The Virtual Water Trade (VWT) thesis has in recent years taken centre stage in the global water security and political economy discourse for its ability to mitigate water scarcity issues through global trade. However, it has been criticised for neglecting the externalities and the full social-environmental costs, which in this research is highlighted through the case of Brazil. This multivariate research critically assesses the dangers of seeing VWT as a ‘pure’ economic model by investigating the intervening variable of the structural conditions of the Brazilian government and their close intertwinement with agricultural corporations. By qualitative content analysis and empirical data supporting the arguments, the research found that agrarian corporations’ participation in an extractivist system can only thrive where the state actively guarantees the structural condition. This includes financial incentives which provide them with the hegemonic power to influence policies and amendments favouring agrarian business expansion with detrimental socio-environmental consequences for the vulnerable communities within Brazil. The research concludes that it is important to acknowledge this macro-micro linkage when formulating international agreements regarding agricultural trade, otherwise, the purpose of the Virtual Water Trade to mitigate water stress and prevent violent conflicts is instead undermined.