scientific potential, which Brazil fails to harness, often allowing foreign researchers to extract knowledge only for the country to buy back expensive finished products. Protecting this ecosystem and investing in its scientific potential are framed as essential to a sustainable and socially just development model.

Biogas in Brazil: How Small and Medium Farmers Can Cut Costs and Boost Sustainability

Did you know that animal manure and leftover crop residues, materials often discarded in rural properties, can be turned into clean, renewable energy? This is the premise behind biogas, a technology that can significantly reduce fuel and electricity costs for Brazilian farmers.

In a recent episode of Ganhando o Futuro, host Luciane Iur interviewed Yuri Queiroz, president of ABREM (the Brazilian Association for Waste-to-Energy Recovery), to explain how biogas works, why Brazil uses only 3% of its potential, and how small and medium farmers can benefit financially from this growing market.

What Is Biogas and How Is It Produced?

Biogas is generated from the anaerobic decomposition of organic waste, such as animal manure, agricultural residues, and urban organic waste, inside biodigesters. During this process, microorganisms break down the material without oxygen, producing a gas composed of roughly:

• 60% methane (biomethane)

• 40% carbon dioxide

After purification systems such as membranes, PSA, or washing units remove CO₂, the resulting biomethane has nearly the same chemical composition as natural gas. It can be injected into the gas grid, used to power tractors and trucks, or converted into electricity directly on the farm.

"Biomethane is already fully regulated in Brazil and can be mixed in any proportion with natural gas," explains Yuri.

How Small and Medium Farmers Can Adopt Biogas

Producers can use residues from:

• Swine, poultry, and cattle operations

• Sugarcane processing (vinasse and filter cake)

• Crop biomass and other organic waste

By installing a biodigester, either on their own or through partnerships, they can generate electricity or vehicle fuel, lowering operating costs and reducing dependence on external suppliers.

For small and medium farmers, the path often involves cooperatives to gain scale, pool resources, and negotiate contracts with investors and biogas companies.

Why Does Brazil Use Only 3% of Its Biogas Potential?

Despite being one of the world’s largest agricultural producers, Brazil taps into only a fraction of its biogas capacity. According to ABREM:

• 75% of the country's biogas today comes from landfills, and

• up to 70% of that gas is still lost to the atmosphere, contributing to greenhouse-gas emissions.

Yet 92% of Brazil’s total theoretical biogas potential comes from agricultural waste, a sector that remains largely unexplored.

“The biggest barrier is information,” says Yuri. “Producers need to know that this waste has value.”

Government Incentives for Biogas and Biomethane

Brazil has implemented several policies to accelerate the sector:

1. Certificate of Origin (Combustível do Futuro) – 2027 Onward

Starting in 2027, natural gas distributors must blend 1% biomethane into the national gas network. Producers will receive certificates of origin to compensate for the price difference.

2. RenovaBio (Decarbonization Credits – CBIOs)

Biomethane producers can earn and sell CBIOs on the B3 exchange, generating additional revenue tied to emissions reductions.

3. PATM – Energy Transition Acceleration Program

Allows rural producers to use tax credits as guarantees for financing biogas installations.

“These are market-based incentives that bring direct financial benefits to rural producers,” notes Yuri.

Biogas as a Tool for Sustainability and Soil Health

Beyond energy generation, anaerobic digestion produces two valuable by-products:

• Biofertilizer (liquid or in flakes after drying)

• Organic compost (digestate)

Both can replace imported chemical fertilizers, more than 90% of which Brazil currently imports.

This makes biogas a powerful driver for:

• Lower production costs

• Better soil quality

• Reduced methane emissions (11–15 times more effective than other mitigation methods)

• Environmental compliance and easier licensing

Success Stories: Cooperatives Leading the Way

Yuri highlights the case of H2A, a company that partnered with small swine farmers in western Paraná:

• Farmers formed cooperatives

• Their manure feeds local biomethane plants

• Plants generate renewable gas, biofertilizer, and purified biogenic CO₂ used in beverages

With more than R$ 1.2 billion in planned investments, this model demonstrates how small producers can participate in large-scale energy projects.

Training, Support, and How to Get Started

Producers interested in biogas can access training from:

• ABREM

• CIBiogás

• Biogás Brasil (UN project)

• Portal Biogás

• Industry events like the Brazilian South Biogas Forum and ABREM’s Waste-to-Energy Congress

“Today, knowledge is not the problem,” Yuri emphasizes. “Producers need to organize, form cooperatives, and seek partnerships.”

A Growing Market with Untapped Potential

With more than 900 operational plants in Brazil, mainly in Paraná, São Paulo, and Minas Gerais, biogas is becoming a key part of the country’s energy transition. As agricultural waste accumulates and sustainability becomes central to farming, the biogas sector represents both an economic opportunity and an environmental necessity.

For small and medium rural producers, biogas offers a clear path to:

• Reduce energy and fuel costs

• Generate new revenue streams

• Improve soil quality

• Meet environmental requirements

• Participate in Brazil’s expanding renewable-energy market

Political Shockwaves: How Brazil's 2026 Election Uncertainty Sent the Ibovespa Plunging and Hiked Selic Rate Forecasts

Brazilian financial markets experienced one of their most turbulent sessions in recent history last Friday, as political developments in Brasília reignited deep-seated concerns over fiscal policy, monetary strategy, and long-term economic planning. The market's reaction was swift and severe: the benchmark Ibovespa index suffered a dramatic drop — after a series of record highs, the Ibovespa B3 experienced a drop of more than 4% —, while the Central Bank's latest Focus Report reflected this new wave of instability by signaling higher expectations for the Selic rate in 2026. This shift underscores how political uncertainty in Brazil directly translates into heightened risk premiums and a more restrictive monetary outlook.

Political Volatility Reshapes Monetary Outlook

For weeks, the financial community had been anticipating a potential easing cycle in Brazil's monetary policy, hoping for lower interest rates ahead. However, Friday’s political shock abruptly reshaped these expectations.

The catalyst was the early, and later confirmed, report that Flávio Bolsonaro would be the chosen presidential candidate for the 2026 election. This news immediately fueled investor anxiety regarding economic unpredictability, particularly concerning fiscal management in a potential 2027 administration led by the candidate.

The weekly Focus Report, compiled from projections by over 100 financial institutions, now signals a reversal of the recent downward trend in interest rate forecasts. A month prior, the market projected the Selic rate to end 2026 at 12.25%. Following the political sell-off, projections have jumped, reflecting the market's need to price in additional risk.

The Ibovespa's Steepest Decline Since 2021

The Ibovespa had been on a record-setting streak, briefly touching 165,000 points early in the session. The news of the potential Bolsonaro-aligned candidacy triggered a swift and severe reversal, resulting in one of the index's sharpest single-day drops since 2021.

The index plunged from nearly 165,000 points to 154,000 points. This massive sell-off was driven by fears that a politically motivated administration could undermine fiscal predictability, especially when compared to expectations surrounding other potential contenders, such as São Paulo governor Tarcísio de Freitas, who is widely viewed by markets as a more technocratic and fiscally disciplined option — in fact, Tarcísio de Freitas is even more radical than Bolsonaro when it comes to the economy. In São Paulo, the government even privatized the water supplier company (Sabesp). The governor also established a public security policy marked by dozens of cases of police brutality. There were cases where police officers threw a citizen off a bridge and also a police operation in Guarujá, in the Baixada Santista region, where 38 people from a poor community were killed by the police. On that occasion, Tarcísio said he was "extremely satisfied" with the police action.

Analysts highlight that the connection between political risk and monetary policy is direct: political uncertainty and a lack of clarity on economic plans increase the country's risk premium. The Central Bank, in turn, tracks these risks closely, as political turbulence affects asset pricing, the currency, and overall investor confidence. Consequently, expectations of unstable fiscal policy push long-term interest rates higher, forcing the market to price in a higher Selic rate to compensate for the added risk.

Focus Report Quantifies Risk: Higher Selic in 2025

The latest Focus Report, released this week, provides a clear quantification of the market's revised expectations. While inflation and GDP growth forecasts remain relatively stable, the outlook for the Selic rate has been revised upwards for 2025.

Metric	2024/Forecast	2025/Forecast
Inflation (IPCA)	4.40%	4.16%
GDP Growth	2.25%	1.80%
Exchange Rate (BRL/USD)	5.40	5.50
Selic Rate	N/A	12.25% (Revised Up)

Source: Central Bank Focus Report, December 2025

The upward revision of the Selic rate for 2025 (from 12.00% to 12.25%) confirms that the market is now less certain about the speed and depth of the current interest-rate cutting cycle. Analysts broadly expect rate cuts to resume in 2025, but the political noise has pushed the anticipated start date from January to March.

Structural Hurdles: Why Brazil's Interest Rates Remain High

The recent volatility has forcefully resurfaced the broader debate over Brazil's structural economic challenges. Despite a global trend toward lower policy rates, Brazil remains burdened by high structural rates due to several persistent factors:

1. Low Productivity and Supply Constraints: The country's economic structure lacks dynamism and struggles to adjust supply to rising demand, making it highly susceptible to inflationary pressures.
2. Tight Inflation Target: The inflation target was arbitrarily lowered during the Temer administration (from 4% with a 2-point band to 3% with a 1.5-point band) without corresponding structural improvements in the economy.
3. Aggressive Monetary Response: A tighter inflation target necessitates a more aggressive interest-rate response from the Central Bank, even when inflation is driven by supply-side issues rather than excess demand.

In essence, Brazil's combination of low productivity, deindustrialization, and a narrow inflation band all contribute to keeping interest rates stubbornly high, making the economy highly sensitive to political risk.

Navigating the Political-Economic Crossroads

The immediate future holds a high-stakes "Super Wednesday" with key decisions from both the U.S. Federal Reserve (Fed) and Brazil's Monetary Policy Committee (COPOM). The Fed is widely expected to cut rates, which would ease pressure on emerging markets. While COPOM is not expected to signal immediate cuts, analysts will scrutinize its tone for any subtle shift that might leave the door open for reductions later in 2025.

While Friday’s drop may have been an overreaction, early trading this week showed a partial recovery, with long-term yields dropping and the Ibovespa attempting a rebound. Nevertheless, markets will remain in a holding pattern, highly sensitive to both the COPOM decision and any further developments in the volatile political landscape ahead of the 2026 elections.

Regera Aims to Transform Brazil's Agribusiness With “Renewable Fertilizer” and High-Value Biomethane Strategy

Regera, a Brazilian company specializing in biogas and biomethane, is solidifying its position as a strategic force in the agribusiness and energy-transition sectors by producing high-value biofertilizers derived from organic waste. Cofounder André Holzhacker explains that the company’s mission is rooted in the concept of “renewable fertilizer,” a proposal aimed at reducing Brazil’s heavy dependence on imported agricultural inputs.

Hacker, an environmental engineer active in the sector since 2009, points to a fundamental paradox: although Brazil is a global agricultural powerhouse, it still imports 80% to 85% of the NPK (Nitrogen, Phosphorus, and Potassium) it consumes, even as large quantities of these nutrients are discarded in organic waste. Regera’s model converts this environmental burden into valuable outputs such as biomethane, electricity, and high-performance biofertilizers.

Integrated Business Model Drives Competitiveness

A core pillar of Regera’s strategy is its fully integrated business model, in which the company owns and operates its plants, a structure that covers 95% of its portfolio. By keeping ownership and operational control in-house, Regera safeguards its technological know-how and manages every stage of the process, from waste sourcing to digestate recovery. This mitigates risk, optimizes project structuring, and strengthens the company’s ability to scale efficiently.

The company currently operates three proprietary plants, two in Minas Gerais and one in Paraná, and expects to produce 8,000 to 10,000 tons of biofertilizer in 2025. Central to Regera’s competitive edge is the valorization of digestate, which is transformed into high-value renewable fertilizer. This approach generates an additional revenue stream while aligning the business with principles of regenerative agriculture and the circular economy.

Capital Backing Fuels Expansion

Regera’s rebranding from Alma Energia was accompanied by a key capital raise: investment funds Shift Capital and Risa Asset acquired equity stakes, supplying the resources needed to execute the company’s robust project pipeline. This financial backing enables Regera to overcome one of the sector’s most significant structural bottlenecks, like limited availability of growth capital, and accelerates its expansion trajectory.

Biomethane at the Center of a Growing Market

The company is fully focused on biomethane, a high-value product experiencing rising demand amid the global energy transition. Regera aims to reach an ambitious production milestone of 500,000 m³ of biomethane per day by 2030, a goal that requires navigating complex logistical and regulatory hurdles. Still, its integrated model, strong capital base, and expertise in scaling biogas operations position it favorably to achieve this target.

Strategic Partnerships Strengthen Long-Term Vision

Regera places strong emphasis on long-term partnerships and “win-win” relationships, a strategic necessity in a sector that depends on cooperation, reliable waste supply, and long-term off-take agreements. These partnerships reinforce the company’s ability to expand sustainably while aligning stakeholders around shared environmental and economic gains.

With a robust business model, a clear focus on biomethane, and a strategy that monetizes every byproduct of the biogas chain, Regera is emerging as a key player in Brazil’s circular bioeconomy. Its approach positions the company to reduce fertilizer dependency, support regenerative agriculture, and help drive the country’s transition toward cleaner and more resilient energy systems.

Stock market plummets after Flávio Bolsonaro announces his candidacy for the Brazilian presidency in 2026

Flávio Bolsonaro announced today that his father, former Brazilian President Jair Bolsonaro, currently imprisoned after being convicted of leading an attempted coup, has nominated him to run for president in the 2026 election.

Flávio, who is a senator for the Liberal Party (PL) in the state of Rio de Janeiro, said his father wants him to be the PL's presidential candidate. For many journalists, Flávio would be the ideal candidate to face Lula, as the son of the convicted former president is more popular than the current Brazilian president.

Others believe that the announcement of Flávio's name is just a trial or an attempt to gauge the reaction of the population and the financial market to the name of the senator from Rio de Janeiro. 

The announcement of Flávio's candidacy hit the Brazilian financial market like a bomb and caused the biggest drop in the Brazilian Stock Exchange since February 22, 2021, when former President Jair Bolsonaro (PL) appointed General Joaquim Silva e Luna to take over as president of Petrobras. 

How Petrobras' (PETR3; PETR4) bet on pre-salt oil transformed Brazil into a major oil power

Brazil’s rise as a global oil powerhouse is rooted in one of the boldest industrial bets in its history. When the first exploratory wells in the pre-salt layer were proposed, the cost, depth, and geological challenges were so extreme that private partners walked away. Shell, then a partner of Petrobras, refused to drill, fearing the R$1 billion price tag per well and the uncertain chance of finding commercially viable oil nearly seven kilometers below the seabed.

But Petrobras, as a state-controlled company, made a different calculation: if the attempt failed, it would survive; if it succeeded, it could rewrite Brazil’s economic trajectory. That strategic risk set the stage for one of the most significant energy discoveries of the 21st century.

What Is the Pre-Salt Layer?

Geologically, the “pre-salt” refers to oil-bearing rock formations that were created before massive deposits of salt covered the region millions of years ago. Along Brazil’s southeastern coast, especially in the Campos and Santos Basins — the Santos and Campos Basins are large sedimentary basins located on the southeastern coast of Brazil, on the continental shelf, with the Campos Basin further north (coast of Rio de Janeiro and Espírito Santo) and the Santos Basin further south (coast of Rio de Janeiro, São Paulo, Paraná and Santa Catarina) —, layers of microorganisms formed rocky structures known as stromatolites, which over time became reservoirs of oil. Later, shifts in the Earth’s oceans left behind thick salt formations that buried these reservoirs under up to 7 kilometers of water, rock, and salt.

This salt layer acts like a geological curtain: homogeneous and dense, it blocks seismic waves and makes traditional imaging almost impossible. For decades, companies explored only the shallower “post-salt” layers.

The Breakthrough: Imaging Below the Salt

The turning point came when Petrobras geophysicists developed a proprietary data-analysis technique, enhanced by artificial intelligence, capable of amplifying the faint seismic signals that passed through the salt. This allowed them to identify oil-rich zones beneath the thick geological barrier.

The discovery was considered so strategic that strict security protocols were imposed. Even geological samples (“cores”) were handled under near-military secrecy inside Petrobras’ headquarters, given their potential impact on financial markets and national policy.

The Next Challenge: Drilling Through Salt

Finding oil was only the first obstacle. Drilling into the pre-salt presented another enormous challenge: unlike typical rock layers, salt is plastic. When a drill penetrates it, the walls of the well can collapse as the salt shifts and closes in.

To overcome this, Petrobras engineers spent years developing new drilling and cementing techniques, capable of stabilizing wells while drilling. This innovation drastically reduced costs and made large-scale extraction viable.

From Improbable Discovery to Economic Engine

Today, the pre-salt fields account for more than half of Brazil’s total oil production, generating tens of billions of dollars in tax revenue and foreign currency inflows. The reserves discovered in these deep layers rival those of major global producers, earning Brazil comparisons to a “South American Saudi Arabia.”

What began as a high-risk geological hypothesis became a technological triumph, and a central pillar of Brazil’s economic landscape.

Petrobras (PETR3; PETR4) and Shell Win $1.7 Billion Pre-Salt Auction for Mero and Atapu Fields in Brazil

The consortium formed by Petrobras (PETR3; PETR4) and Shell emerged victorious in the Auction of Uncontracted Areas held by Pré-Sal Petróleo S.A. (PPSA) on Thursday, December 4th, securing the Union's stakes in the giant Mero and Atapu fields in the Santos Basin. The strategic move, which reinforces Petrobras's portfolio and expands its reserves in high-return areas, involved a total outlay of approximately R$ 8.8 billion (Brazilian Reais). The amount came in below the federal government’s expectation of R$ 10.2 billion, as no offer was made for the Tupi field. According to PPSA president Luís Fernando Paroli, the government will not incur losses from the absence of bids, since it will continue receiving and selling the oil corresponding to its share in the area.

The acquisition reaffirms Petrobras's commitment to deep and ultra-deep water investments, particularly in the Pre-Salt, which is currently the company's main cash generator. By acquiring stakes in mature, highly productive fields, the state-owned company aims to mitigate risks and enhance financial predictability amidst global energy market uncertainties.

Auction Details and Financials

The consortium submitted proposals significantly above the minimum required value. For the Union's 3.5% stake in the Mero field, the group offered R$ 7.791 billion, representing a premium of 1.90%. In the Atapu field, the 0.95% stake was secured for R$ 1 billion, an expressive premium of 16%.

Paroli hailed the result as historic, noting that the Union's total revenue from the state-owned company could reach R$ 30 billion in 2025, surpassing all previous years combined.

Market Optimism and Strategic Impact

The market reacted with optimism to the news. Petrobras shares (PETR4) were already trading higher before the official confirmation, reflecting investor confidence in the company's strategy to expand reserves and future cash flow. The operation is seen as strengthening three core pillars for Petrobras's performance:

1. Expanded Reserves: Mero and Atapu are among the world's most productive fields;
2. Greater Cash Generation: Assets already discovered and in operation reduce risks and increase economic efficiency;
3. Sustained Dividends: Increased financial flow supports the continuation of robust dividend policies.

For shareholders, the move is expected to strengthen the company's fundamentals, improve the potential for stock appreciation, and support long-term dividend continuity. The lot related to the Tupi area did not receive offers, but PPSA clarified that this does not cause prejudice, as the Union's production in the region will continue to be commercialized normally.