Despite tensions surrounding the war in the Middle East, Brazil’s Central Bank cut interest rates for the second time in a row. The Monetary Policy Committee (Copom) unanimously reduced the Selic rate, the economy’s benchmark interest rate, by 0.25 percentage points to 14.5 percent per year.

From June 2025 to March of this year, the rate stood at 15 percent per year, the highest level in nearly 20 years. At its last meeting, Copom cut interest rates again amid falling inflation. However, the war in the Middle East, which has led to higher fuel and food prices, complicates the committee’s work.

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In a statement, the committee gave no indication of the future path of interest rates. It noted that it is monitoring the war in the Middle East and the effects of a possible prolongation on inflation.

Inflation

The Selic rate is the Central Bank’s primary tool for keeping inflation under control, as measured by the Broad National Consumer Price Index (IPCA).

The inflation target set by the National Monetary Council for the Central Bank to pursue is 3 percent, with a tolerance band of 1.5 percentage points above or below.

In the latest Monetary Policy Report, released at the end of March, the Central Bank raised its forecast for the IPCA in 2026 from 3.5 percent to 3.6 percent.

The benchmark interest rate is used in government bond trading within the Special Settlement and Custody System (Selic) and serves as a reference for other interest rates in the economy. By raising it, the Central Bank curbs excess demand that puts upward pressure on prices, as higher interest rates make credit more expensive and encourage saving.

Although unpopular, the tax on low-value international purchases had positive effects for Brazil, according to a survey released on Wednesday (Apr. 22) by the National Confederation of Industry (CNI).

The business entity reported that the measure helped curb imports, preserve more than 100,000 jobs, and stimulate the Brazilian economy. Billions of reais in foreign products were not purchased, while the tax bolstered state revenues, the confederation stated.

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CNI calculated the effects of the Import Tax based on the average value of shipments in 2025, comparing the volume of imports it projected for the year with the amount actually recorded.

Key figures from the survey:

• BRL 4.5 billion in avoided imports;
• 135,800 jobs preserved in the country;
• BRL 19.7 billion circulating in the Brazilian economy;
• 10.9% drop in the number of international orders from 2024 to 2025;
• 23.4% decline in the number of shipments in the first half of 2025 compared to the same period in 2024, before the tax took effect;
• Tax revenue of BRL 1.4 billion in 2024 and BRL 3.5 billion in 2025.

According to CNI, the tax has reduced unfair competition from imported products, particularly those from China, giving a boost to Brazilian industry.

The main objective of the tax, the confederation highlighted, is not to tax consumers but to protect the economy. “Making Brazilian industry competitive is essential to maintaining jobs and generating income,” said Marcio Guerra, CNI’s superintendent of economics.

How the tax operates

The measure establishes a 20 percent import tax on international orders of up to USD 50. In practice, the tax is collected at the time of purchase, facilitating enforcement and reducing fraud. The rule took effect in August 2024 as part of the Remessa Conforme program, created to regulate international e-commerce.

With the new rule, the volume of orders has declined. Shipments to Brazil fell from 179.1 million in 2024 to 159.6 million in 2025.

The Brazilian government’s economic team has proposed a primary surplus target of BRL 73.2 billion for 2027, the first year of the next presidential term. The figure corresponds to 0.5 percent of Gross Domestic Product (GDP) and was presented in the Budget Guidelines Bill (PLDO) sent to Congress on Wednesday (Apr. 15).

If confirmed, it would mark the first positive result in federal accounts since 2022, considering all public spending.

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The primary surplus represents the government’s budget balance excluding interest on public debt. For this year, the government forecasts a small surplus of BRL 3.5 billion under official criteria. However, when spending outside the fiscal framework is included, the forecast shifts to a deficit of BRL 59.8 billion.

The proposal will need congressional approval and will apply to the next president-elect, who may maintain or alter the rules with lawmakers’ consent.

Spending limits

Under the fiscal framework rule, which limits real spending growth (above inflation) to 70 percent of real revenue growth, federal spending could rise by up to 3.3 percent in 2027.

In absolute terms, the Brazilian government could spend up to BRL 2.541 trillion in 2027. Of that total, the Executive Branch could spend up to BRL 2.441 trillion.

Next steps

The PLDO sets broad budget guidelines, while details on revenue and expenditure will be presented by August 31 with the submission of the Annual Budget Bill (PLOA).

The proposal underscores the challenge facing the next administration in balancing public accounts amid persistent fiscal pressures and moderate economic growth.

According to estimates in the 2027 Budget Guidelines Bill (PLDO), submitted to Congress on Wednesday (Apr. 15), Brazil’s economy (GDP) is expected to grow 2.56 percent next year.

The bill also forecasts a drop in official inflation, as measured by the Broad National Consumer Price Index (IPCA), to 3.04 percent in 2027, compared to the 3.74 percent estimated for this year.

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Regarding the IPCA, the projection for next year falls within the continuous 3 percent target set by the National Monetary Council (CMN), with a tolerance margin of 1.5 percentage points. Within this range, inflation could vary between 1.5 percent and 4.5 percent next year without breaching the target.

The bill also projects the Selic, the economy’s benchmark interest rate, at 10.55 percent per year in 2027, compared with the current 14.75 percent.

The text sent to Congress projects an average exchange rate of BRL 5.47 for 2027. Although oil is currently trading at around USD 100 per barrel, the bill estimates the commodity’s average price - used to project federal government royalty revenue - at USD 67.69 next year.

The Brazilian government raised 5 billion euros on Wednesday (Apr. 15) in a bond issuance on the European market, marking the country’s return to the segment after more than ten years. The transaction was led by the National Treasury and was announced by Finance Minister Dario Durigan.

According to the minister, the issuance was divided into three maturities: four-, seven- and ten-year terms. The minister provided details of the operation during an official visit to Washington, D.C., in the United States, where he is taking part in meetings of the International Monetary Fund (IMF) and the World Bank.

Higher-than-expected demand

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According to the minister, demand for the bonds exceeded government expectations, indicating strong interest from international investors.

“We achieved historic fundraising,” said Durigan. “We have successfully returned to the European market and plan to explore new markets by the end of the year.”

According to estimates presented by international financial institutions, the issuance was structured into three tranches: 2 billion euros in bonds maturing in 2030, 1.5 billion euros maturing in 2033, and 1.5 billion euros maturing in 2036.

The National Treasury will subsequently provide details such as interest rates and spreads. The Brazilian government’s last euro-denominated bond issuance was in 2014.

Debt strategy

The transaction is part of Brazil’s strategy to manage public debt and expand its presence in different markets and currencies.

According to the Treasury, the issuance also aims to establish a benchmark for euro-denominated bonds, which could facilitate future fundraising by Brazilian companies abroad.

The proceeds will be used primarily to refinance federal public debt, replacing existing obligations.

A drop in coffee exports and an increase in vehicle imports caused Brazil’s balance of trade to record its lowest surplus for March in six years, the Ministry of Development, Industry, Trade, and Services reported Tuesday (Apr. 7). Last month, exports exceeded imports by USD 6.405 billion.

The result represents a 17.2 percent drop from the same month in 2025, when the surplus stood at USD 7.736 billion. The surplus is the lowest for March since 2020, the start of the COVID-19 pandemic, when the result was a positive USD 4.046 billion.

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The figures were as follows:

• Exports – USD 31.603 billion, up 10 percent from March last year;
• Imports – USD 25.199 billion, up 20.1 percent from March last year.

The value of exports is the second highest for the month of March since the beginning of the time series, surpassed only by March 2023. Imports reached the highest value in the series, which began in 1989.

Sectors

Broken down by sector, exports in March varied as follows:

• Agriculture – +1.1 percent, with a two percent decline in volume and a three percent increase in average price;
• Extractive industry – +36.4 percent, driven by oil, with a 36.4 percent increase in volume and a 0.2 percent increase in average price;
• Manufacturing – +5.4 percent, with a 4.2 percent increase in volume and a one percent increase in average price.

Imports

As for imports, the increase is mainly linked to vehicles, with purchases from abroad rising by USD 755.7 million in March compared to the same month in 2025. By category, the main products are as follows:

• Agriculture – fish (+28.9%); fruits and non-oil seeds (+26.6%); and soybeans (+782%);
• Extractive industry – ores and concentrates of base metals (+33.7%); non-agglomerated coal (+59.9%); and crude petroleum oils (+19.4%);
• Manufacturing – other medicines, including veterinary medicines (+72.2%); chemical fertilizers (+61%); and passenger cars (+204.2%).

Year to date

In the first three months of the year, the trade balance recorded a surplus of USD 14.175 billion, 47.6 percent higher than the same period last year. The surge is due to the import of an oil rig in February 2025, a transaction that did not occur in 2026.

• Exports – USD 82.338 billion, up 7.1 percent compared to the same period last year;
• Imports – USD 68.163 billion, up 1.3 percent in the same comparison.

The cumulative surplus is the third largest in the time series, surpassed only by the first quarters of 2024 and 2023.