BRAZIL Trends and Developments Contributed by: Thiago Fernandes Chebatt and Luiz Eugênio Araújo Müller Filho, Müller Chebatt Advogados
Two developments deserve attention going into 2026. The first is the continued implementation of Brazil’s broader tax reform agenda, which is reshaping indirect taxation over a multi-year transition. During transition periods, businesses often face adjustments in pricing, credit recovery and compliance routines before the system stabilises. The second is the renewed focus on dividend taxation, which can influence distribution behaviour and increase the importance of tight leak - age controls, well-drafted restricted payments provi - sions and clear definitions around permitted distribu - tions and related-party flows. For lenders, the takeaway is to price and structure with tax variability in mind and to build documentation that can absorb change through workable covenants, change-in-law mechanics and monitoring duties. This is also an area where experienced Brazilian counsel adds value, because translating tax uncertainty into enforceable and operational protections typically requires more work – and more creativity – than in jurisdictions with a more stable tax perimeter. Courts and Institutional Friction Brazil is a jurisdiction where economic disputes are frequently judicialised. This is not inherently negative; it reflects broad access to courts. The practical chal - lenge for private credit is that court access also cre - ates delay options for sophisticated debtors. In default scenarios, borrowers often do not contest the debt head-on; they contest the pathway. Formali - ties are questioned. Injunctions are sought. Forum strategy becomes central. Many disputes are steered toward judicial reorganisation, where stays and cen - tralisation rules can reshape leverage. This is why pro - cedural dynamics must be treated as part of under - writing. A strong security package can still lose time, and in credit, time often equals value. There is also an internal Brazilian reality that for - eign investors sometimes underestimate: outcomes can vary meaningfully by venue and by the judge’s approach to interim measures, “essentiality” argu - ments and procedural incidents. That does not mean the system is arbitrary, but it does mean that forum selection, evidence and timing can influence lever - age. Clean perfection, clear proof of default, and an
enforcement-ready record are not “nice to have”; they are core risk controls. Election cycles can intensify these dynamics. It is not a simplistic story about courts becoming political, but rather about institutional temperature rising and com - plex cases attracting more stakeholders, narratives and parallel pressures. The right response is prepara - tion: fewer attack surfaces, cleaner perfection, better evidence, and remedies designed for early interven - tion. This is also why local legal counsel is indispensable. Brazil’s legal tools are powerful, but formalistic. A security interest that is not perfected correctly is not “almost” security; it is a future dispute. A covenant that cannot be operationalised is not a protection; it is a talking point. The market rewards lenders who treat counsel as a strategic partner, not as a last-step drafter. Terms That Matter: Operational Control Over Paper Protections People often say that terms are tightening. That is true, but it can be misunderstood. The tightening that matters is not adding more covenants. It is making the deal work in the real world. Operational tightening includes reporting that actually arrives on time and in usable form; audit rights that can be exercised without endless negotiation; cash- flow routing that prevents leakage; and triggers that automatically change the rules when risk rises. In a high-rate environment, the best covenant is the one that forces action early, not the one that proves the lender was right after the borrower collapses. Another meaningful tightening is governance. In Bra - zil, governance failures often precede financial fail - ures: related-party transactions, opaque cash man - agement, informal distributions, and “temporary” arrangements that become permanent. Strong docu - ments place guardrails around those behaviours and create real consequences for crossing them. It is not about being punitive; it is about preventing slow value erosion.
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