Brazil Roundup: Green development support from China, new tariffs and quotas on steel products, consumer prices rise below expectations

Brazil turns to China for green development support

Brazil is increasingly partnering with China to advance renewable energy and digital infrastructure. During President Lula’s recent state visit to China, he announced key agreements, including a $1 billion deal with Envision Group to produce sustainable aviation fuel and a partnership with Windey Energy to launch a renewable energy R&D centre. China also pledged $4.76 billion in additional investment. Lula highlighted the growing trade between the two nations, which has risen from $6.6 billion in 2003 to $160 billion today. As founding members of BRICS, Brazil and China continue to deepen their strategic ties.

Brazil renews tariffs and quotas on steel products

Brazil has renewed 25% tariffs on 19 steel products and extended the measure to four more, effective for another 12 months, according to the Ministry of Development, Industry, Trade and Services. The quota system on steel imports remains in place. Initially imposed in April 2023 to counter a surge of cheap steel, mainly from China, the tariffs exclude imports under trade agreements or special regimes.

Brazil mid-May consumer prices rise below expectations

Brazil’s consumer prices rose less than expected in mid-May, easing to 0.44%—below the 0.48% forecast—despite recent floods, IBGE reported. Annual inflation slowed to 3.70%, the lowest mid-month reading since October 2020, staying within the central bank’s target range. Food inflation was milder than feared, rising 0.26%, down from 0.61% in April. Analysts say the data support a continued rate-cutting cycle, although flood-related price pressures may still emerge in the coming months.

Argentina sends troops to secure crime-plagued border with Brazil

On May 26, 2025, Argentina launched Operation Guaçurarí, a six-month security campaign targeting a 25-km border stretch with Brazil plagued by drug trafficking and violence. The effort focuses on dismantling criminal networks, including Brazil’s PCC and Comando Vermelho gangs. The move follows a 400% rise in drug seizures and seven contract killings in 2023. Despite Brazil not being consulted, local mayors support the initiative. Federal forces will work with Misiones and Santa Catarina authorities, using drones and surveillance to monitor key routes. The operation is part of the wider Plan Roca military deployment across northern Argentina.

Brazil's budget missteps continue to unsettle investors

For the second time in six months, a Brazilian government plan to ease investor concerns backfired, sparking a market selloff and renewed doubts about President Lula’s commitment to fiscal discipline. A proposed tax hike on financial transactions, including a controversial 3.5% levy on offshore investments, triggered the backlash. Finance Minister Fernando Haddad quickly scrapped the offshore tax, denying any move toward capital controls. The episode revealed growing tension between markets and Lula’s administration, with investors questioning fiscal credibility despite a larger-than-expected budget freeze. Haddad, once seen as a stabilising force, moved ahead without central bank input, deepening the disconnect.