In addition to the significant financial pressure inherited from the last months of 2024, Brazil enters 2025 under considerable pressure from more challenging external geopolitical and economic conditions. The increasingly perceived deficit of global leadership advances at a time of change of command and guidelines in the United States, while the chances of a rupture with China grow, increasingly bringing . The diagnosis is in the “Top Risks 2025” report, from Eurasia.
The global consultancy’s analysis lists the 10 main risks of the year and also points out how they could affect Brazil. According to Eurasia, among the main geopolitical risks in 2025, those that most affect Brazil are those that lead to an unfavorable global scenario for emerging market economies.
“If the global economic scenario deteriorates (…), the risk that Brazil will enter a new recession increases, which would shake politics on the eve of a fierce election in 2026”, says the text signed by executives Ian Bremmer and Cliff Kupchan.
The consultancy highlights that Brazil is already entering 2025 under significant financial pressure due to growing concerns about its fiscal accounts. “The inability of Luiz Inácio Lula da Silva’s government to calm investor concerns regarding rising debt levels contributed to a 27% drop in the real in 2024, which, in turn, helped the Central Bank raise rates interest rates”, recalls the text.
Most of the economic risks that could affect Brazil this year are related to what it must implement in its second administration, dubbed “Trumponomics” in the text.
“Donald Trump is poised to inherit a robust American economy, but his policies will undermine its strength this year through higher inflation and reduced growth,” the consultancy predicts.
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The analysis is that if Trump’s policies on immigration, trade and fiscal management contribute to higher inflation and a stronger dollar, Brazil’s economic problems will deepen. “The real could depreciate even further, fueling inflationary pressures that would limit the BC’s ability to reduce interest rates in 2025, after a cycle of monetary tightening,” says the report.
Brazil would feel the potential effects of rising US interest rates and inflation, given its substantial debt (78% of GDP) and low savings rate (around 15% of GDP). “Brazil has taken out loans to finance more than investments; with a deficit of almost 8% of GDP, it has resorted to financial markets to cover social security expenses and essential services”, explains Eurasia.
Trade wars
Another risk mentioned that could make the year even more difficult for Brazil is lower global growth caused by – especially between the USA and China. “This would weigh on commodity prices, which represent the majority of Brazil’s exports; a barrel priced below US$60 would reduce revenues from oil production”, projects the text.
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According to Eurasia, the way the Lula government will deal with this economic scenario will be crucial. “The Independent Fiscal Institute estimates that, to stabilize the debt, primary surpluses of 2.4% of GDP are needed. But an adjustment of this magnitude would require spending cuts that were unthinkable for Lula. His government will cut some discretionary spending and implement measures to raise revenue, but it is unlikely to do enough to alleviate market stress — which could fuel more inflation by weakening the real.”
Still, the consultancy believes that a widespread economic crisis is unlikely. “Growth should not collapse in 2025, and the Central Bank will remain independent, fulfilling its mandate to pursue the inflation target. But a more negative global scenario will increase the Planalto Palace’s concerns regarding Lula’s chances of re-election in 2026 and will encourage the weakening of policies”, says the text.
“A negative global scenario would increase the chances of a market-friendly opposition candidate winning in 2026, but it would also inflame anti-system sentiment and open the doors to an unexpected result”, he warns.
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Opportunities
Despite citing negative effects of a possible rupture between the US and China, such as the Brazilian market being flooded by Chinese products, undermining domestic producers in key sectors such as petrochemicals, manufacturing and clothing, Eurasia also sees some opportunities in this scenario.
“Brazil will also benefit from cheaper Chinese inputs, which will prove deflationary. In Trump’s first term, those in retaliation against US tariffs”, recalls the report.
According to the consultancy, even though Brazil is not expected to gain much from a new trade war — since China already imports around 60% of all the soybeans it needs from Brazil — it could still have some marginal benefit.
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Regarding Brazil’s relations with the USA in Trump’s new term in the White House, the text warns that, as the country holds the rotating presidency of the BRICS this year, any move it makes to challenge the dominance of the dollar or support China could provoke retaliatory actions.
“Furthermore, a possible conviction or arrest of former president Jair Bolsonaro, an ally of Trump, could further intensify political polarization, possibly inciting Trump or members of his government to express solidarity with Bolsonaro,” he comments, adding that members of the Brazilian government today lacks robust communication channels with the future US government, which could harm bilateral engagement.
Even global geopolitical uncertainty also opens up opportunities for Brazil, says the consultancy. “As countries intensify their search for food and energy security, Brazil can integrate into new production chains or expand into emerging consumer markets”, he mentions.
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Another opportunity cited is related to the risk classified as “Mexican impasse”. “The worsening of Mexico’s institutional stability and uncertainty regarding the future of the US-Mexico-Canada Agreement could shift long-term investments to Brazil – especially from multinationals seeking economies of scale to better serve the Latin American consumer market” , says the text.
