October 31, 2017
Farmer insurance fund’s budget slashed by more than 50%

With coffers still empty following the recent economic downturn, the government decided to slash even further the fund used to subsidize insurance policies taken on by farmers, to R$260 million from a previously announced amount of R$550 million – which was already seen as too slight when the Agriculture Minister disclosed the sum in June. Vitor Ozaki, head of the Rural Risk Management department at the Ministry, said that this budget cut could lead to major setbacks. That would especially be true if extreme climate conditions next year lead to crop losses, says Pedro Loyola, economist at the Paraná Federation of Agriculture.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 31, 2017
Brazil’s worst recession on record ended in 2016, committee says

Based on the positive growth figures for various sectors of Brazil’s economy, the country’s worst recession on record – which led to a retraction of 8.6% during the 11 quarters of the economic contraction — officially ended in late 2016, the Committee for the Dating of Economic Cycles (Codace), a group at Fundação Getulio Vargas, said following a Friday meeting. Despite weak growth at the start of this year, which led to some uncertainty about the end of the economic downturn, current signals indicate that growth is returning, economist Paulo Picchetti says. The depletion of government funds contributed to the slow recovery, with previous attempts to staunch the 2008 crisis creating serious imbalances, according to the economist.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 31, 2017
Grupo Pão de Açúcar to spend R$45m in supermarket renovation

Grupo Pão de Açúcar (GPA) will start renovating some of its supermarkets already this year. After hypermarkets, supermarkets are gaining greater relevance among large retailers in the country. GPA is also adopting some measures to improve results after supermarket sales fell 1.2% in the January-September period. Fifty Pão de Açúcar supermarkets are due for renovation this year, with total investments of R$45 million. “For 2018, I will likely request at least 50 more renovations, but this has not been decided yet,” says GPA director Marcelo Bazzali. The chain has 185 stores in the country.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 31, 2017
Power distributors request R$1bn from reserve energy account

One week after approving changes to the methodology and values of rate-flag levels, the board of the National Electric Energy Agency (Aneel) will analyze, in a meeting scheduled for this Tuesday, a new request presented by power distributors. The proposal includes the release of nearly R$1 billion from the Reserve Energy Account (Coner) and the postponement, from the beginning to the end of the month, of the monthly settlement in the short-term market. Should Aneel accept the distributors’ request, the deposit of companies’ financial guarantees related to September’s settlement of short-term market operations, scheduled for this week, would be carried out by late November. The Brazilian Association of Electric Energy Distributors (Abradee) pointed out that “the increase in the hydrological-risk costs could result in a R$6 billion deficit in the ‘flag account’ through December this year,” preventing the distribution segment from meeting its obligations in the short-term market.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 30, 2017
Heat map shows moderate improvement in Brazil economy

A heat map of the Brazilian economy shows that activity is recovering, albeit at a moderate pace, according to a study by consultancy Tendências Consultoria Integrada. About a quarter of indicators provided a “hot” reading, while slightly more than a quarter were deemed “cool” and 47% rated “neutral.” According to Alessandra Ribeiro, who coordinates the macroeconomics and politics area at the consultancy, improving employment figures, low inflation, and falling rates should sustain the recovery. She expects Brazil’s GDP to grow 0.7% this year and 2.8% in 2018.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 30, 2017
JBS says committee decision led to dollar hedge ahead of audio leak

JBS will try to convince securities regulator CVM that public knowledge about market factors showing that the dollar would strengthen is what led the meatpacker to set up a $2.8 billion currency play earlier this year – and not privileged information linked to the leaking of conversations between JBS controlling shareholder Joesley Batista and Brazil President Michel Temer that sent the Brazilian currency tumbling. According to US consultancy Nera, which analyzed the trades using company information, after one year out of the currency hedge market, JBS decided on April 25 to return to the market, and began mounting its position on May 5, less than two weeks before Mr. Batista came forward with the audio recordings. JBS laywer Walfrido Warde says discussions began all the way back in February to hedge against widely expected dollar gains, and were carried out without any knowledge that Mr. Batista’s recording would become public on May 17.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 30, 2017
Ricardo Eletro reaches accord with creditors on R$1.5 bn bond sale

Máquina de Vendas, which controls home goods chain Ricardo Eletro, came to an agreement with creditors whereby a new holding company controlled by two partners will take on about R$1.5 billion of company debt by selling bonds in that amount to banks Bradesco, Itaú, and Santander. Following the sale of the bonds, which come due in 2024, the three banks will end up controlling about 60% of the retailer. The new holding company, MV Participações SA, will help Máquina de Vendas deleverage — after taking on massive debt to buy rivals right when a recession was undercutting sales – and possibly prepare it for a sale, one source said.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 29, 2017
DL shifts strategy from tablets to internet of things

Brazilian electronics manufacturer DL, whose sales are focused on tablets in the retail market, is expanding in the corporate segment. The initiative is part of the company’s strategy to diversify its revenue amid the shrinking tablet segment over the past three years — sales have dropped to 3.76 million units from 9 million, according to research firm IDC. Paulo Xu, DL’s founder and president, says the focus will be on equipment for the so-called internet of things (IoT). The initial investment in the new area totaled R$2.5 million, including market research, acquisition of test equipment and approval of products and personnel.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 29, 2017
GP Investments bets on Silicon Valley startups

Known for investments in large companies, GP Investments has started betting on Silicon Valley firms at an embryonic stage. Allocations are made through venture-capital asset manager Expanding Capital, founded in early 2016. Of the $40 million raised by Expanding with Brazilian investors, GP is the largest individual investor. Since May last year, Expanding Capital has invested $10 million in six startups, such as mParticle (data company), TuneIn (radio and audio), and Coinbase (digital currency platform), according to CrunchBase, which gathers data on the venture capital industry.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 29, 2017
Evangelical congregations driving candidacy of Bolsonaro

The president of the Brazilian Council of Pastors, Robson Rodovalho, says the candidacy of Deputy Jair Bolsonaro (Social Christian Party, PSC, of Rio de Janeiro) could turn into a “torrent that carries off everything in its path,” with support growing among members of evangelical congregations who see him as an alternative to the decay in Brazilian institutions. For sociologist Ricardo Mariano at the University of São Paulo, the weakening of the Workers’ Party (PT), which during the presidency of Luiz Inácio Lula da Silva attracted lower-income voters, has led to a trend of more people looking to populist candidates like Mr. Bolsonaro.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 28, 2017
SouthRock in talks to purchase Starbucks operations in Brazil

São Paulo-based private-equity firm SouthRock Capital is in talks with Starbucks to acquire the coffeehouse chain’s operations in Brazil. Starbucks Corporation has owned 100% of the business since 2010. According to the memorandum of understanding signed between the parties, SouthRock may become a master franchisee of the brand and owner of chain’s 105 units, with sales of nearly R$200 million last year. Contacted by Valor, Starbucks and SouthRock declined to comment. According to a source familiar with the talks, the plan initially discussed includes the opening of about 60 new stores in the country over the next three years, reaching 170 units by 2020.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 28, 2017
Fashion retailer Restoque may raise R$800m in stock offering

The share offering that fashion retailer Restoque — owner of Le Lis Blanc, Dudalina, Rosa Chá, Bo.bô. and John John brands — has signaled to the market could raise R$800 million and mark the exit of private-equity firms Advent International and Warburg Pincus from the company’s capital structure. The share sale would help improve debt ratios at Restoque, which has been closing stores and factories, reduced its administrative staff, and seen a number of executives come and go. No date has been set for the share offering.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 28, 2017
Government already admits partial pension reform

Although officials are still publicly pushing for approval of the full proposal, behind the scenes the government is already admitting that it may have to split pension reform into different bills if Congress doesn’t vote on the law by the end of the year. President Michel Temer selected three critical points to push forward that he considers “75% of the reform”: a minimum age of retirement of 65 for men and 62 for women, equal rules for public and private-sector workers, and rules for the transition to the new system. If resistance among lawmakers doesn’t wane by late November, aides close to the president agree that the discussion needs to evolve on at least those three issues.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 27, 2017
Supreme Court justices exchange accusations

Justices Luís Roberto Barroso and Gilmar Mendes traded harsh words on Thursday during a Federal Supreme Court (STF) hearing. In the exchange of reciprocal attacks, Mr. Barroso accused his colleague of leniency toward white-collar crimes, and “changing jurisprudence according to the defendant.” In return, Mr. Mendes said he was not “an attorney for international thugs”, alluding to the fact that Mr. Barroso defended Italian terrorist Cesare Battisti before joining the STF.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 27, 2017
Vale still faces two major challenges after migrating to Novo Mercado

After securing its migration to Novo Mercado — B3’s strictest corporate governance segment — scheduled for December 22, mining company Vale, in addition to continuing to pursue operational improvements and debt reduction, will face two major challenges: finding solutions to its money-losing nickel operation in New Caledonia, and resuming operations at Samarco, in Mariana, Minas Gerais, which will require a “complicated” environmental licensing process following Brazil’s worst-ever environmental disaster at the site.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 27, 2017
Federal decree may release up to R$4.6bn for environmental projects

The federal decree that allows environmental fines to be converted into investment may free up as much as R$4.6 billion for investment in priority environmental projects during the initial stage of implementation. That amount surpasses the R$3.9 billion that was disbursed during the last ten years by the Amazon Fund, the largest fund focused on protecting the region. The Environment Ministry’s budget for environmental projects, including agencies such as Ibama, the Chico Mendes Institute, the National Water Agency and the Brazilian Forest Service, is just R$600 million. “It’s a historic breakthrough,” says Ibama president Suely Araújo. Historically, the average revenue from Ibama fines accounted for just 5% of that total.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 26, 2017
No agreement reached at Oi board meeting with creditors

Oi’s board meeting, which discussed the terms of its Plan Support Agreement (PSA) with creditors, ended with no consensus on Wednesday, three sources told Valor. Oi is trying to obtain support from the group of creditors known as G6, which would be willing to join in on a future capitalization of the carrier. An initial version of the PSA was disclosed by the company along with the judicial recovery plan. However, the document presented for discussion at Wednesday’s meeting brought radical changes from the first version. Among the PSA’s controversial points is that the G6 must be compensated even in the event of an intervention by the National Telecommunications Agency (Anatel), one source explained. Because of the changes in the original document, it was agreed that the PSA will be resubmitted to the board, likely next Friday, another source said. Contacted by Valor, Oi declined to comment.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 26, 2017
Eletropaulo and 25 carriers to invest R$300m in undergrounding

The tangle of electrical wires, telecommunications cables, and utility poles have been slowly disappearing from the skyline of large cities around the world. In Brazil, Eletropaulo and 25 carriers with networks in downtown São Paulo will spend at least R$300 million in a project to bury cables, known in industry parlance as undergrounding. The works are already being carried out and slated to end in 2019. These companies signed an agreement with the São Paulo city government to try to improve the landscape in part of the metropolis. A study by Eletropaulo shows that Brazil has a low percentage of cables buried, despite having started the process in the 1940’s with utility Light. Since then, even with the inclusion of other companies, the rate reached only 11% in Rio de Janeiro, 7% in São Paulo and 2% in Belo Horizonte.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 26, 2017
Temer friend accused of money laundering in foreign exchange contracts

The Federal Police is investigating foreign exchange contracts worth $1.2 million and €1.4 million linked to AF Consult, implicated in Operation Car Wash and located at an address linked to Colonel João Baptista Lima Filho, a friend of President Michel Temer for more than 30 years. Mr. Lima Filho is accused of receiving R$1 million that were allegedly meant for the president, according to the Office of the Prosecutor General (PGR). Mr. Temer’s defense has denied the allegations. Accused of money laundering, AF Consult was hired by state-run nuclear power company Eletronuclear. Defense attorneys for João Baptista Lima Filho said they would not comment on the matter.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 25, 2017
Pressured by PR party, Temer removes Congonhas from airport auctions

Pressured by the Party of the Republic (PR), which has controlled the Transportation Ministry for years, Brazil removed the Congonhas airport in São Paulo from the list of airports to be auctioned off. Congonhas, Brazil’s busiest domestic airport, helps finance state-run Infraero’s money-losing terminals and its sale would weaken Infraero even further, minister Mauricio Quintela (of the PR) protested. But political motivations spoke louder: the PR has 39 seats in the lower house – which was set to vote on whether criminal allegations against the president should move forward – and Mr. Temer wanted to avoid conflicts with party leaders.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 25, 2017
Brazil cuts Selic to 7.5%, opens door for additional cuts in 2018

Brazil’s Monetary Policy Committee (Copom) cut the benchmark Selic rate by 75 basis points to 7.5% and signaled that it will likely make a 50 bps cut at its next meeting, the last one for this year. But a change in the statement that accompanied its decision raised doubts about what would follow in 2018. The Copom removed from its statement any mention that it was nearing the end of the easing cycle, and instead said once more – as it did in September, when it cut the Selic by 100 bps – that it would “moderate” its reduction of the rate, while adding that future decisions would depend on the economy’s continued recovery and on whether inflation falls even further than expected.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 24, 2017
Government readies restructuring plan for Oi

The draft of a restructuring plan for Oi, prepared by the government, will be ready next Friday for a final discussion on Monday by its task force. The Attorney-General of the Union, Grace Mendonça, who is heading the task force, will meet with the company’s management before the final meeting and the plan will then be presented to creditors on November 10. Bondholders will have to contribute R$3 billion to a capitalization but will be allowed to swap debts for shares while government banks will not participate in the plan in any way.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 24, 2017
Brazil to introduce governance rules for public expenditures

Brazil plans to create governance rules to improve the efficiency of public spending and establish targets, part of its effort to abide by new caps on spending and as part of its bid to become a member of the Organization for Economic Cooperation and Development (OECD). Not only is the government reviewing existing programs – it cut off Bolsa Familia disbursement funds to 490,000 non-eligible recipients and ceased payment on R$10 billion in improper social security medical disability payments – but also wants to include targets and governance practices in all future programs in order to recoup confidence in government.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 24, 2017
Political meddling squeezed Caixa capital ratios

Caixa Econômica Federal’s cash crunch to meet Basel 3 capital requirements results from policies adopted by the Luiz Inácio Lula da Silva and Dilma Rousseff administrations, including the so-called “creative accounting” to generate primary surplus from financial transactions and a steep increase in its credit portfolio as a counter-cyclical tool against the 2008 crisis. Since 2008, Caixa’s loan portfolio has increased nine-fold to R$715.9 billion by late June, while the overall financial system’s loan balance rose 151.7%, as the government used Caixa and other state-owned banks to lower global spreads in the financial system – which also hurt the bank’s earnings.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

Montblanc invests online and seeks better margins

Luxury pen-maker Montblanc opened its own online store last week after more than a year in the works, seeking to take advantage of Brazil demand while reducing costs associated with brick-and-mortar stores in the gigantic country. Montblanc has nine stores in the country, five franchises, and also sells products via other retailers. Online operations, meanwhile, had previously been through the platform operated by jewelry store Vivara. But in its quest for better margins, Montblanc decided to operate its own site, and hopes that within one year it will get 10% of sales from the digital platform, which will offer the company’s full portfolio of products.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 23, 2017
Heráclito Fortes, the man putting out political fires

During President Michel Temer’s most difficult week in his 17 months in power, Federal Deputy Heráclito Fortes (Brazilian Socialist Party, PSB, of Piauí) has been responsible for mediating a conflict between Mr. Temer, his longtime friend, and Chamber of Deputies President Rodrigo Maia, as the lower house prepares to vote on a second round of charges against the president. Dubbed “Soft Mouth” in Odebrecht spreadsheets, Mr. Fortes spent all week trying to reconcile differences between the two men, and succeeded in reestablishing communication after a 20-day standoff.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 23, 2017
Brazil to redefine slavery-like work conditions, Temer says

The federal government continues to refuse to fully revoke a decree that weakened efforts to eliminate slavery-like conditions in Brazil – by demanding explicit proof of restrictions on worker freedom to come and go as they please – and instead will revisit the issue and try to more clearly define what constitutes the crime of slavery. During a Saturday lunch, President Michel Temer told that the Labor Minister Ronaldo Nogueira is talking with Prosecutor General Raquel Dodge to work out the language of future definitions of when someone can be accused of creating slavery-like work conditions.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 23, 2017
Fintech Bart Digital gets R$2.2m injection to expand in barter market

SP Ventures, an asset manager focused on innovative projects, has invested R$2.2 million in Bart Digital, which provides solutions for the Brazilian agribusiness market. The startup, created in April 2016 by four entrepreneurs, applies blockchain technology to the barter trade, where there is an exchange of grains for inputs between producers and agro-industries. Founding partner Mariana Bonora says the system simplifies and speeds up the approval of transactions, integrating the parties involved. The company plans to start selling the solution in March 2018.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 22, 2017
Lab São Marcos seeks acquisitions to lift revenue by 300% in 4 years

Laboratório São Marcos, Belo Horizonte’s second largest medical diagnostic chain, plans to grow through acquisitions and increase its revenues by more than 300% within four years. Since the start of this year, the company has bought two laboratories in Minas Gerais and one in São Paulo. The transactions cost about R$40 million, financed by loans with commercial banks and cash. São Marcos has expanded rapidly in recent years, with gross revenue rising from R$5 million in 2005 to R$103 million in 2016, and is expected to total R$160 million this year. The company’s target is to reach gross revenue of R$700 million by 2021, says Ricardo Dupin, executive director of São Marcos.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 22, 2017
Rede D’Or São Luiz in talks to buy 60% of São Rafael Hospital

Rede D’Or São Luiz is in final talks for the acquisition of approximately 60% of São Rafael Hospital, located in Salvador. The deal is valued between R$420 million and R$480 million. According to sources, the entire São Rafael Hospital is valued at R$700 million, but it could reach R$800 million depending on its financial performance. São Rafael, which has 400 beds and 12 operating rooms, is expected to post revenues of R$600 million this year. The investment would mark the debut of Rede D’Or, the country’s largest hospital chain, in the Bahia market. Until now, Rede D’Or’s presence in the Northeast was restricted to the state of Pernambuco.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 22, 2017
Coutinho, Casino and Minas governor accused of bribery scheme

The Federal Police charged eight people, including former Brazilian Development Bank (BNDES) president Luciano Coutinho, and is awaiting authorization from the Superior Court of Justice (STJ) to charge Minas Gerais Governor Fernando Pimentel (Workers’ Party, PT) with accepting a R$2.8 million bribe from Casino. The French retail group was accused of trying to block BNDES financing for a proposed merger between Carrefour and Grupo Pão de Açúcar. Mr. Pimentel would have accepted the bribe in 2011 while holding office as minister of Development, Industry, and Commerce and, according to investigators, would have told Mr. Coutinho to add a rule blocking the development lender from financing retail chains. In a note, Casino said it was “surprised” by the accusations and denied paying any bribes. Mr. Coutinho rejected the allegations, saying through his press representatives that the clause at stake was suggested by the collegiate body of BNDES.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 21, 2017
Oi top creditors come together to postpone general meeting

The top creditors of telco Oi have jointly requested to Judge Fernando Viana, of Rio de Janeiro’s 7th Corporate Court, to postpone from November 23 to November 27 the general meeting related to the company’s judicial reorganization, with the goal of developing a plan that has a majority endorsement. Together, creditors seeking to postpone the meeting are owed R$30 billion. Oi’s total debt reaches R$74 billion, considering the R$20 billion in liabilities linked to regulator Anatel. The government needs more time to build a comprehensive solution to the company’s financial situation. By the end of November, it’s possible that American fund TPG, together with China Telecom, advance on a proposal to buy a stake in Oi.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 21, 2017
Government faces difficulties on FGTS funding for Caixa

The government already faces difficulties in obtaining reinforcement of capital for Caixa Econômica Federal with funds from the Workers’ Severance Fund (FGTS). Representatives of the fund have raised doubts about the legality of the measure. The conclusion is that the purpose of the FGTS, which is meant to finance the housing sector, basic sanitation and urban transportation, is being corrupted. According to a government source, there is concern that the move will be questioned by the Federal Court of Accounts (TCU). The operation is intended to work as a loan with which the Caixa would issue perpetual bonds, that would be transferred to the FGTS, in exchange for R$10 billion in cash. Caixa would pay the FGTS annual interest corresponding to the Selic rate (currently 8.25% annually) plus 1.2%.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 20, 2017
Economists project record low interest rates for 2018

Among economists a consensus is forming that by 2018, an election year, the country will reach a record low level of interest rates, at an annual 7.25%. Of 33 economists heard by Valor, one foresees an interest rate of as low as 6.75% by the end of this year, while the remainder foresee a rate of 7.25% by the end of December. Of the group, 29 believe that interest rates will remain at this level, or will fall a little more by the end of 2018. Only four expect an increase in rates next year. The prospect of the maintenance of the base rate confirms the success of the Central Bank in the management of inflation expectations. In two years, the annual IPCA fell from 10.67% to a current 2.5%. In the last 12 months, a period in which Selic fell to 8.25% from 14%, the real interes rate went to 2.96% from 7.13%.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 20, 2017
Kia Motors invests R$165m to expand in Brazil and create 1,300 jobs

Kia Motors do Brasil announced on Thursday a plan to invest R$165 million to expand operations and the creation of 1,300 jobs in the country, or 48% of today’s total. The announcement comes after the end of Inovar-Auto, a federal government program that in the last five years set an additional tax for vehicles produced outside of Mercosur. In terms of investments, R$50 million will be allocated to new car dealers; R$45 million to advertising and marketing; R$30 million to equipment and R$5 million will be spent to stock spare parts for vehicles to be launched, as well as for staff training. Another R$35 million will be allocated to a technology center in Salto, São Paulo.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 19, 2017
Financial regulation reform heads to Senate

The Chamber of Deputies passed a bill that allows financial companies to sign leniency deals with the Central Bank and securities regulator CVM. The maximum securities fine rose to R$5million from R$500,000, while Central Bank fines could go as high as R$2 billion or 0.5% of some bank revenues. But the bill also allows whistleblowing companies to win immunity if they report crimes first. Insider trading gained a broader definition and tougher penalties on market agents entrusted with keeping the data confidential but who trade on it.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 19, 2017
Caixa Econômica Federal planning sale of R$10bn in perpetual bonds

To help Caixa Econômica Federal comply with Basel 3 capital requirements, which will come into effect in 2019, the government may authorize the bank to issue R$10 billion in perpetual bonds, which generally pay higher interest rates. Caixa would sell the R$10 billion in securities through the Workers Severance Fund (FGTS), which would, in turn, would keep the perpetual bonds that are issued. According to a source who spoke with Valor, the model, still under discussion, would be interesting both for Caixa, which could book the funds as Tier 1 capital (of better quality), and for the FGTS, which would have higher returns than the current ones.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 19, 2017
Neoenergia partners reach consensus for IPO

After reaching an agreement on the price set for Neoenergia, partners of the power company will resume the IPO on the stock exchange. Under the new consensus, the transaction may be launched with a floor between R$16 billion to R$17 billion. In early October, Neoenergia’s IPO was postponed after Banco do Brasil, Previ (pension fund of BB employees) and Iberdrola failed to reach consensus on the stock price for the sale. Now, Neoenergia will await the release of its third-quarter figures, scheduled for early November, to resume the transaction.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 18, 2017
Tax secretary vows to offset losses from PIS/Cofins ruling

Federal Revenue Secretary Jorge Rachid said Wednesday he will appeal the removal of the ICMS sales tax from the base of the calculation base of PIS/Cofins social contributions, which was ordered by a controversial Federal Supreme Court ruling. He said officials would have to offset the lost revenue with budget cuts or by creating a new tax if the STF ruling prevails.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 18, 2017
Brazilian pharmaceuticals double down on Canada

Biolab Farmacêutica is accelerating its internationalization project. The company Thursday will open its first research and development center outside of Brazil, in the province of Ontario, Canada, and plans to set up a drug factory there in the next two to three years. As a result of investments of 56 million Canadian dollars, the center will operate as a technological platform to advance the laboratory, the first 100% of national capital to install an R&D unit in another country. Biolab’s interest in Canada is not isolated. In an interview with Valor, Ontario’s commercial consul Todd Barrett said seven of Brazil’s largest pharmaceutical companies, including Biolab, are in talks with the local government for potential investments.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 18, 2017
Amazon looks to raise the bar in Brazilian electronics sales

Amazon Wednesday took its first large step in expanding since it entered the Brazilian market. Since mid-night, the American company began selling 44 items in 5 electronic product categories in its virtual “marketplace,” including TVs, cell phones, games and accessories that are all from highly competitive segments and large chain stores operating in the country. The sales are from stores hosted on the group’s site, which forms the “marketplace” concept. The new service launch has weighed heavily against other competitors in Brazil’s digital commerce segment and brought down shares of B2W, Magazine Luiza and Via Varejo. Amazon began operations in the country in 2012 selling books, and company officials expressed optimism about prospects for continued growth with the new offerings “Beginning with books we learned some things,” said Amazon Brazil General-Director Alexandre Szapiro. “In Brazil it seems the bar is low regarding how consumers are treated. This is what we are looking at in electronics.” In a recent report, BTG Pactual bank analysts estimated that Amazon’s sales in Brazil rose 65% in 2016 over the previous year, to R$200 million.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 18, 2017
Senate overturns Supreme Court ruling and brings back Aécio Neves

Brazil’s senate, by 44 votes to 26, decided to overturn the decision of the 1st Panel of the Federal Supreme Court and allow Senator Aécio Neves (Brazilian Social Democracy Party, PSDB, of Minas Gerais) to resume his activities. Mr. Neves needed the support of an absolute majority of the Senate (at least 41 votes) to retake his legislative role and be released from a nightly arrest. With support also from the Brazilian Democratic Movement Party (PMDB) and Progressive Party (PP), some of the largest in the Senate, and a broad negotiation led by other equally charged senators – such as Renan Calheiros (PMDB, of Alagoas) and government leader Romero Jucá (PMDB, of Roraima) –, Mr. Neves was able to suspend the precautionary measure that had kept him away from Congress since September 26. Government allies even brought lawmakers on medical leave to save the Senator’s term.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 17, 2017
Cade analyst warns of concentration in agricultural inputs segment

Patrícia Samensato, general coordinator of analysis and antitrust for the Council of Administration of Economic Defense (Cade), said on Tuesday that the agency has identified several cases of relevant market concentration in agricultural inputs and has been seeking to intervene to ensure competition in the segment. Ms. Samensato cited as a recent example the rejection of the purchase of Precision Planting by John Deere, which manufactures farm machinery. In case of the acquisition of Vale Fertilizantes by Mosaic, the Confederation of Agriculture and Livestock of Brazil (CNA) and deputies from the farm caucus raised concerns, during a hearing with Ms. Samensato held Tuesday, that the transaction leads to an increase in fertilizer prices in Brazil’s top agricultural regions, mainly in the Central-West.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 17, 2017
JBS suspends operations in 7 slaughterhouses in Mato Grosso do Sul

JBS will suspend operations at its seven cattle slaughterhouses in Mato Grosso do Sul as of Wednesday. The company claims legal uncertainty after having more than R$620 million frozen by a court decision at the request of the Parliamentary Inquiry Commission conducted by Mato Grosso do Sul’s Legislative Assembly, which investigates tax irregularities. In a statement, JBS said that activities in the state, which has the fourth largest cattle herd in the country, will be shutdown for an indefinite period of time. Meanwhile, the Securities and Exchange Commission of Brazil (CVM) shelved an investigation into potential wrongdoing for insider trading by Banco Original, another asset of J&F Investimentos, which controls JBS.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 17, 2017
Cade position hurts prospects for Itaú, XP deal

The decision of the Cade anti-trust court to declare the purchase of XP Investimentos by Itaú Unibanco as complex practically buries the possibility of unrestricted approval, according to information obtained by Valor. Of the 29 cases that have been declared complex by the court since the new anti-trust law took effect in 2012, only five were approved without restrictions. Itaú closed a deal for the purchase of XP in May this year for R$6.3 billion. If the deal is approved by regulators, the largest private Brazilian bank will hold 49.9% of XP’s capital and 30.1% of shares with voting rights. The bank’s stake in the brokerage could increase to 74.9% of total capital and 49.9% of common shares by 2022. In a decision published Monday, Cade requested more information on the case and opened the doors for the possible prolongation of the final timeling for making a decision on the operation. Sought for comment, Itaú and XP declined to make a statement.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 16, 2017
Latam Brasil to invest R$130m in Guarulhos maintenance center

Latam Brasil announced on Monday, in a meeting with President Michel Temer in Brasília, a R$130 million investment in São Paulo’s Guarulhos Airport to build a new maintenance center. The hangar will be used to carry out light inspection and maintenance of all Latam’s aircraft models. The investment will be made under the build-to-suit system, that is, a construction company, to be defined, will deliver the project to Latam in exchange for a long-term lease. More complex maintenance will continue being carried out at the center located in São Carlos, interior of São Paulo.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 16, 2017
Brazilian consumers becoming more politically aware of brands

The stance of brands on social and political issues is gaining increasing clout among Brazilian consumers when it comes to making a choice or even forfeiting purchases. According to media agency Edelman, 62% of consumers interviewed reported they care about a brand’s stance when it comes to picking products, from a global average of 57%. The number of people reporting product boycotts because of a company’s political position has risen 32%. Daniela Schmitz, managing VP of engagement at Edelman, believes the trend derives from today’s skepticism about the country’s institutions. “Companies can’t just focus on selling anymore. People are not accepting neutral companies,” she said. Entertainment and electronics had the smallest level of consumer calls for political awareness, while fashion and social media saw the most prominent calls.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 16, 2017
Itamaraty and Agriculture ministry clash over import quotas

A proposed 750,000-tonne quota for imported wheat is triggering a new clash between the Agriculture Ministry and Brazil’s Foreign Ministry, or Itamaraty, which is expected to reach the Foreign Trade Chamber (Camex). Agriculture Minister Blairo Maggi practically promised the quotas to US officials in return for opening the country’s market to Brazilian beef. Brazil also has a World Trade Organization commitment to set up the wheat quotas, which never materialized as Itamaraty officials refused to create them and even proposed to the US lowering the consolidated tariff to 37.9% from 55%. After Mr. Maggi forwarded the quota proposal to Camex, Itamaraty officials blocked it amid growing irritation with another unilateral decision by Mr. Maggi of restricting milk imports from Uruguay. The disagreements set the stage for a showdown at Camex’s next meeting on October 25.
Source: Valor Econômico S. A.
http://www.valor.com.br/international

October 16, 2017
Brazil will nominate new BRICS Bank representative in two weeks

The Finance Ministry wants to pick a veteran private-sector banker with diplomatic skills but no political affiliation to replace economist Paulo Nogueira Batista Junior at a vice-president post at the New Development Bank, better known as the BRICS Bank. In Washington, Finance Minister Henrique Meirelles said he believes the nomination will be ready two weeks from now. Mr. Nogueira faced accusations of harassment and of violating the bank’s charter by commenting on domestic politics of a member country, in this case, Brazil. He was dismissed on Thursday after a unanimous decision from the bank’s five national partners: Brazil, Russia, India, China and South Africa.
Source: Valor Econômico S. A.
http://www.valor.com.br/international