Brazil’s government on Wednesday rolled out a long-awaited relief package including 30 billion reais ($5.6 billion) in credit to support local companies hit by Donald Trump’s trade tariffs.
The plan incorporates a measure allowing affected businesses extra time to pay their taxes. It also includes a comprehensive overhaul of the Export Guarantee Fund, which is controlled by the state development bank BNDES and is designed to cover risks in export-related credit operations.
Brazil is taking action after US Treasury Secretary Scott Bessent canceled a trade meeting with Finance Minister Fernando Haddad this week. With negotiations surrounding 50% tariffs still ongoing, President Luiz Inacio Lula da Silva said on Tuesday he hasn’t ruled out retaliatory action against the US. Still, the leftist leader stressed on Wednesday he doesn’t want to do anything that would worsen the relationship between both nations.
“My team isn’t afraid of a fight — if we have to fight, we will,” Lula said at the ceremony to present the measures. “But our priority is to negotiate first.”
The government plans to ask Congress for a waiver allowing it to exclude 9.5 billion reais of the plan’s cost from Brazil’s fiscal target, the Finance Ministry’s executive secretary, Dario Durigan, said during a press conference following the announcement.
The waiver would apply to 5 billion reais from an export incentive program, along with 4.5 billion reais that will be transferred to guarantee funds to help exporters, Durigan said. The government has already discussed the package’s fiscal impact with congressional leaders, he added.
Haddad had previously said that tariff relief efforts would not fall outside of the country’s fiscal rules. The finance minister has been under mounting pressure to deliver on his goal of eliminating Brazil’s primary budget deficit, excluding interest payments, this year.
“The size of the package itself is not massive, but the exclusion of some of the fiscal cost may raise some concerns over the fiscal credibility, as tariff threats are used as an excuse for the government to expand spending outside of the fiscal rule,” said Dan Pan, an economist at Standard Chartered Bank.
Brazil’s stock exchange Ibovespa deepened losses following the announcement, hitting its lowest level of Wednesday’s session before rebounding.
As part of the plan, the government also plans to purchase products from exporters impacted by tariffs. Haddad has said the levies are expected to affect some 4% of Brazil’s shipments to the U.S., which is the South American nation’s second-biggest trade partner.
“Brazil is a country that is being sanctioned for being more democratic than its aggressor,” Haddad said at Wednesday’s ceremony. “It is an unprecedented and very unusual situation in the world.”
The US government levied 50% tariffs on Brazilian goods earlier this month as part of a pressure campaign to get the country’s Supreme Court to drop coup attempt charges against former head of state Jair Bolsonaro, who is a Trump ally. Haddad had previously expressed hope for breakthroughs after the Trump administration exempted nearly 700 products from the higher levies.
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