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1. EU-Mercosur agreement paused

The European Parliament has decided to pause the EU–Mercosur agreement, referring it to the Court of Justice of the European Union (CJEU) to assess its compatibility with EU treaties. This measure, approved by a narrow margin (334 against 324), halts the agreement’s progress for an estimated 18 to 24 months, until the judges issue their opinion.

The main reason for this suspension stems from questions about the legal basis for ratification, which could allow approval without the consent of national parliaments, and the rebalancing mechanism, which critics say could undermine the EU’s regulatory autonomy in areas such as the environment and sanitary standards. The European Commission regretted the decision, stressing the “vital” importance of the agreement, while countries such as Germany criticized the pause and advocate for its immediate provisional application, citing the pact’s strategic relevance.

Exame: Europa pausa acordo EU-Mercosul e tratado deve ir ao Tribunal Europeu

2. Boletim Focus indicates lower inflation in 2026

The Central Bank of Brazil’s Boletim Focus indicated a slight improvement in inflation expectations for 2026, with the IPCA falling to 4.02% for the second consecutive week, while projections for 2027 and 2028 remain stable at 3.80% and 3.50%, respectively. Other inflation indicators, such as the IGP-M and administered prices, also show stability, suggesting a controlled outlook in the medium term.

On the other hand, the Selic rate projection for 2028 was revised upward to 10%, marking the second consecutive increase and indicating that the market expects interest rates to remain high for a longer period. GDP growth expectations remain stable at 1.80% for 2026 and 2% from 2028 onward, and the exchange rate remains at R$ 5.50 for 2026 and 2027, with slight increases in the following years.

InfoMoney: Boletim Focus aponta queda da inflação em 2026 e mostra alta da Selic em 2028

3. IMF reduces Brazil’s growth forecast for 2026

The International Monetary Fund (IMF) has revised its projections for Brazil’s economic growth, cutting the 2026 forecast by 0.3 percentage points to 1.6%. This reduction is largely attributed to the restrictive monetary policy adopted to curb inflation, with the Selic rate maintained at 15%. In contrast, the outlook for 2027 improved, rising to 2.3%.

These estimates place Brazil’s growth below projections for Latin America and the Caribbean (2.2% in 2026) and for Emerging Market and Developing Economies (4.2% in the same period). The continued high Selic rate is a key factor, and the market is watching the Central Bank’s next moves regarding possible interest rate cuts, which could influence future prospects.

CNN Brasil: FMI reduz projeção para crescimento econômico do Brasil em 2026

4. Capital estrangeiro impulsionou bolsa brasileira em 2025

Foreign investors injected more than R$ 2.8 trillion into Brazilian equities in 2025, a 15% increase compared to the previous year. This significant volume meant that non-residents accounted for 62% of equity trading and moved a total of R$ 3.5 trillion in the spot market, including other assets. This strong participation reflects high interest and confidence in Brazil’s capital markets.

The inflow of foreign capital was a key factor behind the Brazilian market’s strong performance in 2025. Ibovespa recorded its best performance since 2016, with a cumulative gain of 33.7% and 32 record closing highs. At the same time, the real posted its strongest appreciation against the U.S. dollar since 2016, with the dollar falling 11.19%, consolidating a robust year for domestic assets.

Folha de S.Paulo: Estrangeiros movimentaram R$ 2,8 trilhões em ações na Bolsa em 2025, alta de 15%

5. Brazilian retail sector ends 2025 in decline

Brazilian retail closed 2025 with a 0.5% contraction in sales volume, according to the Stone Retail Index (IVS), pointing to a gradual slowdown in the sector. Economists say the main reason is the more restrictive financial environment, marked by high interest rates, more expensive credit, and high household debt levels, which limited consumption, especially of higher-value goods. In December 2025, the decline was even sharper, at -1.5% compared to December 2024.

Over the year, few segments posted growth, such as Furniture and Home Appliances and Pharmaceutical Products, while Fuel, Hypermarkets, and Textiles/Apparel saw significant declines. Regionally, only a few states in the Northeast and North recorded growth, such as Piauí and Alagoas, due to the resilience of essential consumption. Most states, however, faced contractions, highlighting the widespread impact of tight financial conditions.

InfoMoney: Varejo brasileiro fecha 2025 com queda de 0,5%, aponta Índice do Varejo Stone