Embraer's record quarter exposes fracture in Brazilian economy

Embraer opened this week with what may prove to be the most striking result of Brazil's earnings season: adjusted net income of R$1.11 billion in the second quarter of 2026, up 25.1% year-on-year, on total revenues of R$11.3 billion — an all-time high for a second quarter. Adjusted EBITDA margin reached 16%, a gain of 2.5 percentage points, and this in an environment where import tariffs imposed by the Trump administration cost the manufacturer just US$8 million in the quarter — a figure that suggests manageable tariff exposure for a company whose commercial and executive jets enjoy robust global demand. Embraer's performance, whose common shares trade on B3 under the ticker EMBJ3, contrasts sharply with the broader picture emerging from the rest of the reporting season for the domestic economy: exhausted consumers, struggling retailers, and banks in defensive mode.

It is in this tension between a solid export-oriented Brazil and a domestic Brazil under pressure that today's central theme lies. Household debt among low-income families — those earning up to three minimum wages — hit 84.9% in July, the highest level recorded since the start of the Confederação Nacional do Comércio's historical series in May 2023. Across all income brackets, the general index reached 82%, also a record. This is no abstract data point: 38.5% of these families acknowledge overdue debts, and nearly 18% state they have no means of settling their obligations. Savings accounts, a classic barometer of household stress, posted net withdrawals of R$7.15 billion in July, the largest volume since March, according to BCB data.

These numbers explain why retail earnings have been the main source of market volatility. Shares of Lojas Renner plunged more than 15% during Friday's session (7), after the company cut its 2026 sales guidance when releasing second-quarter results — pressure that dragged the Ibovespa down more than 1% in the same session. Data from Qive on Father's Day neatly captures the contradiction of the moment: B2B order volume grew 46.1% year-on-year, but average ticket size per purchase fell 22.5%, revealing a consumer who buys more frequently but in smaller amounts — behavior typical of someone managing cash constraints, not someone spending with confidence. Bradesco, in a report released Friday, noted that mounting signs of slowing activity — including in the labor market — could open room for the central bank to bring the Selic rate down from the current 14% per year to 13.25% by the end of 2026. July's IGP-DI, released by FGV with a delay due to system instability, fell 0.86% — deflation that, in the current context, reflects less a benign environment than weakness in demand.

The scenario is compounded by a dispute that is taking on an increasingly political tone on the eve of elections. Members of the Lula administration have publicly blamed the central bank for the increase in public debt of more than ten percentage points over the three and a half years of the current mandate — an outlay of R$1.2 trillion in interest that the government itself acknowledges is unsustainable, but whose solution would require a fiscal adjustment that none of the candidates with real chances of victory appears willing to propose. Desenrola Adimplentes, the subsidized credit program launching this Monday (10), had its rules altered at the last minute to make it more attractive to banks — a sign that, in the pre-electoral contest, stimulating consumption trumps fiscal discipline, even as private banks themselves signal tightening credit in the face of rising defaults.

Climate adds a layer of risk that transcends Brazil. The developing El Niño is already moving contracts in the free energy market, where increased rainfall in the South has created uncertainty about the severity of the phenomenon and its effects on reservoirs. For agribusiness, the outlook is even more sobering: specialists warn of possible delays in soybean planting and impacts on the second corn crop, as well as risks to coffee and citrus flowering, while sugarcane may benefit from precipitation in the Southeast. The threat arrives at a moment when Washington is pressuring Brasília: the Trump administration has conditioned the return of a nearly 60,000-ton sugar quota on Brazil presenting "satisfactory trade proposals," without clearly defining what that means — a potential veto weighing on a sector already monitoring the consequences of El Niño.

On the regulatory and financial front, two pieces of news reveal how quickly technological innovation is outpacing the state's regulatory capacity. UnionPay International announced a pilot project allowing users of Chinese payment apps to transact via QR Code at establishments connected to Pix — even before the central bank has defined the rules for international payments on the platform. Simultaneously, the BCB published new rules to hold cryptoasset transactions above US$10,000 for 24 hours, a response to an environment in which criminal groups use artificial intelligence to overcome language barriers and launch ransomware attacks previously concentrated in English-speaking markets. Brazil, according to reports from cybersecurity firms, has become one of the principal targets of this new wave.

Next week, attention turns to the Focus Bulletin and inflation indicators in Brazil and the United States, which should recalibrate bets on the trajectory of the Selic and the dollar — which closed at R$5.084 last Friday, down 0.41%, helped by a weaker-than-expected U.S. payroll number. The performance of major banks' loan books, the evolution of the Desenrola Adimplentes program, and any signal from PRIO on its dividend policy — promised but not yet announced — will also be key elements for investors calibrating positions in an environment where strong corporate performance coexists, in an increasingly uncomfortable fashion, with the deterioration of living conditions for Brazilian households.

**JBS (NYSE: JBS; B3: JBSS3)** — The Brazilian protein multinational announced a joint venture with Danantara, Indonesia's sovereign wealth fund, which will inject US$2.5 billion into the operation, valuing JBS's assets in Australia and New Zealand at US$7.5 billion — half the company's total market capitalization on the New York Stock Exchange, where shares rose 4.5% on the day of the announcement. The structure calls for an initial investment of US$800 million at closing, with the remaining US$1.7 billion drawn over three years as expansion opportunities in Southeast Asia, Australia, and New Zealand are identified.

**Embraer (NYSE: ERJ; B3: EMBJ3)** — The aircraft manufacturer posted record revenue of R$11.3 billion in the second quarter of 2026, with adjusted net income of R$1.11 billion, up 25.1% year-on-year, and an EBITDA margin of 16%. The impact of U.S. import tariffs was limited to US$8 million in the quarter, signaling operational resilience in the face of the Trump administration's trade policies.

**Brava Energia (B3: BRAV3)** — The shareholders' agreement governing the company was terminated after the sale of 26% of shares from a block of investors to Colombia's Ecopetrol, which subsequently completed an additional tender offer and acquired a further 25% of the capital, becoming the principal shareholder of the Brazilian oil company with significant exposure to the domestic pre-salt.