By Gabriel Araujo and Luciana Magalhaes
SAO PAULO, May 29 (Reuters) - Brazilian President Luiz Inacio Lula da Silva on Friday blasted a U.S. decision to designate two Brazilian drug gangs as terrorist organizations, calling it undue interference in the country's internal affairs.
"We will not accept being treated like children, we will not accept being treated as if we were a banana republic," Lula said at a public event on Friday, referring to "a certain Marco Rubio, who said that our criminals are
terrorists and that Americans can intervene."
On Thursday, U.S. Secretary of State Marco Rubio announced a policy to designate Brazil's two biggest criminal gangs as terrorist groups, opening the door for more aggressive interventions, after lobbying efforts in Washington by the sons of far-right former president Jair Bolsonaro.
Brazil's government said the move was counterproductive and a threat to national sovereignty, while legal experts warned it could have knock-on effects for businesses operating in Brazil.
The U.S. embassy in Brazil did not immediately respond to a request for comment.
The two big groups targeted by the U.S., Comando Vermelho (CV) and Primeiro Comando da Capital (PCC), began as drug trafficking groups but have expanded into other areas of the economy, including extortion and control over local supply chains in some regions.
Legal experts said that because of this reach, companies could face indirect exposure if they operate in areas where the groups exert influence, even without direct ties.
Law firms circulated reports to business executives on Friday warning that the U.S. designation could increase scrutiny of financial institutions and companies operating in sectors such as agribusiness, energy, mining and telecommunications.
"Scrutiny on financial institutions is also expected to tighten. Recent examples in Mexico show how quickly the situation can escalate, with local banks cut off from the financial system," one report by local attorneys said.
A separate analysis by international lawyers warned that companies that operate across Brazilian territory face an even steeper challenge, particularly those in agribusiness and the energy, mining, and telecommunications sectors, where exposure to the criminal factions' economic orbit can be difficult to map and harder to avoid.
Comando Vermelho (CV) and Primeiro Comando da Capital (PCC) are both set to be formally listed as Foreign Terrorist Organizations (FTOs), effective June 5, 2026.
MARKET REACTION
Markets showed a muted initial response, though some bank shares edged lower on Friday, with Brazil’s benchmark Ibovespa index ending down 0.7%.
In a meeting with Trump this week in Washington, Brazilian Senator Flavio Bolsonaro, who is preparing a run for president with the blessing of his father, ex-President Jair Bolsonaro, said he had asked for the U.S. to label the gangs as terrorists.
His brother Eduardo Bolsonaro, who participated in the Washington meetings, said that the decision had been under consideration in Washington but was delayed by Lula’s policies.
In an interview with Reuters, Eduardo said he was not focused on whether such measures could sway votes in the Brazilian business community. "I am concerned with the interests of the Brazilian people. I want to destroy the Comando Vermelho, the PCC, so that Brazilians don't go out to buy bread at the bakery and end up taking a bullet to the head."
Lula's administration had tried to avoid such designations, fearing they may pave the way for eventual U.S. military action or sanctions against banks that unknowingly do business with gang members.
In his remarks, Lula, who is running for re-election in October, accused Senator Bolsonaro of "betraying our homeland and going to the U.S. to ask for intervention in Brazil."
Lula himself had also met with Trump at the White House to discuss ways to combat organized crime, but said at the time they did not discuss the possibility of Washington designating the CV and PCC gangs as terrorist organizations.
On Friday, Lula called the U.S. decision "disappointing" and vowed to stay focused on the domestic fight against both gangs, which dominate the drug trade in much of Brazil and have expanded ties around Latin America.
(Reporting by Gabriel AraujoAdditional reporting by Oliver GriffinEditing by Brad Haynes, Aurora Ellis and Sanjeev Miglani)
