A recent decision by Supreme Federal Court (STF) Minister Flávio Dino has sent a shockwave through the Brazilian financial market. Intended to limit the application of foreign laws in Brazil, the measure has created a standoff with the United States, leading Brazilian banks to fear billions in losses and a possible exclusion from key global financial systems.
The Dollar Rises, the Stock Market Falls: The Impact on the Market
Dino's decision is already showing its effects. The devaluation of major bank shares resulted in a 2.10% drop in Brazil's stock market in a single day. In contrast, the dollar soared, reaching a quotation of R$ 5.50, a 1.23% increase. Gustavo Sampaio, a professor of Constitutional Law at the Fluminense Federal University, warns of the risks: "If the Americans decertify the link to these institutions, they will suffer greatly."
The "Magnitsky Act" and the Sanction Against Alexandre de Moraes
The root of the crisis lies in the so-called Magnitsky Act, a US law that financially punishes those who, in the view of the United States, commit serious human rights violations.
The White House recently applied this sanction to Minister Alexandre de Moraes, preventing him from conducting financial transactions with Americans or using US-flagged credit cards. Dino's decision, which requires the STF's approval for foreign punishments to be applied to Brazilians, is seen as an obstacle to the Magnitsky Act, which explains the tension with Washington.
The Risk of Exclusion from the Swift System
The biggest fear for Brazilian banks is being excluded from the Swift system, a global network that brings together nearly 2,500 institutions and enables communication and financial transactions worldwide. Such an exclusion would be a severe punishment, as was done against seven Russian banks in 2022 and against a French institution in 2014, which was fined almost R$ 9 billion for failing to comply with sanctions.
The clash between Brazilian legal sovereignty and the application of foreign laws has put the market on high alert and banks in search of legal certainty. The case is now under the rapporteurship of Minister Cristiano Zanin at the Supreme Federal Court.