The Return of Past Figures and Fiscal Uncertainty: What the Market Needs to Know

Recent political developments involving support for candidates from previous administrations have triggered immediate volatility in country-risk pricing, at a time when institutional stability is the primary asset sought by foreign capital. With the Selic rate at 14.00% p.a., the market is reacting not just to the specific names involved, but to fears that the 2026 electoral debate will deviate from the structural reforms needed to control the public deficit. As political instability becomes the main driver of volatility, investors must exercise caution, as this perception is the first step toward capital flight and higher borrowing costs for Brazilian companies. Commercial dollar rates at R$ 5.2043, up 2.23% in the last 7 days, signal a re-adjustment of the risk premium. With the 12-month IPCA at 4.44%, inflationary expectations remain sensitive to any signs of fiscal profligacy. Our editorial records show this is the seventh consecutive negative report on governance, reinforcing a pattern that hampers long-term capital inflows. From a Value and Margin of Safety perspective, the market is pricing in an excessive discount on national assets as political noise threatens capital allocation logic. As the Selic remains stable at 14.00%, the economy requires fiscal predictability; otherwise, the risk premium on Treasury bonds will rise, tightening credit for the private sector. We expect USD/BRL volatility to remain high in the next 30 days, potentially testing levels above R$ 5.25, while the 90-day outlook hinges on candidates' fiscal proposals.