Temer tries to save PSDB senator to block second charge

With Senator Aécio Neves (Brazilian Social Democracy Party, PSDB, of Minas Gerais) removed again from office, President Michel Temer loses, at a delicate moment, a strategic player in his game to shelve the second charge delivered by the Office of the Prosecutor- General. On Wednesday, while discussing with aides strategies to save Mr. Neves, President Temer still had to deal with the dissatisfaction of the Minas Gerais and Pernambuco caucuses, which together total 82 votes.

Representing 53 disgruntled deputies from the Minas Gerais caucus, the vice lower-house speaker, Fábio Ramalho (Brazilian Democratic Movement Party, PMDB, of Minas Gerais), protested Wednesday against the auction of four plants previously managed by Minas Gerais-based power company Cemig, and warned that the Social Security reform won’t pass in the Chamber, where there would be much “dissatisfaction.”

On another front, Mr. Temer faced the rebellion of Pernambuco’s deputies, who total 29 lawmakers, including four ministers: of Cities, Defense, Education and Mines and Energy. They are all determined to stop the bill of Health Minister Ricardo Barros (Progressive Party, PP, of Paraná) to transfer technology from state-owned Hemobrás — producer of drugs derived from blood or generic engineering based in Pernambuco — to a new unit in Maringá, Paraná — the minister’s electoral base.

It’s in this turbulent context that Mr. Temer will have to circumvent the absence of Senator Neves, his main ally in the PSDB amid his attempt to shelve the second charge against him. On Wednesday Mr. Temer discussed Mr. Neves’s situation with a group of senators, including the government leader, Romero Jucá (PMDB, of Roraima), and the Ethics Council’s president, Senator João Alberto (PMDB, of Maranhão).

In the vote on the first charge on August 3, 22 PDSB deputies voted in favor of Mr. Temer, while 21 advocated the investigations should go ahead. At the time, a presidential aide admitted that Mr. Neves’s interference was decisive to guarantee that result. Mr. Neves and the minister of the Government Secretariat, Antonio Imbassahy, would have managed to win the PSDB’s dissident group, led by São Paulo Governor Geraldo Alckmin.

Presidential sources say it’s too early to assess the impact of Mr. Neves’s departure, which can still be reversed by the Federal Supreme Court or the Senate. On top of that, internally the PSDB’s assessment  — even in the opposition wing to the government — is that Mr. Neves is a victim of a mistaken decision that trampled the Constitution.

Although Mr. Alckmin has retreated in his criticisms of the government, the party’s internal division persists. The so-called “dark-haired wing” of younger members supports the opposition to Mr. Temer, which was clear in a recent move in the Commission of Constitution and Justice (CCJ), which in the next few days reviews the second charge. Deputy Jutahy Júnior (PSDB, of Bahia) left the CCJ, and in his place another Bahia native, João Gualberto, came in. Both voted against Mr. Temer in the first charge.

In the first time, Mr. Neves had been removed from office due an individual decision took in May by the Car Wash rapporteur, Justice Edson Fachin. Almost two months later, a preliminary injunction issued by Justice Marco Aurélio Mello, in late June, reinstated his powers as senator. Mr. Neves immediately resumed his talks to reverse votes from dissidents of the government in favor of Mr. Temer. This negotiation, according to presidential sources, avoided by one vote the victory of the dissident wing in the first charge.

 Source: Valor Econômico

Exxon’s big bet on Brazil oil could signal major pre-salt role

Exxon Mobil Corp’s big bet on Brazil’s offshore Campos basin shows its willingness to pay up to replenish its reserves and may pave the way for hefty bids in October auctions in the country’s rich pre-salt areas, analysts said.

Marking a return to Brazilian exploration after a five-year absence, Exxon took eight blocks in the coveted basin, one of Brazil’s most productive, at an auction on Wednesday. Six were taken in partnership with state-run Petroleo Brasileiro (Petrobras).

The auction’s record take included an Exxon bid of 2.24 billion reais ($704 million) for one block, Brazil’s highest-ever such bid.

That showed how oil companies that can afford significant overheads are willing to shell out for and develop high quality reserves in far-flung locations, despite oil prices that have roughly halved since 2014.

“If anyone can bring a low-cost approach to doing something as big and complex as that, it is probably Exxon Mobil,” said Brian Youngberg, an analyst at Edward Jones.

 Youngberg said he also expects Exxon to be involved in October auctions of blocks in the adjoining pre-salt area, where hydrocarbons are trapped under layers of salt beneath the ocean floor.

Exxon did not immediately respond to a question about its potential participation in the October auctions.

Exxon, with a market value of around $350 billion, has spent heavily this year on oil and natural gas expansion projects to replenish its diminishing reserves, seeking to counteract concerns that it is falling behind peers in exploration and production.

Investments have included the Permian Basin in the United States, offshore Guyana, and Argentina’s Vaca Muerta shale play.

The Brazil deal is a “further sign of the company’s urgency to replenish its resources base,” analysts at Tudor, Pickering Holt & Co said on Thursday, adding that the Campos Basin deal was a bullish sign for Brazil’s pre-salt block auctions.

Wednesday’s record bid was around 5 times as much as the nearest one from Royal Dutch Shell and Repsol. Petrobras said it had information that some of the Campos blocks had high-potential pre-salt reserves.

Before the auction, Exxon was among the few oil majors without an exploration presence in Brazil’s recently discovered large offshore fields.

“For Exxon Mobil, a lack of presence in Brazil’s pre-salt has been arguably the biggest gap in its portfolio, especially now that Shell holds a dominant position in this prolific, relatively low-breakeven play,” Horacio Cuenca, a researcher at Wood Mackenzie, said in a client statement.

Exxon abandoned drilling efforts in the nearby Santos basin in 2012 following disappointing results.

But a series of policy changes under market-friendly President Michel Temer, including a reduction of requirements that forced foreign businesses to use local partners, will likely tempt investors to return to Latin America’s no.1 economy, analysts said.

Source: Reuters

Monsanto set on keeping Intacta after Bayer tie-up: executive

Monsanto Co (MON.N) is set on keeping rights to its Intacta RR2 IPRO genetically modified soybean technology as the U.S. seeds company negotiates its takeover by Bayer AG (bAygN.DE) with global antitrust authorities, a senior executive said on Thursday.

The $66 billion deal, announced in September 2016, would create the world’s largest integrated pesticides and seeds company.

Opponents of the deal have asked Brazil’s anti-monopoly watchdog Cade to block it or force divestments including Monsanto’s Intacta RR2 IPRO seed technology and Bayer’s glufosinate ammonium herbicides.

Brazilian, U.S. and European regulators are working together to ensure that the transaction does not threaten competition.

“We are very confident we will maintain the Intacta technology in the new organization,” Rodrigo Santos, Monsanto’s chief executive for South America told.

“Though working in collaboration, each authority will announce an autonomous decision.”

Bayer is leading talks with regulators to approve the takeover, Santos said, dismissing the prospect of market concentration that would justify tough conditions for approval.

Bayer, a drugs and pesticides company, has pledged to divest businesses with up to $1.6 billion in annual sales if required by antitrust regulators. The companies hope to close the deal by the end of 2017.

Santos’ remarks underscore the hurdle the deal faces in Brazil, Monsanto’s most important market after the United States. Soy and cotton farmers as well as seed producers have formally told Cade they oppose the unconditional approval of the deal.

Soy farmers asked Brazil to force the sale of Monsanto’s registration, patents and brands associated with Intacta, Cade filings shows. They also called for the sale of Monsanto plant breeding firm Agroeste Sementes SA and Bayer’s Credenz.

Cade declined to comment.

The deal will also impact cotton growers, who claim the two companies will control 14 out of 15 genetically modified cotton seed technologies available in Brazil.

Santos declined to comment on specific complaints, adding that Bayer was committed to working with authorities to resolve any competition issues arising from the transaction.

Source: Reuters

Temer Is Brazil’s Most Unpopular Leader Ever, Poll Says

Michel Temer is Brazil’s most unpopular president on record and his government got no “very good” rating at all from women as he faces corruption charges and pushes economic austerity measures, an opinion survey showed.

Temer’s government was rated as good or very good by 3 percent of respondents, down from 5 percent in July and the lowest of any president, according to an Ibope poll published on Thursday by the National Industry Confederation or CNI. Meanwhile, 77 percent of those surveyed described his government as bad or terrible, up from 70 percent previously. No women at all rated his administration as “very good” and 63 percent rated it as “very bad”, the poll showed.

The president has repeatedly shrugged off his lack of popular support. With no plans to run for re-election in October 2018, Temer is pursuing a series of unpopular austerity measures aimed at restoring Brazil’s fiscal credibility. Corruption charges have weakened the president’s standing with the public. Temer may also lose support in Congress as lawmakers distance themselves from him as elections approach.

Former leftist president Luiz Inacio Lula da Silva and a former Army captain lead voter intention ahead of next year’s election amid widespread disillusionment with the country’s political establishment, an MDA poll showed earlier this month. Market-friendly candidates from Sao Paulo trailed a distant third and fifth, respectively.

The Ibope poll surveyed 2,000 people in 126 municipalities on Sept. 15-20. The margin of error was plus or minus 2 percentage points.

Source: Bloomberg

Brazil agriculture ministry says fresh beef exports to U.S. may resume in October

The ban on fresh Brazilian beef exports to the United States could be lifted in October, Brazil’s agriculture ministry said late on Tuesday.

The ban, implemented in June, would end after the United States finishes its current evaluation of documents sent in response to questions raised in a U.S. veterinary mission to Brazil earlier this year, according to a statement on the ministry’s website.

The United States accounts for 3 percent of Brazil’s fresh beef exports annually, but is seen as a leader in food safety standards with other countries often taking cues.

The predicted end to the ban comes after Washington informed Brasilia that it would allow thermoprocessed meat exports from five plants to resume, according to the ministry.

“We received information that processed beef was cleared,” Agriculture Minister Blairo Maggi said, according to the statement. “We hope that very soon, we will also be able to clear fresh beef.”

Brazil exported $211.2 million worth of processed beef to the United States in the year through August, or 30,031 tonnes, according to data from the Abiec industry group.

Following a meeting with U.S. Agriculture Secretary Sonny Perdue shortly after the ban came into effect, Maggi had predicted that the embargo could be lifted in 30 to 60 days, dates which have since passed.

The United States said previously there is no timeline for lifting the ban.

Brazil in March unveiled a probe accusing meatpackers of bribing inspectors, leading many countries to temporarily suspend Brazil meat imports. Most have since lifted the bans.

The United States stepped up inspections after the probe and canceled one establishment’s exporting license in connection with it, Abiec said, before instituting a broader ban. The United States accounted for 5.3 percent of Brazil’s total fresh and processed beef exports last year, Abiec data show.

Brazil has since pledged to tighten food safety inspections and hired more inspectors.

Source: Reuters

Another Brazil Ethanol Producer Seeks Bankruptcy Protection

Abengoa Bioenergia Brasil SA became the latest Brazilian sugar and ethanol producer to file for bankruptcy protection following the country’s economic crisis and a slump in commodity prices.

 The company, a unit of Spain’s Abengoa SA, requested judicial protection in a court in Santa Cruz das Palmeiras municipality, Sao Paulo state. Its bank debt was 837 million reais ($265 million) as of December.

The move followed unsuccessful attempts over the last 19 months to attract outside investors and restructure its debt. Abengoa Bioenergia also cited Brazil’s political crisis and a lack of credit as contributing factors to its bankruptcy.

 The company runs two mills with a combined capacity to crush about 7 million metric tons a year of sugar-cane in Sao Paulo state, and it had been in advanced talks to sell them to E Fert, an United Arab Emirates-based investment firm controlled by Pakistani investors. Those negotiations ended in May after fiscal, labor and operating issues made a deal too risky for E Fert, people familiar with the matter said at the time.

Glencore Deal

About 50 sugar and ethanol mills in Brazil have closed and around 70 have filed for bankruptcy since 2011 as a slide in domestic sugar prices combined with a cap on fuel prices eroded profits and led to defaults.

Some companies have used bankruptcy protection to sell assets. Raizen Energia SA, Brazil’s largest sugar company, completed its acquisition of two bankrupt units from Tonon Bioenergia SA earlier this month. Glencore Plc bought bankrupt sugar-cane processor Unialco SA for 348 million reais in February.

Seville-based Abengoa filed for preliminary court protection in late 2015 following a failed attempt to raise capital as it buckled under about 9.4 billion euros ($11.1 billion) of debt built up over years of expansion. Some of its other subsidiaries around the world, including its utilities arm in Brazil, are also in bankruptcy protection. It sold three U.S biofuel plants to Green Plains Inc. for $237 million in September.

 Source: Bloomberg

Report recommending surcharge on Chinese steel divides government

A new dispute is already taking shape in the cabinet, likely to stir divergent positions in the government: what to do with a report recently concluded by technical officials with the express recommendation of imposing surcharges on Chinese steel.

The report of the Secretariat of Foreign Trade (Secex), still confidential, indicates that suppliers of hot-rolled steel from China and Russia sell their products on the Brazilian market at unfair prices. Because of this, it advocates the application of anti-dumping rights against steelmakers of these two countries. Triggering a conflict with Beijing, currently Brazil’s largest trade partner, is something that worries authorities.

One the one hand is the Brazil Steel Institute, and influential trade group which gathers the three companies that triggered the investigation: ArcelorMittal, Companhia Siderúrgica Nacional (CSN) and Gerdau Açominas.

On the other, 18 manufacturing associations — such as Anfavea, of carmakers; Abimaq, of equipment makers; Eletros, of electronics makers; and Sinaval, of shipbuilders — who sent a letter to President Michel Temer against the surcharge. They claim there will be an “inevitable pass-through of price” by the national suppliers in case the imported product becomes more expensive and warn to the risk of “inflationary pressure and price increase to end consumer, in addition to the impact on the competitiveness of our exports.”

A meeting of the council of ministers of the Foreign Trade Chamber (Camex), with this issue in the agenda, has just been called for October 25. Before that, the Gecex — group comprised of the executive secretaries of each ministry member of the council — has a meeting scheduled on the 11, but no one believes that such a sensitive decision from the commercial and political standpoint may come without the direct endorsement of ministers.

The Ministry of Industry, Trade and Services (MDIC) has maintained a favorable position for imposing anti-dumping policies and everything indicates it will suport the work of its officials at the Secex. The report is described by people familiar with it as “extensive and thorough,” one of the most comprehensive already produced by the trade defense department, precisely as a way of acting ahead of potential criticism.

In April, Camex’s resolution no. 29 — published days before it left the Foreign Ministry and was sent back to the MDIC — regulated as final recommendations from its technical department that anti-dumping or compensatory measures to unfair trade practices may be ignored in cases of “public interest.” Even with evidence that the Chinese and Russian companies flooded the Brazilian market with artificially cheap steel, this principle may be invoked as a way of denying the surcharge.

The case of hot-rolled steel has not even been deeply discussed by the ministries involved in the Camex. In recent discussions and preliminary signals, however, there is a dispute in gestation. The Finance Ministry and the Secretariat of Strategic Affairs — the latter subordinated to Minister Moreira Franco — have been quite critical of the anti-dumping actions. They resort not only to the argument of impact on costs of production chains, but to studies mentioning that more protected industries are less competitive.

In July, Brazil imported 137,000 tonnes of flat-rolled steel, or 14.1% of the month’s consumption. One year before, that penetration was 4.4%. China is one of the biggest external suppliers.

The Agriculture Ministry, which also has seat in the council, tends to cater to the sector’s interests in the discussions. Some recent protectionist measures taken by China, like the initiation of anti-dumping investigation into Brazilian chicken, are seen in backrooms as possible retaliation to the case of hot-rolled steel.

The Foreign Ministry, frequent protagonist in Camex meetings, has a more universal view and forcefully pays attention to the bilateral relations as a whole. And what’s at stake is not little. A big investor in the power industry with a $20 billion fund that may finance big infrastructure projects, China has clearly been showing willingness to deepen its partnership with Brazil in the administration of President Michel Temer, who was received in a state visit to Beijing.

China has been insistently demanded the recognition of market economy by its largest trade partners, including Brazil, since December 2016 — 15 years after it joined the World Trade Organization. That period in theory served precisely for it to adapt to international rules. The US, Japan and European Union say they can’t give such status to China because of the strong state intervention and the huge subsidies to its companies.

Source: Valor Econômico

Brazil’s Votorantim Metais Files for New York, Toronto IPO

Brazil’s VM Holding SA, which operates under the name Votorantim Metais, has filed for an initial public offering and plans to list its shares in both New York and Toronto, according to a regulatory filing.

The Sao Paulo-based miner is working with JPMorgan & Chase Co., Bank of Montreal, Morgan Stanley and Credit Suisse Group AG on the share sale, the filing shows. It said in the filing it intends to rename itself Nexa Resources SA after the listing.

The company didn’t detail how much it plans to raise in the IPO or what valuation it was seeking. It intends to list its shares in Toronto and New York under the symbol “NEXA.”

VM Holding is aiming to raise about $750 million in the share sale and seeking a valuation of about $4 billion, people familiar with the matter said. The company plans to use the proceeds from the share sale to advance the development of certain projects, general corporate purposes and to increase its financial flexibility, according to the filing.

The company is among the top five producers of zinc. It also produces copper, lead, silver and gold byproducts. In 2016, the company said it produced 416,869 metric tons of zinc, 41,551 tons of copper, 59,181 tons of lead and 8.3 million ounces of silver and 27,893 ounces of gold, according to the regulatory filing.

Votorantim Metais is the metals business of Brazilian industrial conglomerate Votorantim SA, and owns and operates five long-life underground mines. Three of those mines are located in the Central Andes of Peru while two are located in the state of Minas Gerais in Brazil, according to the filing.

Source: Bloomberg

Hong Kong suspects false health certificates used for Brazil meat

Hong Kong authorities  suspended meat imports from a Brazilian exporter and two producers on suspicions that health certificates had been falsified for 10 shipments of frozen chicken feet and livestock offal.

Some shipments should have only been intended as pet food, Hong Kong’s Centre for Food Safety said.

The center said it was stepping up verification checks of all health certificates for frozen meat and poultry exported from Brazil.

 In March, Brazil’s police announced a graft probe, known as “Operation Weak Flesh,” and accused companies of bribing food inspectors to evade checks, leading many countries to temporarily ban imports from the country and increase oversight.

Hong Kong is a top destination for Brazilian meat and had temporarily suspended Brazil meat imports in the wake of the scandal. The Centre for Food Safety said that all 562 tests of Brazilian meat since March 21 have been satisfactory.

Brazilian meatpackers association ABPA said in a statement that it supported the investigation into falsified certificates, adding that the tests indicated it was an isolated case.

Brazil’s agriculture ministry did not immediately respond to a request for comment.

Of the 10 shipments suspected of having falsified papers, eight had been re-exported to the Chinese mainland or Vietnam and one is being held in a container terminal.

One shipment of 27 tonnes of frozen chicken feet had found a buyer, although authorities said that the product has not been found on sale in local markets.

 Source: Reuters

Brazil army deploys in Rio slum as drug-related violence worsens

Hundreds of Brazilian soldiers poured into Rio de Janeiro’s Rocinha slum on Friday in a bid to help the cash-strapped state government quell the drug-related violence that authorities blamed for at least four deaths and several injuries there this week.

The army deployed 950 troops in the sprawling favela, responding to a request from the Rio state government, Defense Minister Raul Jungmann told local television.

In the past week, 60 criminals are believed to have launched an effort to dominate the drug trade in the area, not far from some of the city’s most expensive real estate, and shootings were reported there on Friday morning, according to local media.

The violence in Rocinha is one more sign of the backsliding since the launch of a “pacification” program in 2008 to reduce violence by pushing out drug gangs and setting up permanent outposts in the city’s more than 1,000 favelas.

Police struggled to maintain security gains in favelas in the run-up to the 2016 Olympics in Rio and have continued to lose ground as a fiscal crisis in the city and state lead to cutbacks in spending on police and other essential services.

The military operation in Rocinha on Friday disrupted transportation and businesses in the area, with some schools closing or paring back operations.

 I was going to work and suddenly the police closed off the tunnel in Rocinha and started to patrol with guns. There was a panic at the mouth of the tunnel and I saw people running and heard gunfire,” one witness told, requesting anonymity.

“I‘m still shaking now.”

The outbreak of violence is happening in the midst of the Rock in Rio music festival at the far south end of the city, which has drawn thousands of people with musical acts including Fergie and Aerosmith.

Source: Reuters