US Targets Brazil's Pix Payment System as Trade Barrier, Sparking Tensions

The United States is locking horns with Brazil, with the Trump administration scrutinising the Pix instant payment system developed by the Brazilian central bank and labelling it a trade barrier. US Trade Representative Jamieson Greer included Pix in a list of trade barriers that prompted Washington to impose an additional 25% tariff on imports from Brazil, which took effect this week. A senior Trump administration official said Washington is not asking Brazil to scrap Pix, but believes the system should not receive special treatment simply because it is government-owned and operated. “We are not asking Brazil to eliminate Pix,” the official said. However, Washington wants to avoid a situation where Pix receives special treatment solely because it is owned and operated by the government. Brazilian officials believe the US criticism of Pix is aimed solely at protecting American credit card companies. A USTR document states that Brazilian practices could undermine the competitiveness of US companies engaged in digital trade and electronic payment services. The dispute highlights the growing threat to the dominance of global credit card companies. Government-built payment systems like Pix offer an alternative to card payment networks that have dominated global transactions for decades. Pix allows people to transfer money in real-time via banking applications. The system provides free transfer services and offers lower fees and faster transactions for businesses by cutting out most of the traditional card payment chain. Brazilian Central Bank Governor Gabriel Galipolo dismissed the US criticism regarding Pix’s impact on card company revenues and market access, calling the accusations absurd. Galipolo said the absolute number of credit card users has actually increased because Pix has encouraged more Brazilians to open bank accounts. He described Pix as a public service, not a competitor to credit card companies. “It is like saying that building basic sanitation harms the income of water truck owners,” Galipolo said. The Brazilian Central Bank launched Pix in 2020. The system quickly became the most dominant payment method in Latin America’s largest economy, surpassing card transactions in just three years. Pix now accounts for more than half of all transactions in Brazil by volume, with around 170 million users, or about 80% of the total population. Several other countries also have instant payment systems, such as UPI in India and FedNow in the US, but none have matched Pix’s explosive growth. By the first half of this year, the Brazilian Central Bank had signed information-sharing agreements regarding Pix with 65 international partners, ranging from developed nations like Germany and Canada to developing countries such as South Africa and Turkey. “Pix is truly a model and the direction everyone is heading,” Galipolo said. Credit card companies Mastercard and Visa have warned investors in their reports that payment networks like Pix could threaten their business. The Information Technology Industry Council, a Washington-based industry group representing Visa, Mastercard, Meta, and other technology companies, has also been pushing the USTR for years to create a more level playing field for its members in Brazil. The group argues Pix should be subject to a more competitively neutral regulatory framework and that international payment companies should receive equal treatment and access under Brazilian payment system rules. However, it remains unclear why the Trump administration decided to take action against Pix now. The Brazilian payment industry association, Abec, said the existence of various payment schemes and models, including the credit card, debit card, and Pix ecosystems, provides significant benefits to consumers and society. Card transaction volumes in Brazil have continued to rise after Pix brought more than 70 million people into the formal financial system. However, the share of credit card transactions has fallen to around 15% from approximately 20% before Pix’s launch, while the debit card share has plunged to about 10% from around 26%. Pix and similar instant payment systems also have opportunities to expand outside Brazil. Private companies have built infrastructure allowing Brazilians to use Pix when travelling abroad, including in the US, and foreign tourists can also use Pix for transactions in Brazil. Instant payment systems from various countries could potentially become interconnected in the future, a development that adds to Washington’s concerns amid discussions among major developing nations about reducing dependence on the US dollar. In recent public statements, US officials have focused more on criticising Pix’s structure, highlighting a potential conflict of interest in the Brazilian Central Bank’s dual role as both operator and regulator of the system. The International Monetary Fund also compared Pix’s governance with similar systems in China and India in a 2023 paper, noting that in those countries, the operational and supervisory functions are housed in different entities. When asked whether the Trump administration was demanding that the management of Pix be removed from the central bank, Governor Galipolo said the US demands were difficult to understand clearly, arguing the current structure ensures security.