Despite the broad celebration of Brazil's urban reform movement, recent events in Brazil have called attention to a paradox focused on the disappointing results of this movement to deal with Brazil's complex urban context. Taking this "impasse" as a starting point, this article focuses on the role of politics and its relationship to economic interests in urban development in which much decision making around urban policy takes place to understand why Brazil's progressive legislation has not succeeded in creating a more just and equitable urban environment. Using a case study of the city of Niterói, I show that patterns of state and nonstate actors are connected through both formal and informal relationships, and connections between public and private actors have a considerable impact on urban politics and policies. Focusing on the limits of participatory processes in Niterói, I call attention to the contradictions of participatory planning in Brazil.