VOLVER

1. March inflation is lower, but food prices increase

The official inflation rate stood at 0.56% in March, down from 0.83% in February. Despite the slowdown, the 12-month accumulated rate rose to 5.48%, exceeding the Central Bank’s target midpoint and reinforcing the scenario of persistent price pressures.

The main driver of the increase was the food and beverage group, which rose by 1.17% in the month. Essential items such as tomatoes, eggs, and coffee saw significant price hikes, particularly affecting low-income households.

Food inflation continues to directly impact consumption among lower-income classes and may limit room for fiscal relief in the short term. For the government, the data highlights the ongoing challenge of balancing monetary policy, price controls, and maintaining its social narrative.

In the productive sector, the combination of high interest rates and a rising cost of living continues to hinder investment and consumption decisions. The result is a climate of caution in a crucial year for the federal budget and for advancing economic agendas in Congress.

IBGE: Inflação fica em 0,56% em março, pressionada por alimentos

2. Government proposes full opening of free energy market by 2028

The federal government has announced plans to present a proposal for electric sector reform that would allow the full opening of the free energy market by 2028. Currently, only large consumers, such as industries and shopping malls, have access to this model, which allows them to choose their energy provider. With the proposed change, all consumers, including households, would be able to opt into the free market, promoting greater competition and potential cost reductions.

The proposal, which will be sent to the National Congress, also aims to revise subsidies and expand access to the free market, with the goal of modernizing Brazil’s electricity sector.

However, the transition requires careful attention to regulation and infrastructure to ensure that all consumers benefit from the changes. The proposal is expected to be debated in the Legislature over the coming months, with the possibility of gradual implementation by 2028.

Valor Econômico: Reforma do setor elétrico prevê abertura completa do mercado livre de energia até 2028

3. Exchange rate favors exports, buts costs and prices limit gains

The average profitability of Brazilian exports grew by 5% in the first two months of 2025, driven by a nearly 20% depreciation of the real against the dollar. This movement boosted the competitiveness of domestic products in international markets, especially in the metallurgy, transportation, and cellulose sectors.

Despite the favorable exchange rate, gains were partially offset by two key factors: a drop in international prices and rising production costs. Average export prices fell by around 5% during the period, while costs rose by over 8%, driven by imported raw materials and domestic increases.

Agribusiness showed stable performance, while sectors such as oil and non-metallic minerals recorded losses in profitability.

The scenario highlights the growing complexity of Brazil’s foreign trade: while the exchange rate remains an important factor, it is no longer sufficient to sustain margins in a volatile global environment.

For the government and exporters, the data underscores the need for structural competitiveness policies, such as improvements in logistics, innovation, and market access, beyond exchange rate fluctuations.

Valor Econômico: Câmbio ajuda, e rentabilidade de exportações aumenta 5% no 1º bimestre

4. Law allowing trade retaliation against countries that impose barriers on Brazil is sanctioned

President Lula has signed into law, without vetoes, the Commercial Reciprocity Act, which authorizes the Brazilian government to adopt countermeasures against countries that unilaterally impose trade barriers on Brazilian products. The proposal gained momentum after the United States imposed broad tariffs on Brazilian exports, most notably steel and aluminum, which are now subject to a 25% surcharge.

The new legislation provides legal backing for the Executive Branch to respond to such restrictions through measures like suspending concessions or temporarily restricting imports.

The aim is to bring greater balance to trade relations and protect sectors affected by practices deemed discriminatory. Although the law permits strong responses, the government emphasized that it would continue to prioritize dialogue with the countries involved, particularly the United States, in an effort to prevent an escalation of tensions.

Valor Econômico: Sem vetos, Lula sanciona Lei da Reciprocidade Comercial

5. Wage growth boosts consumption but services inflation raises concerns 

The total wage bill of Brazilian workers reached a new record in the quarter ending in February, growing 6.2% year-over-year. This increase is driven by a rise in formal employment and a decline in informality, which have led to higher average incomes and more money circulating in the economy.

This trend has been fueling household consumption, especially in services such as transportation, telecommunications, and leisure. However, the surge in demand is also putting upward pressure on services inflation, which remains above 5% over the past 12 months, one of the Central Bank’s key concerns in the current monetary policy cycle.

For the government, the data is socially positive but may hinder inflation’s convergence toward the target at the desired pace. For the market, the challenge lies in managing expectations: consumption growth is welcome, but it must be accompanied by price stability to sustain confidence.

Valor Econômico: Massa salarial traz mais impulso ao consumo, diz IBGE