McLaren looks set to lose a major sponsor.
The Brazilian state run oil company Petrobras signed a five-year, $200 million deal with the Woking based team last year.
But a new Brazilian president, Jair Bolsonaro, was sworn in this year, and he has announced that the McLaren-Petrobras collaboration will end.
"At the moment, by decision of my government, Petrobras seeks a way to terminate the contract," Bolsonaro said.
Globo reports that a government envoy was at McLaren's UK headquarters last week to negotiate the termination.
It is bad news all round for McLaren, with Fernando Alonso failing to qualify for the Indianapolis 500 over the weekend in the new McLaren entry.
McLaren boss Zak Brown said: "Our contract with Fernando goes beyond the Indianapolis 500."
Brown said he is confident the famous F1 team will eventually return to the top step of the podium.
"As a team we are doing much better than before. I think we will win again in a window of two to ten years," he said.
But at approaching the age of 38, Alonso is unlikely to be at the wheel for that.
Sky Italia quoted an unnamed insider who said the Spaniard wanted to switch to a faster team rather than quit F1 at the end of last year.
"He offered himself for free," the insider is quoted as saying.