By The Rio Times | Created at 2026-09-27 09:06:48 | Updated at 2026-09-27 09:42:17
1 hour ago
BRAZIL · COURTS AND PUBLIC FINANCES
Key Facts
- —The country Brazil has about 213 million people and Latin America’s largest economy, roughly the size of Italy’s. It is the world’s biggest sugar producer and a leading maker of cane ethanol.
- —Why it matters In the 1980s a federal agency fixed sugar and ethanol prices. Mills sued, saying prices sat below cost, and many won compensation the federal government still owes.
- —Why now The Supreme Court’s panels have ruled both ways on how to calculate the awards. The failed Banco Master also bought mill claims, putting the cases under scrutiny.
- —What happened On Thursday 24 September Justice Gilmar Mendes sent case ARE 1312127, Raízen versus the government, to the full 11-member court.
- —The numbers The government rates R$103.4 billion (about US$19.9 billion) in such claims as probable losses. That is about a fifth of the value of all claims it expects to lose.
- —What it means for you For investors, it is a large potential bill that could squeeze Brazil’s budget targets from 2027. Daily life, prices and travel are not affected.
- —Still open The five-member Second Panel votes to confirm the move by 2 October. No date has been set for the full court’s ruling.
Brazil’s Supreme Federal Court (STF) will decide how much the federal government must pay on decades-old sugar mill claims. The government itself puts the exposure at R$103.4 billion (about US$19.9 billion).
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On Thursday 24 September Justice Gilmar Mendes, its longest-serving member, moved a test case from a five-judge panel to the full bench. The court said the order is already in force.
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A price freeze from the 1980s
The dispute goes back to the Sugar and Alcohol Institute (IAA), a federal agency abolished in 1990. In the 1980s it set the prices mills could charge for sugar and ethanol.
Mills later sued, arguing the fixed prices fell below their costs. Their benchmark was cost surveys by the Getulio Vargas Foundation (FGV), a respected Brazilian research institute.
Many won. Courts often set the award as the gap between the official price and the FGV cost figure, without examining each mill’s books.
Such awards become precatórios, court-ordered debts the government pays through its annual budget. They can be sold, and investors buy them at a discount.
What the court already decided in 2020
In 2020 the full STF set a binding rule, known as Theme 826. It said the state owes compensation only if a technical expert proves the actual loss in each individual case.
That ruled out automatic awards based on the generic FGV gap. It left one question unanswered: what happens to awards that were already final before 2020?
The Raízen case sits on exactly that point. The energy group won a final judgment, and a federal appeals court later refused the government’s request for a fresh expert review.
In 2024 the STF’s Second Panel sided with the government by three votes to two. Justices Mendes, André Mendonça and Dias Toffoli said the 2020 rule applies even to final judgments.
Justices Edson Fachin and Nunes Marques dissented. They said a final judgment’s calculation method must stand, according to the legal news site Migalhas.
Why Mendes wants the full bench
Since then the court’s panels have split on similar cases. In June 2025 the same Second Panel ruled three to two for another mill, Destilaria Alcídia, with Toffoli switching sides.
“All of this shows a scenario that demands a unifying ruling by the full Supreme Court,” Mendes wrote. The full court will decide whether Theme 826 covers every award based on a generic study.
He also warned that delay makes the bill bigger, because interest and inflation adjustment keep accruing on the debts. He flagged the risk of paying debts the court might later declare unenforceable.
Where the government’s estimate comes from
The number is the government’s own. It appears in the Fiscal Risks Annex of the budget guidelines law, where the Treasury lists lawsuits it expects to lose.
Sugar mill claims classed as a “probable” loss total R$103.4 billion (about US$19.9 billion). That is about one fifth of the value of all claims in that category, the court said.
It is an estimate of exposure, not a sum anyone has been paid. For scale, it tops the R$97.7 billion (about US$18.8 billion) budgeted for all court-ordered debts in 2027, Times Brasil reported.
Mendes tied it to the budget. From 2027, court-ordered debts start counting gradually toward the primary balance target, the budget result before interest payments.
“A liability of this size, if it materialises, will press directly on the fiscal target,” he wrote. It would shrink room for spending the government can choose freely.
Our report on Brazil’s 2027 Budget Promises a Primary Surplus of 0.1% of GDP shows how thin that margin already is.
The Banco Master shadow
The cases carry extra weight because of Banco Master. Brazil’s central bank shut the bank in November 2025, and its founder Daniel Vorcaro is now jailed.
Under Vorcaro, the bank bought rights to mill lawsuits against the government, betting on future payouts. Parts of those deals are now under investigation.
On 22 September the national inspector of justice cancelled 16 precatórios of three mills worth about R$4.7 billion (about US$906 million). All three had traded claims with Banco Master.
That order came from the National Council of Justice (CNJ), which oversees judges. It concerned a different set of debts and a different legal question from the Raízen case.
Messages from Vorcaro’s phone, reported by Brazilian media, show people close to Nunes Marques celebrating his June 2025 mill vote. Nunes Marques says he never voted in favour of Vorcaro or Master.
Mendes confirmed meeting Vorcaro in 2024 and says he voted against the bank, as covered in Brazil: Gilmar Mendes Confirms Meeting in Banco Master Case. No justice has been charged.
What comes next
The Second Panel votes online on whether to confirm the transfer, in a session from Friday 25 September to Friday 2 October. The case can already be put on the full court’s agenda.
If the full court applies the 2020 rule to final awards, mills would have to prove their real losses again. Payouts would likely fall, and holders of the claims would wait longer.
If it protects final judgments, the older FGV-based sums stand. The Treasury would then face more of the R$103.4 billion (about US$19.9 billion) it has flagged.
The move does not mean the government has lost or won, and it cancels no payments. It does not show wrongdoing by any judge either.
More: Brazil news in English, every day from The Rio Times.
Frequently Asked Questions
What are Brazil’s sugar mill claims?
Lawsuits by sugar and ethanol producers against the federal government over prices fixed by a state agency in the 1980s. The mills argue those prices were below cost and seek compensation.
What did Gilmar Mendes decide?
On 24 September he sent case ARE 1312127 from the Second Panel to the full Supreme Court. The full court will settle whether a 2020 rule requiring proof of real losses applies to awards already final.
Who pays if the mills win?
The federal Treasury pays, through court-ordered debts, to the mills or investors who bought their claims. The government rates R$103.4 billion (about US$19.9 billion) as a probable loss.
When will the court rule?
No date is set. The Second Panel votes on the transfer until 2 October, then the case awaits a slot on the full court’s calendar.
Sources: STF press office, decision of 24 September 2026 in ARE 1312127; Migalhas; Times Brasil | CNBC; InfoMoney; Fiscal Risks Annex to Brazil’s budget guidelines law as cited by the STF. Currency converted at 5.19 reais per US dollar (open.er-api.com, 27 September 2026).
This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error
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