Dollar hits R$ 5.16 as Iran tensions, Trump threats converge on Brazil

The dollar closed Wednesday (23) up 1.28% at R$5.168, pressured by a combination of factors that rarely converges with such intensity in a single trading session: oil near US$100 a barrel amid a stalemate in the Iran war, Washington's threat to restrict diesel exports to Brazil, the Trump administration's confirmed cut to the Brazilian sugar quota, and a domestic fiscal deterioration that the Finance Ministry finally acknowledged by trimming its 2026 GDP growth projection from 2.3% to 2.0%. The Central Bank had to announce a new US$1 billion FX credit line auction to relieve pressure on FX market liquidity, bringing total interventions to US$4 billion in September alone. The so-called "casado dollar" gauge had been flagging considerable stress in prior sessions, with the spread over the effective Fed Funds rate exceeding 2.3 percentage points.

The US threat on diesel deserves particular attention. Brazil depends on imports from the United States to cover its domestic production shortfall, and any restriction along that route would rekindle inflationary pressures at a moment when economists surveyed by the Central Bank have already raised the expected impact of El Niño on the IPCA in 2027 from 0.4 to 0.5 percentage point. The Copom, which on September 16 cut the Selic from 14% to 13.75% per year, will see its room for further easing narrowed should the external supply shock materialize on fuel and food simultaneously. This outlook makes the position of the economic team even more delicate; the team confirmed to Folha de S.Paulo that the budget freeze will be maintained at close to R$17.9 billion to offset shortfalls in revenue — particularly from the taxation of dividends, whose revenue estimate has plunged to R$10.5 billion in 2026, versus R$29 billion originally projected.

Fiscal pressure takes on even more uncomfortable contours in the electoral context. The 2026 presidential campaign is being fought precisely on the terrain of the cost of living: Flávio Bolsonaro (PL) recorded videos in supermarkets attacking the PT government, and Lula publicly acknowledged that "closing the accounts is a problem today." The credibility of the promise of improvement depends on variables currently beyond Brasília's control — oil, weather, and US tariffs. Goldman Sachs, in a report that circulated through the market, estimates the real could reach R$4.35 with clear signs of post-election fiscal consolidation, but could deteriorate to R$5.80 without them. With the dollar already above R$5.16, the market is pricing in the adverse scenario.

On the trade front, Washington confirmed the 56,000-tonne cut to Brazil's preferential sugar quota, redistributed to other countries. On Friday (25), the Lula government will formally challenge the United States at the WTO over tariffs that reach 37.5% for some Brazilian sectors — but Washington has already rejected China's request to jointly participate in these consultations, signaling it does not intend to open the process to a coalition of emerging economies. Brazil is going it alone in a dispute that has all the hallmarks of dragging on.

In the energy sector, two developments merit attention. The Ministry of Mines and Energy has put out for public consultation a proposal to introduce "caps" on hydroelectric concession auctions expiring by 2032, aiming to prevent concentration among the sector's largest groups — a signal that could alter investor appetite for these assets. In parallel, the TCU has ended negotiations with Eneva over an agreement that would have allowed greater operational flexibility for its thermal plants, according to sources cited by Reuters, leaving the company without the operational flexibility it sought.

The Banco Master scandal continued to unfold on multiple institutional fronts. The CNJ canceled R$4.73 billion in court-ordered debt payments (precatórios) from sugarcane mills whose rights had been acquired by Daniel Vorcaro's bank, with the amounts returned to the National Treasury. The Federal Police suspect the 16 precatórios were issued irregularly, before the conclusion of execution proceedings. Along the same lines, the Federal District's Audit Court ordered the precautionary freezing of assets of the former BRB president, Paulo Henrique Costa, and four other former executives over transactions with Master. The scope of Vorcaro's influence over the judiciary is progressively coming to light: at least R$14.3 billion was invested in lawsuits whose returns depended on court rulings.

Meanwhile, the Central Bank is advancing on two regulatory fronts. The authority announced tougher rules for crypto assets, requiring reports to Coaf for self-hosted wallet transfers above US$10,000, aligning Brazil with international anti-money-laundering standards. And it is studying raising capital requirements for credit card lines — a response to record household indebtedness, aggravated by the proliferation of sports betting, which is already having a measurable impact on the disposable income of lower-income segments.

Cutting against this environment of tension, surprisingly, is a heavyweight fund manager. Samuel Vecht of BlackRock labeled Brazil a "clear buy" during the J. Safra Investment Conference in São Paulo, arguing that excessive pessimism is priced in and that a small reduction in interest rates would have a disproportionate impact on assets. The thesis depends on some credible signal of spending control in 2027 — precisely the point of greatest uncertainty in the electoral scenario now opening.

In the coming weeks, the market will closely watch three vectors: developments in the Caixa Econômica Federal strike negotiations, which entered their 13th day without agreement after TST mediation ended without results on Wednesday; Brazil's formal WTO consultations against US tariffs; and any signals from the Fed on the pace of monetary tightening, whose implications for the real and for the Copom's room for additional cuts will be decisive for the trajectory of the Brazilian market in the final quarter of the year.

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