Brazil | The Unconventional Policy Agenda Keeps Expanding

Research evidence excerpt

Brazil | The Unconventional Policy Agenda Keeps Expanding

Latin America | Banks EquityJulyResearch17, 2026

FIRST VIEWBrazil | The Unconventional Policy Agenda Keeps

Expanding

Conclusion

A key takeaway from our recent trip to Brazil was the government's growing

reliance on unconventional measures amid (1) a slowing economy, (2)

expectations of high real interest rates for longer, and (3) an approaching

election. As a result, the administration appears less focused on questioning

monetary policy and increasingly focused on implementing countermeasures

to support activity and credit growth. This week's news flow reinforced

that view. The government announced a package to refinance BRL100bn

of agricultural loans at an estimated fiscal cost of c.BRL3.6bn, while also

considering an expansion of Bracket 4 within the FGTS-funded MCMV program

to broaden eligibility for subsidized mortgage financing. While neither measure

is inherently credit-negative for banks, investors are likely to question not

only the sustainability of these support mechanisms, but also whether they

could improve the prospects of the market's apparent least-preferred electoral

scenario.

Detail

Agri refinancing package – Finance Minister Dario Durigan announced yesterday that Congress

had reached an agreement on the final rules for a BRL100bn refinancing package for farmers.

The program is intended to support producers facing financial stress and facilitate access to the

2026/27 crop plan. Key features include grace periods on principal repayments and subsidized

interest rates ranging from 9% to 12%, with even lower rates potentially available for distressed

borrowers. According to Valor, the government is also evaluating additional funding sources,

including the Pre-Salt Fund, to support the program.