Brasil
July 3rd, 2026
1. Federal government announces gradual phase-out of fuel subsidies
The decision comes after the partial agreement between the United States and Iran regarding the conflict in the Middle East and the normalization of international oil prices, which have stabilized at around US$70 per barrel, closer to pre-conflict levels. The first measure announced by Finance Minister Dario Durigan was the elimination of the R$0.35-per-liter diesel subsidy, which had been costing the government R$1.7 billion per month. This subsidy was introduced at the end of May to replace the PIS/Cofins tax exemption announced in March, which had expired at the end of that month. The additional R$1.12-per-liter diesel subsidy and the R$0.44-per-liter gasoline subsidy are also under review.
The initiative aims to restore fiscal balance and meet the government’s target of a primary surplus equivalent to 0.25% of Gross Domestic Product (GDP). The package, designed to mitigate the economic effects of the conflict in the Middle East, is believed to have consumed up to R$16 billion of this year’s budget. The withdrawal of these measures will be implemented gradually and in a coordinated manner to avoid distortions in consumer prices. According to preliminary analyses by Brazil’s National Agency of Petroleum, Natural Gas and Biofuels (ANP), fuel prices at the pump are expected to remain broadly stable, with the decline in international oil prices offsetting the gradual elimination of government subsidies.
2. Mercosur plans trade agreement with China
During the 68th Mercosur Summit in Asunción, Brazilian President Luiz Inácio Lula da Silva announced that the bloc intends to begin trade negotiations with China soon, while also initiating conversations about an economic partnership with Japan and advancing discussions with Canada, India, and Vietnam. In his address, Lula criticized “automatic alignments” and “exclusive choices” in foreign policy, arguing that South American countries should preserve their strategic autonomy. Meanwhile, Paraguayan President Santiago Peña sharply criticized the “asymmetries” in the allocation of reduced-tariff export quotas under the agreement with the European Union, calling for a revision of the distribution of these benefits so that the bloc is “fair internally” before seeking greater credibility abroad.
The summit was also marked by expressions of solidarity and political support across the region. At Lula’s request, the heads of state observed a minute of silence in honor of the victims of the recent earthquakes in Venezuela, while Uruguayan President Yamandú Orsi announced that joint humanitarian relief efforts are already being coordinated. Mercosur members also expressed their support for Bolivian President Rodrigo Paz, condemning attempts to undermine the country’s institutional stability as Bolivia continues to face a severe political crisis and widespread road blockades.
G1: Cúpula do Mercosul critica assimetrias com UE e prepara negociações com a China
3. Public sector registers R$56.1 billion deficit in May
Brazil’s consolidated public sector, which includes the federal, state, and municipal governments, as well as state-owned enterprises, excluding Petrobras, recorded a primary deficit of R$56.131 billion in May 2026. The result marked a sharp reversal from the R$24.642 billion surplus posted in April and was also significantly larger than the R$33.740 billion deficit recorded in May 2025. The shortfall exceeded the R$53.900 billion median forecast of financial market analysts surveyed by Projeções Broadcast, making it the largest deficit for the month of May since 2024, when the negative balance reached R$63.895 billion.
May’s performance was mainly driven by the R$55.169 billion deficit recorded by the central government, which comprises the National Treasury, the Central Bank, and the National Social Security Institute (INSS), along with a R$1.236 billion deficit posted by state and municipal governments. Of this amount, states accounted for a R$956 million deficit, while municipalities recorded a R$280 million deficit. The only positive contribution came from state-owned enterprises, which posted a R$237 million surplus during the month. As a result, the consolidated public sector accumulated a primary deficit of R$24.883 billion between January and May, equivalent to 0.45% of GDP.lar um déficit primário de R$ 24,883 bilhões de janeiro a maio, o equivalente a 0,45% do Produto Interno Bruto (PIB).
Estadão: Setor público tem déficit primário de R$ 56 bi em maio, acima do esperado; dívida vai a 81,1% do PIB
4. Government launches “Desenrola Adimplentes” with subsidized interest rates
The federal government has announced the launch of Desenrola Adimplentes, a new subsidized credit program aimed exclusively at informal workers who are current on their financial obligations or have payments overdue by no more than 90 days. Introduced through a provisional measure, the initiative comes less than two months after the launch of the program for delinquent borrowers and focuses on unsecured personal loans with outstanding balances of up to R$15,000. To qualify, informal workers must have paid at least four installments of their original loan, which will be fully refinanced through a new credit operation offering more favorable terms.
The new loans will carry a maximum interest rate of 1.99% per month, and the new monthly payment may not exceed 90% of the previous installment amount. The repayment period will match the remaining term of the original loan, with the possibility of extending it by one to six months, depending on the time left on the existing debt. The program also allows borrowers to obtain additional credit of up to 50% of the original outstanding balance and is backed by the Operations Guarantee Fund (FGO). At the same time, the government will continue operating Desenrola 2.0 for delinquent borrowers, which allows the renegotiation of debts of up to R$15,000 with discounts of up to 90%, while also permitting the use of up to 20% of a worker’s FGTS balance to repay eligible debts.
CNN Brasil: Desenrola adimplentes: Governo lança nova linha de crédito subsidiado
5. Central Bank launches digital trade receivable to modernize credit market
Brazil’s Central Bank (BC) has introduced the electronic trade receivable (duplicata escritural), a fully digital version of the credit instrument commonly used in business-to-business sales on credit. The new model centralizes the entire lifecycle of the document – from issuance and trading to payment or use as collateral – within electronic systems authorized by the monetary authority. Now entering a testing phase, the initiative aims to modernize a market estimated at R$11 trillion and involving approximately 2 million issuing companies. Its primary objectives are to strengthen legal certainty, reduce operational costs, and curb common forms of fraud, such as duplicate receivables and the issuance of trade receivables without underlying commercial transactions.
The transition to a fully digital environment is expected to improve access to credit, particularly for small and medium-sized enterprises (SMEs), which will be able to use traceable and auditable receivables to obtain early financing or provide stronger collateral for loans at lower interest rates. The Central Bank’s implementation schedule will be gradual and based on company size: large corporations will be required to adopt the system beginning in June 2027, followed by medium-sized companies in December 2027, and small businesses in June 2028. According to industry experts, while the technology significantly reduces fraud risks, the new ecosystem will require companies to achieve close integration among their finance, tax, commercial, and legal departments.
Diário do Comércio: Banco Central lança sistema de duplicatas digitais; especialistas apontam impactos para empresas