City of Sao Paulo Precatorios in 2026: EC 136/2025 Reset the Price, Not the Investment Case

Published on May 21, 2026.

By Leonard da Rosa.

After EC 136/2025, the question is no longer whether the City of Sao Paulo's direct-settlement route remains investable. The question is the clearing price.

Framing under EC 136/2025

The overdue stock of the City and its consolidated debtor entities at the Sao Paulo Court of Justice closed at R$ 40,500,784,490.33 on February 28, 2026. The 2025 RCL pulled from the Brazilian Treasury fiscal accounting system (SICONFI) totaled R$ 100,652,954,891.44. As an underwriting proxy for Article 100, paragraph 23, of the Federal Constitution, as amended by EC 136/2025, the 40.24% stock-to-revenue ratio places the City in the 2.5%-of-RCL tier, implying a minimum 2026 annual deposit of R$ 2.516 bn.

In 2025, the City's total deposit at TJSP reached R$ 4.042 bn, of which R$ 2.005 bn flowed into Account II. The 2026 theoretical settlement channel (R$ 1.258 bn) sits 37.24% below what Account II actually received in 2025. The annualized run rate from January and February 2026 deposits is R$ 2.67 bn, already close to the new total floor.

The payment pipeline is operating

From the Sao Paulo Court of Justice's public settlement-payment lookups for March and April 2026, 1,575 records were extracted (887 in March and 688 in April). Cross-referenced by case identifier against the approved batches from Settlement Call 01/2025, 249 paid records already appear in the published batches. The largest block belongs to the August batch for non-priority support-type claims and other categories, approved on March 13, 2026: 138 payment records released through April 23.

The public record therefore shows proposals converting into payments. For underwriting, the remaining variable is effective time to payment for each claim, not a guarantee based on aggregate pipeline activity.

Settlement Call 01/2025: a larger queue still under review

The Office of the City Attorney (PGM-SP) registered 8,781 proposals in Settlement Call 01/2025, against 6,854 in 2024, 3,809 in 2023, and 3,153 in 2022. Item 6.1 of the call splits the review into three blocks:

• 2009 and 2010 vintages, in their own batches;
• 2011 to 2024 vintages, by month of presentation, with separate batches for priority support-type claims and non-priority support-type claims plus other categories;
• 2025 vintage, processed last, in two dedicated batches (priority and non-priority/other).

Through April 23, 2026, the published sequence totaled 5,333 approvals: 218 from the 2009/2010 vintages; 1,220 from the June batches; 902 from July; 2,032 from August; and 961 from the 2025-vintage priority support-type batch released on April 23. The final 2025-vintage batch remains pending.

Between the 8,781 proposals submitted and the 5,333 approvals already published, 3,448 proposals remain without a public outcome. Some will resolve as denials, duplicates, appeals, or adjustments. The surviving balance rolls into the final batch — non-priority support-type claims and other categories in the 2025 vintage — which concentrates the economically most sensitive portion of the next window.

Next-cycle concentration in the 2025 and 2026 vintages

Overdue stock by vintage shows why the next settlement cycle should be competitive:

The 2025 vintage alone carries R$ 5.41 bn of overdue stock. The 2026 vintage stands at R$ 8.51 bn, including R$ 7.81 bn of support-type claims — close to the R$ 8.45 bn issued in 2025 according to the annual official map. When the next settlement call opens, material supply from the 2025 and 2026 vintages is reasonable to expect, including claims held by professional acquisition vehicles. The currently defensible acquisition thesis is 2025 vintage and earlier, where the TJSP pipeline is already observable and Settlement Call 01/2025 has substantially advanced.

Purchase pricing

Working assumptions:

• purchase in April 2026;
• credit accrual under EC 136/2025: compounded IPCA and a 2% simple annual default-interest charge;
• IPCA path drawn from the Focus survey median (BACEN's market expectations report), reference date April 17, 2026;
• 60% of adjusted value as the settlement payment. This is the conservative underwriting base: Settlement Call 01/2025 pays a higher share on older vintages, but origination discipline should not price to the more generous rule — future calls may standardize the discount at 40% across all vintages;
• illustrative target nominal BRL gross return of 25% to 30% per year, before taxes, legal costs, operating costs, structuring expenses, and FX. The range is a scenario input used to solve for a maximum purchase price; it is not an assertion of current market bids or actual fund performance.
• All return figures are BRL-denominated and do not include a separate USD hedge, U.S.-level tax treatment, or investor-specific structuring constraints.

The base case is 36 months to payment. 48 months is a tail scenario, not the central case — especially for 2025 vintage and earlier, whose pipeline is already running within the expected window at TJSP. The longer horizon is kept in the matrix as a stress reference, not as the primary bid-setting rule.

Technical price ceiling, 2025 vintage and earlier, as % of current adjusted face value:

In Brazilian reais, for R$ 10,000,000.00 of current adjusted face value in April 2026:

Sensitivity to IPCA

The Focus path on April 17, 2026 has IPCA converging to target across the carry horizon, with roughly 10% to 11% cumulative inflation over 36 months. The underwriting sensitivity runs in both directions: inflation above the entry assumption increases the adjusted claim value, while inflation below it reduces the modeled return. Actual results can fall below the target, particularly when lower inflation combines with a longer tenor, costs, taxes, or legal and execution delays.

Tenor upside: what happens if the carry shortens

The 36-month base case is the underwriting anchor. Two illustrative shortening scenarios show how effective return can move above the modeled target at entry; neither is a forecast:

• An STF decision on ADI 7873 during the carry window may reopen the EC 136/2025 annual flow and compress the queue, reducing effective time to payment;
• Selective origination of 2025 vintage and earlier claims that, under an explicit scenario, enter an earlier settlement cycle and shorten payment to 24 to 30 months.

For a buyer entering at the base-case price (36 months) where payment actually occurs in 30 or 24 months, the effective return changes as follows:

The gain is captured because credit accrual under EC 136/2025 keeps running: when the tenor shortens, the excess between what the asset accumulates and the contracted return belongs to the buyer.

Origination note

The 30% per year × 48-month cell — R$ 2.64 mn per R$ 10 mn of face — produces a much lower maximum purchase price. All else equal, a lower bid can reduce available supply and make portfolio construction harder. That is an underwriting implication, not a statement of current dealer quotes; live market evidence must be checked at acquisition.

ADI 7873: legal optionality during the carry

In my view, ADI 7873 gives the position a legal optionality layer during the carry window. I do not price that optionality at entry, but two precedent lines matter:

• Accrual economics. EC 136/2025 fixes default interest at 2% simple per year, added to compounded IPCA. In high-Selic environments this can leave creditor remuneration below ordinary savings-account economics. The creditor-side analogy is ADIs 4357 and 4425, in which the STF rejected the Taxa Referencial as the inflation index for precatorios and adopted IPCA-E.
• RCL bands without a clear stock-clearance horizon. EC 136/2025 ties annual deposits to stock-to-RCL bands. In ADIs 7047 and 7064, the STF struck down a different annual cap that deferred federal precatorios without a clear clearance horizon.

For a holder or assignee, the economically relevant possibilities are a change in accrual, a limitation of the cap or tiering mechanism that compresses duration, or prospective modulation that recalibrates the regime going forward. Any benefit would travel with the assigned credit. The Full Issue-by-Issue Supreme Court Review explains the seven challenged provisions and their procedural status.

The discipline is to treat those possibilities as potential upside, not to pay for a judicial probability at entry. The timing and outcome remain uncertain and are not part of the base-case payment date or return assumption.

Closing

EC 136/2025 did not erase the City of Sao Paulo direct-settlement investment case; it changed the price the stated assumptions can support. Public records show an operating payment pipeline, but they do not guarantee timing for an individual claim. ADI 7873 remains an uncertain legal variable that travels with the credit.

This is the public version of the research case. Portfolio-level parameters require current Brazilian market evidence, claim-level diligence, and the investor's own legal, tax, and investment review.

Data cut and review. Fiscal and stock figures are dated February 28, 2026; settlement approvals and matched payment records are dated April 23, 2026; the Focus input is dated April 17, 2026. These inputs should be revalidated before any acquisition or paid distribution. The official sources control if they differ from this article.

Terms used in this case

• PMSP / the City: the municipal government of Sao Paulo, the debtor analyzed here.
• RCL: Net Current Revenue, the fiscal base used in the payment-floor formula.
• TJSP / DEPRE: the Sao Paulo Court of Justice and its precatorios department.
• PGM-SP: the Office of the City Attorney, administrator of Settlement Call 01/2025.
• Account II: the court account used to fund direct settlements.
• OC / vintage: the year in which a requisition entered the constitutional payment queue.
• Direct settlement: a voluntary route in which a creditor accepts a discount for faster monetization.
• Focus / SICONFI: official Central Bank market expectations and Brazilian Treasury fiscal-accounting data, respectively.

Related reading

• Sao Paulo State Precatorios in 2026: EC 136/2025, Settlement Funding, and the Direct-Settlement Thesis
• Brazil's 2025 Court-Ordered Payment Reform: An Issue-by-Issue Supreme Court Review
• Brazilian Judicial-Credit Due Diligence: What Institutional Buyers Check Before They Buy
• How Brazil Pays Court-Ordered Claims: Precatorios Explained

Primary sources

• City of Sao Paulo: closure of Settlement Call 01/2025 with 8,781 proposals
• City of Sao Paulo: precatorio settlements page, updated April 23, 2026
• Sao Paulo Court of Justice (TJSP): precatorio governance portal
• Constitutional Amendment 136/2025, Chamber of Deputies
• Central Bank of Brazil (BACEN): annual market expectations, Olinda API
• Brazilian Bar Association: ADI against EC 136/2025
• Lummen internal base for the City of Sao Paulo study, including TJSP stock consolidation and the cross-reference of settlement payments for March and April 2026.