Brazil Records Decline in Poverty and Inequality

Over the past two years, Brazil has undergone one of the most significant processes of social mobility in its modern history. According to a study by Fundação Getulio Vargas (FGV), based on data from the Continuous National Household Sample Survey (PNADC) covering the period from 1976 to 2024, 17.4 million Brazilians moved out of poverty and entered social classes A, B, and C. To put the scale of this shift into perspective, that number is equivalent to the entire population of Ecuador.

As I analyze the data, it becomes clear that Brazil is experiencing a structural change in income distribution at a pace not seen in decades. FGV estimates that the speed of social mobility between 2022 and 2024 was 74% faster than the expansion recorded between 2003 and 2014, another period marked by strong upward mobility. In just two years, the share of the population in classes A, B, and C increased by 8.44 percentage points, with between 13 and 14 percentage points linked to households receiving Bolsa Família and the Continuous Cash Benefit (BPC).

This transformation is not merely statistical. It reflects deeper economic dynamics, especially the recovery of the labor market and the expansion of formal employment. Marcelo Neri, director of FGV Social and author of the study, emphasizes that income from work was the primary engine behind the rise of the middle class. According to him, the protection rule embedded in Bolsa Família encourages formal employment contracts, which may be the clearest symbol of a new middle class emerging from the base of the income distribution.

Beyond that, Brazil’s strong economic growth over the past four years came as a surprise, even to economists. Few expected such performance, and forecasts largely missed the scale of the expansion. In my view, one of the main explanations lies in the massive expansion of income transfer programs, which began during the pandemic under former president Jair Bolsonaro and were later reinforced.

Much of this expansion took place after the Covid-19 pandemic and gained even more momentum as the presidential election approached. Four months before the vote, Jair Bolsonaro’s administration decided to raise Auxílio Brasil — the name given to Bolsa Família under his government — from R$400 to R$600. The move and the increase was widely seen as an attempt to distance the program from its historical association with the Workers’ Party (PT), led by the current president, Luiz Inácio Lula da Silva.

Thus, before the pandemic, Bolsa Família cost around R$30 billion per year. Today, the program alone amounts to roughly R$150 billion annually. Added to this is the Continuous Cash Benefit (BPC), which guarantees one minimum wage to elderly people living in poverty and to individuals with certain debilitating conditions, also exceeding R$150 billion per year. In practice, Brazil moved from a R$30 billion income transfer system to one approaching R$300 billion, a tenfold increase in social spending, not including unemployment insurance and wage bonuses.

When all transfer programs are combined, Brazil now distributes close to R$400 billion per year, effectively operating a welfare-state model. This approach contrasts sharply with the spending cap period between 2016 and 2020, when efforts to contain transfers coincided with weak economic growth averaging just 1.5% per year.

Income transfers played a decisive role in reigniting growth because low-income households spend virtually all of what they earn, injecting demand directly into the economy. This surge in consumption helped explain, for example, why Brazilian industrial output grew 3.5% in 2024.

The strategy helped put Brazil back on a growth trajectory, but it also increased public debt and borrowing needs. Today, the government faces the challenge of financing these programs amid high interest rates, which explains its push to raise funds in financial markets. The Ministry of Finance, led by Fernando Haddad, is fully aware of these constraints and has often clashed with other factions within the government that advocate for even more spending.

This tension now extends to monetary policy. The new Central Bank president, Gabriel Galípolo, faces difficult decisions, including potential interest rate hikes, placing him in a politically sensitive position given past criticism of the Central Bank’s independence and policy direction by members of PT.

In short, income transfers were crucial to Brazil’s recent growth, but the challenge ahead is calibrating social spending while managing debt, inflation, and interest rates in a more restrictive fiscal environment.

In Brazil, social classes A, B, and C are defined primarily by household income. Class C is generally associated with the middle class, composed of families that can meet basic needs while maintaining some level of consumption. Classes B and A include higher-income groups with greater financial stability. In 2024, Brazil reached its highest historical level of participation of middle- and upper-income classes since 1976. The combined share of classes A, B, and C reached 78.18% of the population, with class C alone accounting for 60.97%, while classes A and B together represented 17.21%.

At the same time, the study shows that lower-income groups reached their smallest proportions on record. Class D accounted for 15.05% of the population, while class E fell to 6.77%. For Wellington Dias, Brazil’s Minister of Development and Social Assistance, these numbers confirm the strength of social policies aligned with economic growth. He argues that integrated policies in education, healthcare, and socioeconomic inclusion, combined with GDP growth above 3% per year, have expanded opportunities for employment, entrepreneurship, and income generation. In his view, money reaching millions of low-income Brazilians through programs such as Bolsa Família has acted as a gateway to formal jobs or supported business initiatives, reinforcing a virtuous cycle of growth.

In practical terms, families with a monthly household income between R$4,000 and R$10,000  — a value equivalent to approximately US$1,850 — are typically classified as middle class in Brazil as of 2026. This income range allows households to cover essential expenses such as housing, food, and transportation, while also supporting basic private healthcare, education, and moderate leisure spending. Above this level, families are considered upper-middle class, while those below it tend to remain concentrated in lower-income categories.

Despite this progress, a concerning reality persists. Recent surveys indicate that most Brazilians would struggle to maintain their current standard of living for long if they lost their main source of income. This vulnerability is not limited to the poorest segments of society and affects a significant portion of the middle class as well. Many households operate with little or no financial reserves, revealing a structural weakness in family financial planning.

This picture suggests that even as millions of Brazilians move into the middle class, economic stability remains limited. Income gains are real, but they are not always accompanied by financial education or the ability to save, especially when you're forced to spend your entire salary. In a country where economic shocks are frequent, this combination makes long-term economic security a continuous challenge, even for those who have already climbed several steps of the social ladder.

Petrobras (PETR3; PETR4), Fertilizers and Shareholders: Revival of FAFEN Plants Rekindles Strategic Debate in Brazil

January marks a significant step forward in the restart of Brazil’s nitrogen fertilizer industry, as Petrobras resumes operations at its fertilizer plants in the Northeast. In Sergipe, the FAFEN unit, which had already restarted ammonia production on December 31, began producing urea on January 3. In Bahia, the Camaçari plant completed maintenance in December and is currently in the commissioning phase, with urea production expected to begin by the end of January.

Together, the two plants will produce ammonia, urea and ARLA 32 (Automotive Liquid Reducing Agent), with initial investments of approximately R$38 million in each facility. The restart of the FAFEN units has already generated around 1,350 direct jobs and 4,050 indirect jobs, reinforcing their relevance for regional development.

Production Capacity and Market Impact

The Sergipe plant, located in Laranjeiras, has the capacity to produce 1,800 tonnes of urea per day, equivalent to about 7% of Brazil’s domestic market. The Bahia unit, in Camaçari, can produce 1,300 tonnes per day, corresponding to roughly 5% of national demand. Operations in Bahia also include the Ammonia and Urea Maritime Terminals at the Port of Aratu, in Candeias.

According to Petrobras, the two FAFEN units, together with Araucária Nitrogenados S.A. (ANSA) in Paraná, will be responsible for supplying around 20% of Brazil’s total urea demand.

“Our expectation is to increase domestic production to 35% in the coming years, including a new plant under construction in Mato Grosso do Sul,” said William França, Petrobras’ Executive Director of Industrial Processes and Products.

Strategic Rationale: Reducing Dependence on Imports

Brazil currently imports nearly all the urea it consumes. Petrobras argues that resuming domestic production is a strategic move to reduce external dependence, strengthen the agribusiness supply chain and enhance food security.

The nitrogen fertilizers produced by the FAFEN units are expected to serve not only agriculture, including urea for crops and for animal feed, but also industries such as textiles, paints, and pulp and paper. ARLA 32 production is also highlighted as a contribution to reducing vehicle emissions and supporting environmental goals.

“This is a strategic action,” França emphasized. “It uses natural gas as the main input, expands allocation alternatives for Petrobras’ gas production and generates value for industry, agriculture and the country.” 

The Critical View: Fertilizers as a Costly Detour for Petrobras Shareholders

While the restart of the FAFEN plants has been widely celebrated by regional leaders and industrial policy advocates, market analysts and energy sector specialists warn that Petrobras’ return to fertilizers may revive old problems, particularly for shareholders.

Critics recall that Petrobras previously operated a fertilizer subsidiary, Petrofértil, which failed to make Brazil self-sufficient and generated heavy financial losses, ultimately leading to its shutdown. In their view, the renewed push into fertilizers is driven less by economic rationale and more by geopolitical concerns, especially after Brazil’s exposure to Russian supply disruptions following the Russia–Ukraine war.

For many economists, market analysts and investors, if producing fertilizers in Brazil were economically attractive, the private sector would already be doing it. For them, Petrobras should focus on producing oil and natural gas, rather than subsidizing an industry that has historically only delivered losses

From this perspective, the core issue is competitiveness. Fertilizer production depends heavily on cheap natural gas, something Brazil lacks. 

This dynamic highlights a clear divergence of interests: investors prioritize short-term returns and capital discipline, whereas the Brazilian government frames fertilizer production as a strategic tool to reduce Brazil’s structural dependence on imports.

In 2024, Petrobras reached the milestone of one million individual shareholders on the Brazilian stock exchange. Despite being a publicly traded company, its controlling shareholder remains the Brazilian government, making Petrobras a state-owned mixed-economy company. This structure means that strategic decisions also take national security considerations into account, especially after the war in Ukraine exposed Brazil’s vulnerability and heavy dependence on imported fertilizers. Currently, the country imports more than 80% of its fertilizer needs, largely from suppliers such as Russia and Belarus.

Gas Prices, Environmental Licensing and Structural Barriers

Critics highlight that Brazil’s natural gas is offshore and expensive, unlike Russia or Canada, where abundant and cheap gas underpins global fertilizer leadership. Environmental licensing is also commonly cited as a major obstacle, both for shale gas exploration and for potash mining, particularly in the Amazon region.

As a result, domestically produced fertilizers tend to be more expensive than imported ones, unless production is heavily subsidized, this could reduce short-term shareholders profits. That, in turn, raises concerns among investors and is not good news for PETR3 and PETR4.

Will Fertilizers Become Cheaper for Consumers?

Supporters of the restart argue that domestic production could stabilize supply and potentially reduce costs over time. Skeptics disagree, noting that fertilizer prices tend to follow international benchmarks and that any subsidy would distort market signals.

In theory, cheaper fertilizers could lower food prices, but in practice, margins are usually captured along the chain, and consumers rarely see the full benefit.

There is also concern that subsidized fertilizers could undermine efficiency in agribusiness and weaken Brazil’s long-term competitiveness by masking structural inefficiencies.

Industrial Policy vs. Shareholder Value

The debate reflects a broader tension within Petrobras’ strategy. On one side, the company and labor organizations argue that fertilizers fit into a re-verticalization strategy aligned with energy transition, bio-refining and national development goals. On the other, investors fear mission creep.

From the industrial policy standpoint, Petrobras’ Business Plans for 2025–2029 and 2026–2030 explicitly mark a return to fertilizers, reversing the divestment cycle of 2016–2022. Around US$1 billion has been allocated to fertilizers over the next five years, alongside expanded investments in natural gas processing.

Supporters see this as rebuilding strategic capabilities dismantled in the past decade. Critics see a dilution of focus.

Analysts indicate that Petrobras is one of the world’s best offshore oil producers. For them, that’s where capital should go, especially with new frontiers like the Equatorial Margin.

What This Means for Petrobras (PETR3; PETR4) and Its Shareholders

For shareholders, the fertilizer debate introduces uncertainty. In the short term, the restart of FAFEN plants supports regional economies and aligns with government priorities. In the long term, the key question remains whether Petrobras can operate fertilizers profitably without repeating past losses.

The market reaction is likely to balance optimism about industrial recovery with caution over capital discipline. As Brazil seeks to reduce its dependence on imported fertilizers, Petrobras finds itself once again at the center of a strategic dilemma: serve as an instrument of national policy or focus strictly on maximizing shareholder returns.

The answer will shape not only the future of fertilizers in Brazil, but also the investment thesis behind Petrobras shares in the years ahead. However, we cannot overlook the fact that Petrobras is widely recognized as one of Brazil’s most innovative companies, particularly in the energy sector. Its leadership in innovation is largely driven by its pioneering work in ultra-deepwater oil exploration technologies, an area in which the company is regarded as a global benchmark. The development of the pre-salt layer, one of the largest oil discoveries of the century, stands as a concrete example of how technological capability has translated into operational success.

This culture of innovation is further reinforced by the work carried out at Cenpes (Petrobras Research Center), one of the largest R&D hubs in Latin America, responsible for developing technologies that increase efficiency, reduce costs and improve sustainability across the energy value chain.

From this perspective, Petrobras’ technological expertise could also prove decisive in the fertilizer segment. Its ability to optimize industrial processes, manage complex operations and integrate natural gas supply chains suggests that, under the right economic and regulatory conditions, the company may be able to operate fertilizer production successfully. If so, Petrobras would not only remain competitive in global energy markets, but also leverage its innovation capacity to expand into strategic industrial segments, contributing to Brazil’s long-term energy and food security.

China’s Strategic Pivot in Latin America: Trade Wars, Electric Vehicles, and the Venezuela Crisis

As the Mercosur-EU agreement reshapes trade dynamics, Beijing may begin to recalibrate its influence in the Western Hemisphere amid growing tensions between Washington and Caracas.

The geopolitical landscape of Latin America is undergoing a seismic shift. From the bustling automotive plants in Brazil to the oil-rich fields of Venezuela, China is meticulously evaluating its position. This strategic reassessment comes at a critical juncture, marked by the finalized Mercosur-European Union trade agreement and a volatile political transition in Venezuela that has drawn the direct intervention of U.S. President Donald Trump.

Beyond the well-known consequences, all the actions taken by the United States in Venezuela had an undeniable practical result: Brazil lost part of its diplomatic influence in South America in the face of US actions that, for many, bordered on piracy and the most hardline imperialism possible.

However, Trump, who controls the most powerful military machine on the planet, and doesn't seem at all concerned about the possible repercussions of this action, is going foward. The US action in Venezuala practically overrides international law, defies the legal order of the US itself, trampling over US Congress. In the end, this US action undermines, perhaps irreversibly, the international institutional arrangement that was designed after the Second World War.

This could obviously interfere with decades of effort by the Brazilian government in defending international trade and multilateralism. Brazil's largest trading partner, China, may perhaps be rethinking some of its strategies in the region

The Mercosur-EU Deal: A Challenge to China’s Trade Dominance?

For years, Brazil has sought to diversify its trade partners to reduce its heavy commercial dependence on China. The Mercosur-EU agreement is a cornerstone of this strategy. By opening the Brazilian market to European imports, including a phased reduction of tariffs on automobiles over the next 18 years, the deal aims to create a more balanced trade portfolio.

However, this move might create some "noise" in the Brasília-Beijing relationship. China has recently made multi-billion dollar investments in Brazil’s automotive sector, with giants like GWM, Geely, and BYD establishing major manufacturing hubs in São Paulo, Paraná, and Bahia.

Despite the potential for increased European competition, Chinese industry experts remain unfazed. The global nature of the automotive supply chain means that many "European" cars imported under the new agreement may actually be Chinese brands manufactured in Europe. Conversely, Brazil-made Chinese vehicles could soon find their way into European markets, turning a potential trade barrier into a cross-continental opportunity.

Venezuela: The Frontline of the U.S.-China Resource War

The crisis in Venezuela remains the most contentious point of friction between the world’s two superpowers. While the U.S. administration has framed its intervention as a move to secure "its backyard," analysts suggest the primary objective is to halt Chinese expansionism.

Contrary to popular belief, Venezuela is not China's primary oil supplier, accounting for only 4% of its imports. However, Beijing’s interests are deeply financial and structural. With over $60 billion in loans and 600 joint projects, China is heavily invested in Venezuela’s long-term stability.

"The U.S. cannot deliver what Latin America needs today: massive investment in infrastructure. China has demonstrated this capacity with hundreds of billions of dollars already deployed across the region," notes geopolitical analyst Elias Jabbour.

The Rise of Delcy Rodríguez and the Future of Chavismo

A significant development in the Venezuelan saga is the emergence of Delcy Rodríguez as a central figure in negotiations. A "root-level" Chavista with deep political lineage, Rodríguez is seen as a pragmatic leader capable of navigating high-stakes diplomacy with the Trump administration.

The current shift suggests a potential "Chavismo without Maduro" scenario. While the U.S. seeks a more palatable partner for oil negotiations, the social and military foundations of Chavismo remain intact. For Beijing and Moscow, the failure of a rapid "regime change" in Caracas reinforces their support for a multipolar approach, where Latin American nations maintain sovereignty over their natural resources.

Multipolarity and the "Safe Haven" of Brazil

As the region becomes a "minefield" of geopolitical tensions, China may become more calculated in its investments. This presents a unique opportunity for Brazil. By positioning itself as a "safe haven" for Chinese capital, Brazil can attract the infrastructure and industrial investments that the U.S. is currently unable or unwilling to provide.

However, things are still moving towards consolidating this scenario. Proof of this was China's decision, at the beginning of 2026, to impose import tariffs on meat produced in Brazil.

China announced that starting January 1, 2026, it will impose an additional 55% tariff on Brazilian beef imports exceeding a quota of 1.1 million metric tons. Imports within the quota will continue to be taxed at 12%. In 2025, China imported 1.7 million tons of beef from Brazil, meaning that, if volumes remain unchanged, around 600,000 tons will be subject to the higher tariff.

The measure will not affect Brazil alone. Argentina, the United States, Uruguay and Australia will also face quotas, with the same 55% surcharge applied to shipments above their respective limits. According to Chinese authorities, the policy aims to protect domestic producers, who have been investing to expand national beef production.

Strategic challenge for Brazil

The announcement poses a significant challenge for Brazil’s government and agribusiness sector, given the country’s heavy exposure to the Chinese market. Brazil is the fifth-largest agribusiness producer globally, accounting for 2.6% of world output, and the third-largest exporter, with 8.4% of global exports. It also holds the largest agribusiness trade surplus in the world and exports to more than 150 countries.

Meat products represent the second-largest category of Brazilian agribusiness exports (18%), trailing only the soy complex (36%). China is the top destination, absorbing 31% of Brazil’s agribusiness exports, with beef as a standout product.

Heavy reliance on China

Brazil is the world’s largest beef producer, with output of 12.4 million tons, and the second-largest exporter, shipping roughly 30% of its production abroad. China accounts for 48% of Brazilian beef exports, while Brazilian shipments supply 54% of China’s total beef imports.

While parts of Brazil’s agribusiness sector had already anticipated the introduction of quotas and surcharges, the new policy is expected to force market adjustments. It also reinforces the growing reality that international trade is increasingly being used as a geopolitical tool, reshaping global agricultural flows.

 

Brazil, Hong Kong and Singapore Help Boost U.S. Trade Surplus Under Trump in 2025

According to the United States government's official statistics, Brazil was one of the main contributors to the positive trade results of Donald Trump in 2025, together with the Asian financial centers of Hong Kong and Singapore.

During the first half of the last year, the U.S. enjoyed a trade and services surplus of US$9.2 billion with Brazil, making the country one of the most favored partners of Washington. Only the Netherlands stood above with a surplus of US$20 billion.

Nevertheless, according to a report by ICL, experts point out that the Dutch number is skewed by structural factors. A lot of products that are being imported to the European Union are recorded through the Port of Rotterdam, which leads to the U.S.-Netherlands trade figures being overstated. Also, the substantial impact of the financial services sector on the Dutch economy has a strong effect on the final balance.

Excluding these distortions, Brazil stands out, outperforming several major economies according. The U.S. posted a surplus of US$8.9 billion with Singapore, US$8.6 billion with Switzerland, and US$6.2 billion with Hong Kong. Other countries contributing to positive balances included the United Kingdom (US$5.4 billion), Australia (US$5.2 billion) and Saudi Arabia (US$3.3 billion).

Despite Trump’s aggressive efforts to shrink America’s trade gap, the U.S. continues to run large deficits with key manufacturing economies. The biggest shortfalls remain with Mexico (US$50.3 billion), Vietnam (US$44.2 billion), Taiwan (US$34.4 billion), China (US$33.1 billion) and Germany (US$15.8 billion).

Brazil’s role extends beyond services

When services are excluded and only goods trade is considered, Brazil again appears among the countries helping the U.S. narrow its deficit. Official figures from October show U.S. trade surpluses in goods with Switzerland (US$7.3 billion), the United Kingdom (US$6.8 billion), the Netherlands (US$5.1 billion), Hong Kong (US$2.8 billion) and Brazil (US$2.7 billion), ranking fifth.

By contrast, the U.S. continues to face a deep goods trade deficit, totaling US$17.9 billion with Mexico, US$15.7 billion with Taiwan, US$15 billion with Vietnam, and US$13 billion with China.

Brazilian Panettone Expands to Asia and Oceania, Reaching 50 Countries Worldwide

This year, Abimapi (the Brazilian Association of Biscuit, Pasta, and Industrialized Bread, Cake and Panettone Industries) is also celebrating the expansion of Brazilian panettone into new markets across Asia and Oceania, including Australia, China, Hong Kong, New Zealand, and Singapore.

Panettone is a traditional Italian sweet bread, originally from Milan, made with a soft, aromatic dough enriched with candied fruits and raisins and a distinctive vanilla aroma. Over time, it has become a symbol of the year-end holiday season in Brazil and around the world.

Overall, Brazilian panettone is now sold in around 50 countries across all continents

Tariffs, politics and partial rollbacks

The sharp increase in the U.S. surplus with Brazil occurred during a period when tariffs and trade barriers were imposed on Brazilian products. At the time, Trump framed the measures as retaliation over the treatment of former Brazilian President Jair Bolsonaro. Over time, however, several of these tariffs were gradually lifted.

Even so, Brazilian exports still face minimum tariffs of around 10% to enter the U.S. market, while steel and other industrial products can be taxed at rates exceeding 25%.

Deficit narrows, but imbalance remains

According to the U.S. Census Bureau and the Bureau of Economic Analysis, the American economy still runs an overall trade deficit with the rest of the world. However, that gap has been shrinking rapidly since Trump expanded tariffs on both rivals and allies.

In October 2025, the U.S. trade deficit stood at US$29.4 billion, a sharp decline from US$48.1 billion in September, representing a reduction of US$18.8 billion in just one month.

US-Venezuela Crisis and the Future of Oil: How Petrobras (PETR3; PETR4) is Strengthening its Position with the Búzios Field

The crisis between the US and Venezuela has immediate and potential medium-term implications for global energy markets, particularly crude oil prices and investment flows.

Brazil’s national oil company Petrobras has been steadily increasing production in the pre-salt Santos Basin, with the FPSO P-78 platform (Búzios 6) starting production late December 2025. It can produce up to ~180,000 barrels of oil per day plus significant volumes of natural gas, helping raise the Búzios field’s total capacity to over 1.15 million barrels per day.

More broadly:

• Búzios is already Petrobras’ largest production hub, with multiple FPSOs online and plans for still more through 2030.

• Petrobras reported strong production and financial results through 2025, with robust cash flow and high offshore output, underpinning its growth targets.
  

However, energy markets have been volatile, with Brent oil prices softer at times, and geopolitical shocks like the Venezuela operation tend to inject short-term volatility, risk premia in oil prices, and uncertainty for investors.

For Petrobras, greater global supply, especially if Venezuelan oil re-enters markets under U.S. control, could exert downward pressure on prices. However, diversified Brazilian production and long-term infrastructure projects likely provide resilience.

Current State and Outlook for Petrobras

Petrobras continues to:

• Deliver strong production growth from the pre-salt, especially Búzios.
  

• Expand natural gas exports, boosting Brazil’s energy mix.
  

• Maintain profitable operations with competitive production costs.
  

Near-term risks include:

• Global oil price fluctuations.
  

• Environmental and regulatory challenges (e.g., drilling delays in some basins).
  

Medium- to long-term growth remains anchored by deepwater assets such as Búzios, with projected further FPSO deployments and infrastructure investments through the end of the decade.

The U.S. action in Venezuela has intensified geopolitical tensions and will likely ripple through global energy politics. For Petrobras, the immediate operational outlook remains strong due to ongoing expansion in the pre-salt and rising output. Global market volatility may continue, but Brazil’s offshore production and new platforms like Búzios 6 position Petrobras to weather external shocks while pursuing growth. 

Short history of unemployment in Brazil, from 1900 to today

The history of unemployment in Brazil is a topic that has evolved significantly over time, changing as the country's politics went through democratic and dictatorial periods. It is always important to remember that the job market in Brazil, since the beginning of the 20th century, was built on a foundation that, until 1888, was based on slavery, it is also important to emphasize that the black population was massively excluded from the job market after the abolition of slavery.

Therefore, the emergence of the job market in Brazil took place within a context of profound social inequality and the total helplessness of black people by the government.

The Brazilian job market was born, therefore, within an environment of exclusion towards a significant part of the workforce (the black population) and several public policies aimed at financing immigration (mostly Europeans).

Between 1851 and 1900, approximately 2 million immigrants entered Brazil. This number represented half of the Brazilians who were out of the job market during this period. Thus, the exclusion is evident. Brazilians themselves, especially the black population freed after the end of slavery, could have met a significant part of this demand for labor.

Here is an overview of the key periods and trends in Brazil's unemployment history:

• Early Years (1900s-1950s): In the early 20th century, Brazil experienced significant economic changes, transitioning from an agrarian-based system to industrialization. Unemployment rates during this period were relatively low due to strong demand for labor in expanding industries such as mining, agriculture, and manufacturing.
• Industrialization and Urbanization (1960s-1970s): The 1960s and 1970s marked a period of rapid industrialization and urbanization in Brazil. While this led to economic growth and job creation in urban areas, it also resulted in structural unemployment as traditional agricultural jobs declined. The government implemented policies promoting industrialization and infrastructure development, influencing employment patterns.
• Economic Instability (1980s): The 1980s were characterized by economic instability in Brazil, marked by high inflation, debt crises, and recession. These challenges contributed to rising unemployment rates as businesses struggled, leading to layoffs and reduced hiring.
• Stabilization and Reforms (1990s): In the early 1990s, Brazil implemented economic stabilization measures, including the Plano Real in 1994, which aimed to control inflation and stabilize the economy. While these reforms initially led to improvements in economic stability, they also resulted in short-term job losses and adjustments in various sectors.
• Periods of Growth and Recession (2000s-2010s): Throughout the 2000s and early 2010s, Brazil experienced periods of economic growth driven by factors such as commodity exports, domestic consumption, and government policies. However, there were also periods of recession and economic slowdown, leading to fluctuations in unemployment rates.
• Recent Years (2010s-2020s): In the latter part of the 2010s and into the 2020s, Brazil faced economic challenges, including political instability, fiscal deficits, and the impact of global events such as the COVID-19 pandemic. These factors contributed to fluctuations in unemployment rates, with periods of job creation followed by increases in unemployment due to economic downturns.

Brazil Records Lowest Unemployment Rate on Record in 2025

Brazil’s official unemployment rate fell to 5.2% in November 2025, marking the lowest level since the historical series began in 2012, according to data released by IBGE, the country’s national statistics agency.

Federal government figures from the Continuous PNAD survey show that, in the three months ending in November, 5.644 million people were actively seeking work — the smallest number of unemployed Brazilians ever recorded by the survey. By contrast, the peak of unemployment occurred during the height of the COVID-19 pandemic, in the quarter ending March 2021, when the number of unemployed reached 14.979 million.

The decline in unemployment was accompanied by a record level of employment, with 103.2 million people working across the country.

In the quarter ending October 2025, the unemployment rate stood at 5.4%, also the lowest figure in the series. 

Growth, inflation and fiscal debate

Despite concerns that low unemployment and faster-than-expected economic growth could fuel inflation, there is so far no consistent evidence that labor market tightness is driving price pressures. Economic activity has expanded well above earlier forecasts, many of which underestimated Brazil’s growth momentum.

While fiscal discipline, spending cuts and debt dynamics remain important policy challenges, the latest labor data suggest that Brazil’s economy is not on the brink of collapse, as some narratives suggest. Instead, the figures point to rising employment, income growth and improved welfare, particularly for lower-income households.

Throughout Brazil's history, various factors have influenced unemployment rates, including economic policies, global economic conditions, technological advancements, demographic changes, and social factors. Government interventions, such as employment programs, social welfare initiatives, and labor market regulations, have also played a role in shaping labor market dynamics and positively addressing unemployment challenges.

Currently, one of the main challenges the country is confronted with is the need for more efficiency. Brazil has to create and promote a national ecosystem that is more and more innovation- and technical education-oriented. Large-scale funding for research and development, technical education, and a solid industrial policy are among the main factors that need to be implemented in order to reach this goal. However, in a political and business environment that is always focused on the next quarter or the next election, who will be the one to lead the economic strategy that could possibly take 20 or 30 years to demonstrate its effects?

Petrobras (PETR3; PETR4) at a Crossroads: Venezuela’s Crisis, Carbon Research, and the Future of Brazilian Fuel

Political instability in Venezuela and growing uncertainty over the future of its oil industry may have direct and indirect consequences for Petrobras and fuel prices in Brazil. While a potential increase in Venezuelan oil supply could push global crude prices lower, analysts warn that Brazilian consumers may not fully benefit due to limited transparency in Petrobras’ pricing policy.

The global energy landscape is shifting rapidly, and at the center of this transformation is Petrobras, Brazil's state-owned oil giant. From the geopolitical tremors in Venezuela to groundbreaking carbon stock research and the expansion of cleaner fuels, the company is navigating a complex web of challenges and opportunities that will define Brazil's economic and environmental future.

Venezuela, U.S. Influence, and Global Oil Prices

If the United States succeeds in expanding control over Venezuela’s oil reserves and reopening the country to private investment, global oil markets could respond with downward pressure on crude prices.

“If the market believes that the U.S. will effectively take control of Venezuela and that American and other private companies will return to investing there in the short term, the tendency is for oil prices to fall,” says economist Adriano Pires, founder and director of Brazil’s Center for Infrastructure Studies (CBIE).

Lower oil prices typically reduce revenues for oil producers. In 2025, crude markets already faced sharp declines: WTI crude fell nearly 20%, its worst annual performance since 2020, while Brent crude dropped around 14%. “For Petrobras, this is not positive, because it means lower revenue,” Pires notes.

Short-Term Volatility, Long-Term Pressure

In the immediate aftermath of geopolitical shocks, oil prices often rise due to uncertainty. Following the initial escalation in Venezuela, crude prices briefly increased by about 1%.

“Instability tends to push prices up in the short term,” explains Marcelo Godke, a specialist in international business law. “But in the medium to long term, the scenario points in the opposite direction, toward lower prices.”

If Venezuelan production expands sustainably, the increase in global supply could weigh on oil prices for years, affecting Petrobras’ profitability and investment capacity.

What Happens to Petrobras and Other Brazilian Oil Companies?

The medium- and long-term effects on Brazilian oil companies remain uncertain. A sustained drop in global prices would reduce margins, while increased competition could reshape regional dynamics.

Brazil’s Vice President and Minister of Development, Geraldo Alckmin, downplayed immediate concerns, emphasizing that Venezuela’s production recovery would require significant investment and time, not something achievable “overnight.”

At the same time, a reopening of Venezuela’s oil sector could create new business opportunities. Smaller oil fields may attract mid-sized companies, including Brazilian firms such as PetroReconcavo and Prio, rather than global majors like Chevron.

However, rising geopolitical instability in Latin America may discourage foreign capital, limiting the speed and scale of investment.

Will Brazilian Oil Exports Be Affected?

According to economists, Brazil’s oil export volumes are unlikely to face major disruptions in the short term.

Economist Simão Silber, a professor at the University of São Paulo (USP), explains that increased Venezuelan supply, particularly if directed toward the United States, could shift trade flows rather than eliminate Brazilian exports.

“Other markets, especially in Asia, may become more favorable for Brazil if Venezuelan oil is redirected,” Silber says. Historically, Venezuela supplied large volumes to China, a country with limited domestic oil reserves.

Brazil’s production and export levels will also continue to be influenced by OPEC+, the expanded oil producers’ group that includes Venezuela. While OPEC+ sets production quotas, its influence has weakened in recent years, with some members, including Saudi Arabia, previously exceeding agreed limits.

Will Fuel Prices Fall in Brazil?

Lower global oil prices could, in theory, lead to cheaper gasoline and diesel at Brazilian fuel stations. In practice, the outcome is far less certain.

Since the beginning of President Luiz Inácio Lula da Silva’s third term, Petrobras has adopted a new pricing policy to reduce exposure to international price volatility. However, the pricing formula has not been fully disclosed, limiting predictability.

“Fuel prices in Brazil are highly controlled,” Silber explains. “Any adjustment will depend primarily on government decisions. If prices change, the tendency would be downward, not upward.”

Adriano Pires adds that political considerations, including inflation control and interest rate policy, may increase pressure for price cuts. Fuel prices have a broad impact on inflation, and lower costs could even create room for monetary easing.

The "Carbon Countdown": A $108 Million Scientific Bet

In a move toward environmental accountability, Petrobras and Shell have announced a joint investment of R$ 108 million (approx. $21 million USD) to fund the Carbon Countdown project. This massive research initiative, led by the University of São Paulo (USP), aims to map carbon stocks in soils and forests across all Brazilian states by 2030.

Key Features of the Carbon Countdown Project

While the project is hailed as a step toward "energy security and decarbonization" by Shell’s Alexandre Breda, some NGOs, such as the Arayara International Institute, warn of potential conflicts of interest. They argue that fossil fuel companies might use such data to legitimize carbon credits while continuing oil exploration, a practice often criticized as greenwashing.

Boosting Cleaner Energy: The Rise of Diesel S-10

Amidst these geopolitical and environmental debates, Petrobras is also focusing on operational efficiency. The Henrique Lage Refinery (Revap) in São Paulo has recently expanded its production capacity for Diesel S-10 by 80%.
This low-sulfur fuel is crucial for reducing pollutant emissions and meeting the demands of modern, high-efficiency engines. By optimizing its refining park, Petrobras is shifting its focus from the older S-500 diesel to the cleaner S-10 variant, aligning with stricter environmental standards and market trends.

Uncertainty Still Dominates the Outlook

Despite market speculation, the carbon research, and the future of Brazilian fuel, the coming months for Petrobras remain shrouded in uncertainty, mainly due to the still unclear situation in Venezuela and that country's oil production.

“We still don’t know how a political transition would unfold,” says political scientist Leonardo Paz, from Fundação Getulio Vargas (FGV). “Will new elections be held? Who will effectively govern? These questions remain unanswered.”

If political instability persists and production fails to recover, oil prices could move in the opposite direction, rising instead of falling.

“We need to be very cautious,” says economist Carlos Honorato, from FIA Business School. “There is no immediate positive news for oil supply yet.”

What This Means for Brazil

The Venezuelan crisis highlights how geopolitics, energy markets, and domestic policy intersect. While lower oil prices could ease inflation and benefit consumers, Petrobras’ pricing strategy and political uncertainty will determine whether those gains reach Brazilian households.

For now, the outlook remains balanced between potential relief at the pump and continued uncertainty in global energy markets.

Petrobras stands at a strategic bifurcation. On one hand, it must manage the risks of global commodity volatility and regional instability. On the other, it is investing in the science of the future and the infrastructure for cleaner fuels. Whether these moves will secure Brazil’s position as a global energy leader or leave it vulnerable to market shifts remains the defining question for the coming decade.

Mercosur–EU Trade Agreement: Why the Deal Is a Strategic Win for Brazil

The trade agreement between Mercosur and the European Union establishes one of the world’s largest free trade zones, granting Brazilian products preferential access to a market of nearly 450 million consumers across the EU. The deal also provides the gradual elimination of import tariffs on agricultural and industrial goods, significantly improving Brazil’s export competitiveness.

For Brazil, the agreement represents far more than a commercial milestone. It is a strategic economic, industrial, and geopolitical achievement, years in the making, and one that reinforces the country’s position in a rapidly changing global trade environment.

In fact the agreement between the European Union and Mercosur is a step forward for both Brazil and Europe at a political moment dominated by protectionist actions and a type of opposition to multilateralism from the US government.

Opportunities, Risks, and Brazil’s Industrial Future

Although it is an undeniable positive step towards multilateralism, there are also risks associated with this agreement.

Economist Paulo Gala, for example, argues that while the Mercosur–European Union agreement may represent a political and diplomatic advance, it raises serious concerns from a development perspective. 

According to his analysis, the deal risks reinforcing an asymmetric trade pattern in which Brazil predominantly exports low–human-capital commodities, such as agricultural goods and raw materials, while importing high–value, technology-intensive industrial products from Europe. 

This dynamic, he warns, could deepen Brazil’s dependence on primary exports, limit learning and innovation spillovers, and hinder the country’s ability to move up the industrial and technological ladder. Without a robust domestic strategy focused on industrial policy, technological upgrading, and human capital formation, the agreement may accelerate what Gala describes as a “regressive specialization,” locking Brazil into a middle-income trap rather than fostering long-term development.

Expanded Market Access and Greater Competitiveness

Therefore, by reducing and eventually eliminating tariffs, Brazilian exports, especially in agribusiness, food processing, mining, and manufactured goods, are expected to become more competitive in European markets. Lower trade barriers can translate into reduced export costs, higher margins for Brazilian companies, and stronger integration into global value chains.

The agreement also sends a clear signal to international investors: Brazil is committed to rules-based trade, long-term stability, and deeper economic integration with advanced economies.

A Long and Complex Negotiation Process

Negotiations between Mercosur and the EU took more than two decades, largely due to the complexity of aligning interests among dozens of countries, sectors, and regulatory frameworks. While resistance persisted in some European countries (particularly France, Poland, and Hungary), the final outcome may reflects a “win-win” compromise, balancing agricultural sensitivities with industrial and services opportunities.

Importantly, business communities across Europe, especially in Germany, Spain, Italy, and France’s industrial and services sectors, have shown growing optimism about the deal’s potential.

Why Europe Also Benefits, and Why That Matters for Brazil

While Mercosur countries are often seen as the main beneficiaries, Europe also stands to gain substantially. The EU is a global leader in high-value industrial goods, technology, and services, and the agreement opens new demand for these products in South America.

For Brazil, this dynamic is crucial. European companies may increasingly choose to produce or expand operations in Brazil, attracted by the country’s abundant supply of clean and affordable energy. Around 60% of Brazil’s electricity comes from hydropower, complemented by strong growth in wind and solar energy, offering a competitive advantage amid Europe’s energy constraints.

Industrial Development, Clean Energy, and Jobs

The agreement has the potential to accelerate industrial investment in Brazil, particularly in sectors linked to energy-intensive manufacturing, green technologies, and infrastructure. This can lead to job creation, technology transfer, and productivity gains, strengthening Brazil’s industrial base over the medium and long term.

At the same time, increased competition may encourage greater efficiency on both sides, including in Europe’s heavily subsidized agricultural sector.

The Risk of Deindustrialization and the Strategic Bifurcation

One of the central risks highlighted in the debate over the Mercosur-EU agreement is the so-called “competitiveness shock.” While greater exposure to international competition could theoretically stimulate efficiency and innovation, this mechanism tends to work best when domestic industries already possess a solid technological base and access to financing. 

Critics argue that much of Brazil’s manufacturing sector enters this agreement from a position of structural weakness, shaped by decades of high interest rates, volatile exchange rates, and logistical bottlenecks. 

Under these conditions, sudden trade liberalization might lead not to modernization, but to deindustrialization and firm closures, as domestic producers struggle to compete with highly capitalized and technologically advanced European firms. 

This dynamic places Brazil at a strategic bifurcation, according to Gala: on one hand, a path of resignation, deepening its specialization in commodities while increasing reliance on high-value imported goods, which risks worsening the middle-income trap. On the other hand, a path of persistence, which requires active industrial policies and investments to build a diversified and complex productive structure. The concern is that, without robust safeguards, the agreement may tilt Brazil toward the first path, limiting its long-term development options.

Brazil’s Unique Geopolitical Position

Brazil’s role goes beyond trade. As a member of BRICS, Brazil will become the only country in the group with a free trade agreement with the European Union, positioning itself as a strategic bridge between Europe and major emerging economies such as China, India, and South Africa.

This unique status can enhance Brazil’s relevance in global supply chains and reinforce its influence in multilateral trade and diplomacy, especially at a time when global commerce faces fragmentation and protectionist pressures.

More Than Trade: A Political and Social Connection

Beyond economics, the Mercosur–EU agreement strengthens long-standing political, cultural, and social ties. Brazil’s deep historical connections with Europe, through migration, shared values, and institutional cooperation, add another layer of integration that supports stability and long-term collaboration.

Why This Agreement Matters Now

Signed amid growing global trade tensions and challenges to multilateralism, the Mercosur–EU agreement demonstrates that cooperation remains possible. For Brazil, it represents a decisive step toward economic diversification, sustainable growth, and greater international relevance.

In short, the deal positions Brazil not just as a major exporter, but as a key global partner in trade, energy, and geopolitics.