Institutional Risk and Governance: The impact of investigations on the business environment

Recent investigations into influence peddling within high-ranking government circles have reignited a critical market debate: the predictability of national institutions. In a climate where trust is the scarcest asset, the exposure of financial flows linked to public officials creates noise that transcends politics, directly impacting the risk premium of Brazilian assets. With the commercial dollar trading at R$ 5.16, any signs of governance fragility are priced by the exchange market as potential spending increases or allocative inefficiencies, draining liquidity from productive investments. While the dollar has fallen 0.46% over the last 30 days and the IPCA stands at 4.44% (as of 07/01/2026), the Selic rate remains stable at 14% p.a. Foreign investors are closely monitoring institutional stability, seeking a risk premium to compensate for legal uncertainty. This marks the fourth time in a short period that we have addressed the impact of legal risks on local assets. As the command structure is questioned, the margin of safety narrows, forcing investors to demand higher returns, which inhibits long-term capital formation and sustainable growth. The investigation into lobbying within the INSS shifts focus from public efficiency to crisis management. Given the high opportunity cost of capital, poor governance acts as a catalyst for capital flight. Over the next 180 days, volatility remains likely, with the market focusing on fiscal impacts and the government's ability to demonstrate institutional independence.