1. Tax reform is sent to presidential approval

The Chamber of Deputies has approved the main bill regulating the tax reform. The final vote approved changes that reduced the reference tax rate from 28.5% to 27.8%, a decrease of 0.7 percentage points.

Lawmakers rejected proposals made by the senate, such as a 60% reduction in the rate for sanitation services and the removal of sugary drinks from the Selective Tax.

The bill maintains a cap of 26.5% for the new taxes, requiring the executive branch to implement measures to ensure this limit is not exceeded. The bill will now be submitted for presidential approval.

G1: Câmara aprova primeiro projeto de regulamentação da Reforma Tributária e rejeita parte das mudanças do Senado

2. Dollar hits record high, putting pressure on the economy

The price of the dollar surged in 2024, posting a 25.62% increase for the year and reaching a record high of R$ 6.20 this week. Since November, when it first exceeded R$ 6, the US currency price in Brazil has been on an upward trajectory, driven by domestic uncertainties and external factors.

The appreciation reflects growing concerns about Brazil’s economy. The fiscal framework, which in 2023 brought optimism to the market and helped the dollar drop by 8.06%, is now under scrutiny. Inflation has returned as a pressing issue, and the Central Bank has halted interest rate cuts, reversing the cycle amid escalating economic tensions.

On the international front, Donald Trump’s victory in the United States has added new pressure points. Although the Central Bank has attempted to curb the rise through dollar auctions and Congress has advancing fiscal adjustment measures, such as a spending cut package, the market remains cautious.

G1: O dólar disparou em 2024, acumulando uma alta de 25,62% no ano e alcançando nesta semana o recorde de R$ 6,09. Desde novembro, quando ultrapassou os R$ 6 pela primeira vez, a moeda norte-americana se mantém em trajetória ascendente, pressionada por incertezas internas e fatores externos.

3. Chamber of Deputies approves the government’s fiscal package

This week, the Chamber of Deputies approved the government’s fiscal adjustment package.

Among the proposed measures, the bill prohibits granting or expanding tax benefits in cases of primary deficits and limits the growth of personnel expenses to 0.6% per year. It also imposes a 15% cap on the freezing of parliamentary amendments.

With an estimated fiscal impact of R$ 70 billion by 2026, the government is working to pass all related bills before the parliamentary recess.

G1: Corte de gastos: Câmara aprova texto-base que limita benefícios fiscais e despesa com pessoal em caso de déficit

4. Chamber of Deputies approves minimum tax on multinational profits

On Tuesday, the Chamber of Deputies approved the creation of a supplementary tax to the Social Contribution on Net Income (CSLL) for large corporations. The additional tax, targeting multinationals with annual revenues exceeding 750 million euros, establishes a minimum effective rate of 15% on profits.

The goal of the tax is to ensure these companies do not excessively reduce their tax burdens through exemptions and incentives. The measure was approved through a symbolic vote, without individual roll call, marking a strategic victory for the government, which seeks to increase revenue to balance public finances.

With this legislation, Brazil aligns itself with an international movement for a minimum tax on multinationals, led by the Organization for Economic Cooperation and Development (OECD). The bill now moves to the Senate.

Câmara dos Deputados: Câmara aprova projeto que estabelece tributação mínima de 15% sobre lucro das multinacionais

5. Industrial production declines in October

Brazil’s industrial production fell in four of the 15 regions surveyed by IBGE in October 2024, highlighting regional disparities in the sector’s performance. Among the states with declines, São Paulo recorded a drop of 1.1%.

Nationally, the industry remained stable compared to September, halting two consecutive months of growth. Despite this, 11 states saw increased production, with notable growth in Pernambuco (5.7%), Bahia (3.4%), and Amazonas (3.3%), driven by recovery in sectors such as food, chemicals, and electronics.

On an annual basis, Brazil’s industrial sector has grown by 1.5% in 2024, reflecting gradual recovery after a period of economic instability. However, localized declines in key states like São Paulo, the country’s main industrial hub, signal persistent challenges such as weak domestic demand and high production costs.

IBGE: Produção industrial diminui em quatro dos 15 locais pesquisados em outubro