A powerful economic weapon can be used by the administration of Donald Trump against Brazil in the escalation of commercial and political tensions between both countries: the exclusion of Brazilian institutions from the international financial system, more specifically from the SWIFT system, preventing them from making monetary exchanges with institutions from other countries.
Instantly, affected Brazilian banks would lose the ability to send and receive resources from abroad. In a globalized economy, as Trump’s own tariffs demonstrate, such a measure is equivalent to an “atomic bomb” about the economy.
Much of Brazil’s flow of resources with the abroad would be interrupted, freezing exports, imports, investments and shipments. The country would be practically “island”.
The recent decision of Minister Alexandre de Moraes, who determined on Monday (4) the house arrest of former President Jair Bolsonaro (PL), can contribute to more drastic sanctions by Trump. In the menu of options, the exclusion of Brazil from the international financial system would be the most extreme in economic terms.
After the decree, the Western Hemisphere Department, an organ of the United States Department of the United States, harshly criticized Bolsonaro’s house arrest.
“The United States condemn the order of Moraes that has imposed house arrest to Bolsonaro and will hold all those who collaborate or facilitate sanctioned conduct,” the agency said in a message on social networks.
To date, the exclusion of SWIFT has been applied against Russia and Iran, due to the Ukraine War and nuclear issues, respectively.
What is SWIFT and why it is central to global trade
Created in 1973, the SWIFT system, an acronym in English for the world’s interbank financial telecommunications, is a global messenger network created to facilitate monetary transactions among its members.
Swift currently connects 11,500 financial institutions in over 200 countries. Every three days, approximately funds that equivalent to world GDP of one year. Its headquarters is in the city of La Hulpe, Belgium, which makes it governed by the European Union legislation.
Greer says 50% tariffs were “smaller step” of sanction
The first signaling of the US government that the exclusion of SWIFT could also be adopted in relation to Brazil came last Sunday (3). In an interview with the CBS network, US commercial representative Jamieson Greer made it clear that 50% rates are a “smaller step” compared to other US sanctions.
“Sometimes, [a sanção] It is all over the country, it is sometimes specific to certain individuals and often for foreign leaders and authorities. So that [as tarifas sobre o Brasil] It is not unusual. In fact, the president could have gone further in the type of sanction that was used. Instead, he simply used a rate instead of cutting them [Brasil] completely from the financial system [internacional]”He added.
For the lawyer specializing in international business law Marcelo Godke, the possibility of exclusion of SWIFT is real and, if Brazil does not correspond to Trump’s “requests”, there may be a climb in sanctions.
Exclusion from Brazil from Swift would paralyze commerce and cause capital escape
The eventual exclusion of the SWIFT system would have significant consequences for Brazilian foreign trade operations, according to Francisco Américo Cassano, professor and consultant for international economic relations and foreign trade at Mackenzie de São Paulo.
The national financial system would also be very affected. “The financial system has a daily movement between $ 3 and $ 5 billion and the consequences would be unpredictable in the face of the stoppage of these operations,” he says.
Brazilian economy would suffer an immediate shock
Marcelo Godke states that, early on, the exclusion of Swift would generate a shock in the national economy. “Companies that import and export, people traveling, external investments – all of this would be stopped because all the shipments of Brazil, abroad and abroad are made through SWIFT,” he explains.
The announcement of exclusion of SWIFT would also lead to an instant and mass escape of foreign capital in Brazil.
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China has its own alternative to Swift
Even though it is the best known and used monetary track system in the world, SWIFT is not the only one. Some countries have developed their own system, such as China, with the Cross-Border Interbank Payment System (CIPs) or transionic interbank payment system.
The CIPs was created in 2015 by the Popular Bank of China to enable financial exchanges in Chinese currency, without intermediation of banks that operate with the dollar. Thus, the system stands as an alternative to SWIFT and aims to reduce dependence on the dollar and the international financial system.
In June this year, Banco Master was the first Brazilian institution – and also the first in Latin America – to be qualified to operate at CIPs. At the time, the Master’s exchange rate, Felipe Wallace Simonsen, said the adhesion was a way to bring Real and Renminbi closer [moeda chinesa] and to accelerate the flow of direct investments from China to Brazil, as well as facilitating business relations between companies.
History: Russia and Iran have been banned from the system
Russia also has its own system, SPFS, or financial messaging system. It is through him and others, such as CIPS, that some Russian banks have been performing their monetary exchanges since 2022.
That year, eight Russian financial institutions were banned from Swift. In practice, the action aimed to exclude the country from the international payment system in order to isolate its economy and thus discourage the promotion of war in Ukraine. At that time, the United States and the European Union (EU) countries were in favor of exclusion.
Before Russia, the EU pressured to ban Iranian Swift banks in 2012. The measure retaliated the advances of the Iranian nuclear program, but was revoked in 2016 after a nuclear treaty signing. However, it was again resumed in 2018, on demand from the US, in Donald Trump’s first management.
US pressure may influence SWIFT’s decision against Brazil
Since Russia and Iran cases reveal, the exclusion of SWIFT is not a decision that can be made unilaterally. Being a global cooperative, the system is governed by the world’s central banks, including the National Bank of Belgium, where the institution’s headquarters is, the Federal Reserve from the US and the European Central Bank.
However, according to Marcelo Godke, even with mixed management, the United States and its institutions, due to their relevance in the international financial system, can generate great pressure if they want to exclude some SWIFT member, causing other countries to end up their demand.
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Trump quotes Moraes and “Witch Hunt” to justify sanctions
Recent political and judicial issues can serve as fuel for the US if they choose more pronounced sanctions. According to Trump, rates were imposed due to “recent policies, practices and actions of the Brazilian government that constitute an unusual and extraordinary threat to national security, foreign policy and the economy of the United States.”
The US president also cited Moraes’s “judicial war” to threaten thousands of political opponents, to suppress dissent, as well as support criminal actions against US companies and citizens who criticize their practices.
In the view of the US representative, all this is a serious violation of human rights, which undermined the rule of law in Brazil and, therefore, justify the application of tariffs and other sanctions.
Application of Magnitsky to Moraes demonstrates climbing in sanctions
After advances in Bolsonaro restrictions, which still in July began to wear an electronic anklet and was forbidden to wear social networks, the US government included Minister Alexandre de Moraes on the list of magnitsky law last Friday (1st).
Before that, he and seven other STF ministers had their visas to the US repealed, due to decisions that, in the US government’s view, contributed to scale censorship in the country.
Approach with China and BRICS also weighs against Brazil
Professor Francisco Cassano signals that criticism of Brazilian stance in the face of the conflict between Ukraine and Russia, support for terrorist groups in the Middle East and against Israel and the effort to decolarize international trade can also weigh against Brazil and make the way for heavier sanctions, such as an exclusion from SWIFT.
Last Sunday (4), President Luiz Inacio Lula da Silva (PT) said again that he seeks alternatives to the American currency. “I will not give up thinking that we need to try to build an alternative currency so that we can negotiate with other countries,” he said.
According to Lula, the creation of a new currency or other alternative payment mechanisms could strengthen Brazil’s economic independence in its external business relations.
