The minute
- Brazil’s newly elected Congress shows a significant shift toward the far right, weakening the legislative base for environmental and social policies.
- Even if President Lula wins the presidential runoff, socio-environmental agendas are expected to lose further ground in the Legislature.
- The political reconfiguration comes as Lula faces a difficult second-round election.
Why it matters: Brazil’s environmental governance depends not only on the presidency but on Congressional willingness to pass, fund, and enforce green legislation. A more hostile Legislature can block new protections, accelerate the passage of bills that weaken existing safeguards, and starve enforcement agencies of budget. For companies operating in Brazil, the composition of Congress often matters more than who sits in the Planalto, because it is Congress that writes the rules on land use, deforestation penalties, carbon markets, and Indigenous land demarcation.
What changes for Brazilian companies
A Congress less sympathetic to environmental regulation creates immediate uncertainty for sectors tied to ESG compliance. Agribusiness firms that invested in traceability and zero-deforestation supply chains may see competitors face weaker enforcement, distorting the competitive landscape. Banks and asset managers that priced in a tightening regulatory trajectory (such as the anticipated regulation of the Brazilian carbon market under the framework approved in late 2024) now face the possibility that implementation rules could be diluted or delayed in committee. Infrastructure and energy companies waiting on licensing reform or new protected-area designations must reassess timelines.
For exporters, the gap between domestic political signals and international expectations widens. The European Union Deforestation Regulation (EUDR) still requires proof of deforestation-free supply chains regardless of what Brazilian law demands. Companies that relied on domestic regulation as a baseline for compliance now carry more of the burden themselves, increasing costs for due diligence, satellite monitoring, and third-party audits.
What remains undecided
Several critical pieces of legislation sit in different stages of Congressional processing, and their fate depends on the new composition. The regulation of the Brazilian carbon market (SBCE, Sistema Brasileiro de Comercio de Emissoes) still requires detailed implementation decrees and complementary rules that Congress can accelerate or stall. The bill updating Brazil’s Mining Code has environmental provisions that a more extractivist-leaning Congress could strip. Reform of the Forest Code’s enforcement mechanisms, periodically proposed, could move in either direction depending on committee chairs and rapporteurs appointed in the new session.
The presidential runoff adds another layer of uncertainty. If Lula wins, he governs with a Legislature that has less appetite for his environmental platform, forcing heavier reliance on executive decrees and ministerial orders, which are legally fragile and reversible. If the opposition wins, the alignment between Executive and Legislature could produce rapid rollbacks of protections enacted in the current term.
Who gains and who loses
The immediate beneficiaries are sectors that view environmental regulation as a cost rather than a framework: illegal land grabbers, wildcat miners, and parts of the agricultural frontier that resist traceability. The rural caucus (bancada ruralista), already the largest bloc in Congress, is expected to grow its influence further, giving it more leverage over committee assignments and floor votes.
On the losing side are enforcement agencies like IBAMA and ICMBio, which depend on Congressional budget allocations and legislative backing. Indigenous communities seeking land demarcation face a Legislature more inclined to approve the “marco temporal” thesis limiting their territorial rights. Civil society organizations working on climate and forests lose legislative allies who could champion or defend protective bills. International investors that channeled capital into Brazil’s green transition narrative must now weigh higher political risk into their models.
The situation also pressures state-level governance. States like Para, Mato Grosso, and Amazonas, which sit at the center of deforestation debates, may find their own environmental programs either reinforced or undermined depending on how federal policy shifts ripple through fiscal transfers and enforcement cooperation.
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