The Page Has Turned: What Brazil Reveals About the New Terms of U.S. Engagement

Brazil has traditionally sought strategic autonomy without sacrificing a workable relationship with the United States: preserving ties with U.S authorities while retaining room to deepen bilateral and multilateral relationships with China, Russia, BRICS, and other partners. That strategy depended, at least in practice, on a degree of predictability. Political disagreement with the U.S. might carry diplomatic costs, but exposure to U.S. legal and economic coercion was generally associated with identifiable geopolitical red lines.

The past eighteen months have made that assumption harder to sustain. Even as Brazil has leaned further into multipolarity (hosting the 2025 BRICS summit, keeping China as its largest export market, and declining to align with U.S. sanctions posture in several cases), it has faced an unusually broad array of U.S. legal and economic measures: a Supreme Court justice sanctioned and delisted within five months; tariffs justified in part by Brazil’s domestic judicial and political affairs; Section 301 action reaching from digital regulation to Brazil’s Pix payment system; and the designation of Brazilian criminal organizations as Specially Designated Global Terrorists and Foreign Terrorist Organizations. What has changed is not simply the intensity of U.S. enforcement but the speed and unpredictability with which legal exposure can shift in form and origin.

What’s Driving the Change

Three forces are converging. First, sanctions and trade authorities are increasingly being used as instruments of bilateral political leverage, tying enforcement and market access more closely to the state of the relationship. Second, counter-terrorism financial authorities are being extended to organized-crime groups, creating sanctions and terrorism-finance exposure for companies operating in sectors infiltrated by those organizations. Third, the 2025 recalibration of anti-corruption enforcement by the U.S., the February executive order pausing new FCPA matters and the June guidelines refocusing enforcement around U.S. interests, national security, serious misconduct, and cartel or transnational-criminal-organization links, has made the future role of U.S.-led cross-border enforcement less predictable. Brazil, meanwhile, has continued diversifying its own enforcement relationships, including with China and other jurisdictions. That broader tilt toward Beijing and other partners outside the orbit of the U.S. is itself a source of friction, and the approaching October 2026 election adds a further layer of volatility.

What the Experience of Brazil Reveals

Brazil offers one of the clearest illustrations of how quickly formal policy shifts can translate into commercial risk. Operation Lava Jato (‘Car Wash’), launched in 2014, began as a money-laundering probe and grew into a sprawling corruption investigation centered on Petrobras and bribery involving major construction and engineering conglomerates. Built on longstanding cooperation between Brazilian authorities and the U.S. DOJ and SEC, it produced some of the largest FCPA resolutions in history, including the Petrobras and Odebrecht/Braskem settlements. Whatever one’s assessment of the controversies that ultimately undermined it, the degree of cooperation achieved at its peak remains striking.

The 2025 recalibration of FCPA enforcement (the February pause and narrower June guidelines) did not cause that model’s unraveling per se, but it underscored a shift away from an architecture in which the U.S. was the predictable center of gravity. Brazil, meanwhile, kept diversifying its own cooperation, deepening anti-corruption ties with other jurisdictions, including China.

The result is a more fragmented system, with enforcement priorities and jurisdictional pressure shifting among a broader range of authorities, reducing predictability as the enforcement map itself is redrawn.

The Magnitsky sanctions against Justice Alexandre de Moraes are a sharper illustration. Moraes was designated in July 2025, his wife added in September, and both removed from the list in December, formally grounded in human-rights authorities but explicitly intertwined with political dispute. Delisting did not erase the exposure created in the interim: banks and payment networks had to determine, in real time, what a SDN designation against a sitting Supreme Court Justice meant. That operational stress, not the delisting, is what compliance teams should study and be prepared for in the future.

Trade policy followed a similar pattern. In July 2025, the U.S. imposed an additional 40 percent Brazil-specific tariff under emergency powers, bringing the burden on many products to 50 percent, linked in part to political reasons. In February 2026, the U.S. Supreme Court held that IEEPA did not authorize the tariffs, so Washington shifted to other authorities, including a Section 301 action naming Brazil’s Pix payment system, imposing additional tariffs. As a consequence, the mechanism changed, but the commercial exposure did not.

Layered on top was the 2026 designation of Primeiro Comando da Capital (PCC) and Comando Vermelho (CV): in May, the Secretary of State signed determinations naming both Specially Designated Global Terrorists and Foreign Terrorist Organizations, effective upon publication in June. Brazilian investigations link these networks to billions of reais in transactions across fuel distribution, logistics, payment institutions, real estate, mining, and agribusiness; sectors many companies had approached only through AML and organized-crime controls. Transactions involving PCC, CV, or associated blocked parties may now also carry U.S. sanctions and material-support exposure where a sufficient U.S. nexus exists.

Taken together, these developments show something broader than stronger or weaker enforcement: how quickly cross-border risk can migrate between legal categories. Conduct once treated primarily as a corruption or AML concern can become a sanctions, terrorism, or trade-law issue; political disputes can generate immediate compliance consequences; and one authority can be replaced by another without the underlying pressure disappearing. The durable lesson is that compliance frameworks must respond not just to enforcement intensity, but to changes in the source, legal basis, and jurisdictional character of risk itself.

Implications for multinational companies

That fragmentation, however, should not be mistaken for insulation from U.S. legal power. As Brazilian authorities deepen cooperation with China, BRICS partners, and other jurisdictions, companies should expect to operate across multiple enforcement ecosystems at once. Diversification changes the map; it does not eliminate existing exposure. Brazil’s OFAC risk, for example, continues to run through dollar clearing, correspondent banking, and global payment-network relationships largely independent of Brazil’s foreign-policy choices. The result is therefore additive rather than substitutive: new cooperation channels may create additional compliance demands without displacing the U.S.-linked risks already embedded in multinational operations.

The most underestimated risk may be indirect exposure to the terrorism-finance regime through counterparties operating in sectors where designated organizations have penetrated the legitimate economy. Sector presence alone does not create sanctions or material-support liability, but it materially increases the importance of ownership, counterparty, and transaction-level diligence. The practical response: operationalize sanctions clauses that may previously have been treated as boilerplate; establish risk-based screening against OFAC sanctions lists and the State Department’s FTO list; define termination triggers; extend beneficial-ownership diligence beyond first-tier counterparties; treat tariff exposure as similarly dynamic; and build standing capability to monitor OFAC, FinCEN, USTR, and State Department actions in near-real time.

What comes next

The October 4, 2026, election is likely to keep that volatility elevated rather than resolve it. President Lula is seeking re-election against Senator Flávio Bolsonaro, the leading right-wing challenger, endorsed by his father, former President Jair Bolsonaro. With U.S.-Brazil tensions already embedded in the domestic political debate, full normalization before the election looks unlikely, the more important question for companies is not whether friction rises or falls, but where it moves next.

It will be important to follow the practical implications of the PCC and CV designations as Specially Designated Global Terrorists and Foreign Terrorist Organizations, including how they affect companies’ exposure to material-support and financial-crime liability, their disclosure and compliance obligations, and the treatment of financial institutions and counterparties operating in sectors these groups have penetrated.

Bottom Line

For multinational companies, the central lesson is that in Brazil, and increasingly in other jurisdictions exposed to shifts in U.S. policy, sanctions, trade, and enforcement risk must be treated as live, continuously monitored variables rather than static features of an otherwise predictable operating environment. Seeking to expand relations with other countries and blocs as a hedge against shifting U.S. policy and enforcement does not necessarily solve that predictability problem, it may instead multiply the enforcement obligations a company is exposed to.