The Kaipher Editorial Team The Brazilian real surged this Tuesday (23) as the dollar closed at R$ 5.2791, its weakest level against the real since June 6, 2024, after U.S. President Donald Trump publicly praised Brazilian President Luiz Inácio Lula da Silva during a speech at the United Nations General Assembly and announced an upcoming meeting between the two leaders (Estadão/UOL).
Background
In recent months, Brazil–U.S. relations have been strained by a series of tit-for-tat measures. In August, the United States imposed 50% tariffs on a range of Brazilian exports, citing political interference concerns dating back to the Bolsonaro administration (A Pública). The following week, Washington sanctioned Viviane Barci de Moraes, the wife of Brazilian Supreme Court Justice Alexandre de Moraes, escalating diplomatic tensions on the eve of the UN gathering (InfoMoney).
Diplomatic Shift at the UN
During his address to the UN General Assembly, President Trump recounted a brief backstage encounter with President Lula, describing “excellent chemistry” and confirming an agreement to meet next week. “I saw him, he saw me, and we hugged. In fact, we agreed to meet next week,” Trump said, adding, “He seemed like a very nice man. He liked me, and I liked him. And I only do business with people I like” (Agência Brasil). The Palácio do Planalto press office later confirmed the encounter was “quick and totally friendly,” underscoring a notable softening of tone in U.S. communications toward Brazil (UOL Economia).
Market Reaction
Financial markets interpreted Trump’s conciliatory remarks as a signal of potential easing in trade tensions. According to Glaucy Rosa Lima, FX manager at Fair Corretora, “Trump’s statement about having chemistry with Lula was the icing on the cake for the currency’s behavior. This more diplomatic and friendly tone reduces any uncertainty in the market and creates optimism for the two to discuss the tariff issue” (Estadão/UOL). The real outperformed its emerging-market peers, and oil futures rising over 1% provided additional support to commodity-linked currencies (InfoMoney).
Equity Markets and Broader Sentiment
Optimism extended to Brazil’s stock market, with the Ibovespa climbing 0.91% to a record 146,424 points. Investors cited the prospect of trade negotiations between Washington and Brasília as a catalyst for renewed appetite for Brazilian equities (UOL Economia). Analysts noted that, beyond tariffs, a thaw in diplomatic relations could pave the way for cooperation on energy, infrastructure, and environmental projects.
Tensions in Bilateral Relations
Despite the positive market response, underlying frictions remain. The U.S. tariffs were justified by allegations of “political persecution” against former President Jair Bolsonaro, while Brazilian officials view the sanctions on Justice Moraes’s family as an overreach into domestic judicial affairs (A Pública). These incidents have fueled nationalist rhetoric in both capitals, complicating efforts to build sustained trust.
Implications for Trade Negotiations
Analysts suggest that the planned meeting—whether by phone, videoconference, or in person—offers an immediate opportunity to address outstanding tariff disputes and broader trade barriers. “Both sides have room to negotiate reciprocal tariff reductions, potentially expanding agricultural exports for Brazil and opening new market access for U.S. manufacturers,” said an economist at a leading Brazilian bank (InfoMoney). However, experts caution that political pressures within each country, especially ahead of upcoming elections, may constrain the scope of any agreement.
Future Outlook
As of now, no firm date has been set for the presidential meeting. Market participants will watch closely for announcements on the agenda, participants, and format. If the discussions yield concrete commitments on tariffs and regulatory cooperation, the real could strengthen further, and Brazilian equities may extend gains. Conversely, a failure to produce tangible outcomes could reignite uncertainty and reverse recent currency gains. Brazilian exporters and investors alike will be monitoring the diplomatic dialogue as the primary driver of market sentiment in the coming weeks.
