Brazil’s machinery and equipment industry opened 2026 with its worst January in years. Net revenue fell 17% compared to the same month in 2025, dropping to R$17.3 billion ($3.1 billion), according to data released Tuesday by Abimaq, the national manufacturers’ association. The figures signal that the central bank’s aggressive monetary tightening is reaching the factory floor.
Domestic Demand Cratering
The damage was concentrated at home. Domestic sales revenue fell 19%, to R$12.8 billion, as the Selic benchmark rate at 15% continues to choke investment. Abimaq attributed the decline directly to tight monetary policy, which it said is inhibiting capital spending, raising the cost of living, eroding household income, and pushing up delinquency rates. Apparent consumption — a measure of total domestic demand including imports — dropped 21.5% to R$26.5 billion.
Exports offered a thin silver lining. January shipments reached $838 million, up 3.1% year-on-year, though they plunged 41.4% from December due to seasonal factors and a high base of comparison. Imports fell 10.3% to $2.48 billion, led by declines in consumer goods and infrastructure equipment. Even so, Abimaq warned that import levels remain elevated, with China accounting for over 32% of all machinery entering Brazil — evidence that the country continues to offshore its industrial dynamism.
Farm Machinery Faces a Tougher Year
Agricultural equipment, a bellwether for Brazil’s agribusiness economy, painted an even bleaker picture. Revenue from farm machinery sales fell 15.6% year-on-year in January to R$3.6 billion. Pedro Estêvão Bastos, president of Abimaq’s agricultural machinery chamber, projected a roughly 5% decline in farm equipment sales for the full year, citing high borrowing costs.
The Iran war adds a layer of uncertainty the sector had not anticipated. Asked about the conflict’s impact, Bastos said it “brings uncertainty, but we still need to understand the duration.” Oil prices surged roughly 7% on Tuesday as the Strait of Hormuz disruption rippled through global commodity markets, raising concerns about fuel and input costs for Brazil’s farmers heading into the second harvest season.
A Cautious Full-Year Outlook
Despite the rocky start, Abimaq projects 3.5% production growth and roughly 4% revenue growth for 2026 overall. The association is banking on domestic demand expanding by 5.6%, sustained by infrastructure projects already under contract and continued investment in mining and extraction. The order backlog stood at nine weeks in January, slightly below the 9.3-week average of 2024-2025. Employment held relatively steady at 418,900, up 18,000 from a year earlier but down 2% from October’s peak.
On trade policy, Bastos noted that the U.S. Supreme Court’s decision striking down Trump’s broad tariffs offered some relief, since 50% duties had previously hit the sector hard. But he cautioned that Washington could still raise targeted tariffs on Brazil beyond the current 10% baseline. For a sector squeezed between domestic interest rates and global trade uncertainty, the margin for error in 2026 is razor-thin.