Unipar (UNIP6) Pagará R$ 72,0 Milhões de Dividendos em Novembro

Unipar Carbocloro has shown interest to Novonor (formerly Odebrecht) for Braskem assets in São Paulo’s Petrochemical Complex, and has also presented a non-binding proposal, Valor has learned. Sources say that the integration of the petrochemical complex in São Paulo to Unipar’s operations is strategic because it grants access to ethylene, the raw material to produce PVC.

In addition, Unipar is capitalized and has breath to face a potential acquisition. In June, the company had net cash assets of R$316.5 million, resulting from a cash position and cash equivalents of R$1.09 billion, higher than the gross debt of R$768.6 million.

Unipar’s interest was manifested to Braskem’s controller as part of the divestment process resumed this year.

Advised by Morgan Stanley, Novonor initially aimed at selling all of Braskem’s operations. But, in this process, there was more interest in specific assets of the company than in the whole.

Because of that, Novonor is also evaluating the possibility of selling the petrochemical company in slices. If this model generates greater return, the parent company will involve Braskem itself and other shareholders, including Petrobras, in the formal discussions.

At this moment, sources say, there are informal talks both with Petrobras and with creditor banks of the private group about the transaction model that will bring more value to the shareholders.

Besides Unipar, other investors have submitted proposals for specific Braskem assets Petrobras is interested in the petrochemical company’s assets in the Southeast, particularly those in the Rio gas-chemical complex, but didn´t make a formal proposal, according to sources.

Braskem’s operations in Duque de Caxias, Rio de Janeiro — one unit for basic petrochemicals and another for the production of polyethylene (PE) and polypropylene (PP) — are modern and are linked to the Duque de Caxias Refinery (Reduc). The state-owned company is also not going to privatize the Capuava Refinery (Recap), in São Paulo state, and could be interested in maintaining petrochemical assets in the complex.

In the past, Unipar had direct access to the ethylene produced at the São Paulo plant, via Petroquímica União (PQU). Today, it buys the input from Braskem. The verticalization of operations would bring important synergies, said a source.

Unipar said “that it has no current proposal with Braskem”. Novonor declined to comment on the matter. In a statement to the market, Petrobras said that “it maintains its position in seeking the full sale of its stake in Braskem and monitors the process of sale of the stake held by Novonor.”

“In the context of active portfolio management, Petrobras evaluates opportunities in the petrochemical segment, as provided for in its 2021-2025 strategic plan, aiming at the integration of its exploration and production and refining activities,” said the statement, adding that no decision has yet been taken about the subject.

Source: Valor international


The fiscal and political risks, as well as the prospect of a close election in 2022, seem to be encouraging exporters to hold their revenues abroad. Data from the Central Bank and the Secretariat of Foreign Trade (Secex) show that the so-called “alligator mouth” – the spread between the exchange rates of exported products and hard currency that actually enters the country – continues to widen or remains at historic highs.

In the face of the steady increase of the Selic policy interest rate and the apparent end of deleveraging efforts of large companies, sources say there are few arguments left to explain the gap besides the fear about the political scenario.

The 12-month spread between shipped exports, disclosed by Secex, and the contracted exchange rate for exports, informed by the Central Bank, jumped to $45.2 billion in August 20 from $34 billion in May. Another way to do the math, using only balance of payments data, which are updated monthly, shows this gap at $26.9 billion in July, also near all-time highs.

“Comparing the Secex data with those of the Central Bank seems methodologically incorrect to me” since they contain substantial differences, said Marcello Curvello, currency manager of ASA Hedge Multimercado. “Even so, both figures still point to the same direction.”

Mr. Curvello expected this gap to strongly narrow in 2021, which has not materialized so far. As a result, he cut his projection for the balance of the foreign exchange flow in the year to $25 billion from $44 billion. “The great nemesis of this downward revision” was the spread between the exchange rates of exported products and hard currency inflows, he acknowledged.

Although revenues from Brazilian exports are expected to hit all-time highs this year, not all of these funds come here. Since 2006, when the Central Bank started to remove mandatory currency hedging requirements, some exporters started to keep part of their hard currency abroad and use it to pay suppliers, for example.

In their forecasts for the foreign exchange rate in 2021, many market players foresaw that a narrower gap would strengthen the real – exports are at record levels, but only the funds that actually enter the country affect the exchange rate. The argument was – and still is – that the “alligator mouth” is the result of many factors that were running out of steam. Among the main ones are the maintenance of the Selic rate at ultra-low levels and the deleveraging of companies abroad.

Pointed out as one of the main factors behind this process – as the Central Bank itself pointed out in 2019 – the Selic has been on the rise since March and market expectations for the level of the rate at the end of the tightening cycle have only advanced since then. The deleveraging process of companies abroad seems close to an “optimal” point, said Mr. Curvello, with ASA Hedge. Oil giant Petrobras, which accounts for most of this movement, delivered virtually the entire deleveraging target for 2021 already in the second quarter.

Another explanation for the wider spread is the fact that in the first half of 2020 many companies took advantage of a higher exchange rate to bring forward export revenues and ensure liquidity to face the Covid-19 crisis. As a result, “it was natural that there would be a new gap” between the exchange rates “in the following months,” said

Iana Ferrao — Foto: Divulgacao/BTG Pactual

Iana Ferrao — Foto: Divulgacao/BTG Pactual

, an economist with BTG Pactual. “I can’t say exactly how much of that has already been paid, but one would expect this issue to be temporary. I don’t believe that this factor explains the alligator mouth on the margin,” she said.

Considering the favorable Selic rate and companies’ moves to deleverage and bring forward revenues in theory near the end, the risks remain as the possible factor for the spread. “The greater perception of fiscal risk, after the surprise on the issue of court-ordered payments, may be contributing to this movement, besides the caution in relation to the elections, which has been accelerated,” Ms. Ferrão said. This fear, she points out, has been relevant even in the face of the better economic results reported in the last few months.

Source: Valor international


The first paper machine of the Puma II project, the largest investment in Klabin’s history, went into operation on Monday. Installed in Ortigueira, in the state of Paraná, the machine named MP 27 has a capacity of 450,000 tonnes per year of Eukaliner packaging paper and should produce more than 100,000 tonnes this year already.

The company has already started the works for the second machine of the project, which comprises a total investment of R$12.9 billion until 2023 – so far, Puma II has received more than R$6.5 billion. The two new machines will be supplied by the Finnish company Valmet.

At its debut, the MP27 will encounter encouraging market conditions – fair supply, heated demand in Brazil and in the international market, besides prices on the rise. In addition, Eukaliner is better suited for making lightweight boxes and offers better print quality, important requirements for packaging used in e-commerce, which has been leveraged by the Covid-19 pandemic.

“The moment in the packaging paper market is very favorable, which made it possible to sell 100% of the production volume in advance,” says the director of Klabin’s paper business, Flavio Deganutti.

Innovative, Eukaliner is the first kraftliner in the world obtained exclusively from eucalyptus pulp, which confers a weight gain of around 10% in relation to conventional pulp. For this reason, it will be negotiated with a premium of 5% to 10% compared to traditional kraftliner prices.

According to Mr. Deganutti, in the first month of operation, the goal is to produce brown Eukaliner, and then white. Sales will be balanced between the domestic and export markets, with an initial mix of 35% and 65%, respectively, and part of the production should be converted into boxes and packaging by Klabin itself.

The additional supply is not expected to impact prices, because the capacity of MP27 is relatively small compared to the 170 million tonnes of the global market.

Initially, Klabin had planned to start operating the new machine in the second half of July, but technical issues led to the postponement until now. The MP 27 is integrated with a production line of unbleached pulp.

According to Klabin’s director of Industrial Technology, Innovation, Sustainability and Projects, Francisco Razzolini, a good part of the common structure, which will also serve the second machine of Puma II, has already been executed.

In November the gasification plant will start up. It will use biomass to replace fossil fuels. In the first quarter, the line will bring self-sufficiency in sulfuric acid, obtained from the capture and treatment of gases from the production process. “There will be a gain in energy efficiency and a reduction in the use of water, and all the energy generated will be used in the new project,” says the executive.

The second machine in Puma II, the MP 28, will be dedicated to card production and will start operating at the end of the second quarter of 2023. Today, the cartonboard market is even tighter than that of kraftliner, and Klabin has already started conversations to sell the production. MP 28 will have a production capacity of 460,000 tonnes per year.

Source: Valor international


Economic Growth - ESID

The Brazilian economy grew across the five regions in the second quarter, according to figures from the Central Bank’s Regional Economic Activity Index (IBCR) surveyed by Valor using the historical series of the monetary authority. The comparison is made with the first three months of the year, in the seasonally adjusted series. The Central Bank officially releases this Thursday the numbers for the second quarter in the Regional Bulletin.

In the period from April to June, the strongest increase in the IBCR was seen in the North region, with a growth of 2.36%, followed by the Central-West (1.88%), Southeast (0.69%), Northeast (0.54%) and South (0.16%).

“Trading and services were the main driver of the regions’ economic performance,” said Paulo Eduardo Pereira, analyst at 4E Consultoria.

He points out that the North was the only region in which there was a drop in economic activity in the first quarter of this year compared with the last three months of 2020.

“The base of comparison was low,” he said, highlighting that several municipalities in the region were hit hard at the beginning of the year by the pandemic, which forced a large number of stores and services to suspend activities.

New emergency aid payments were another factor that boosted economic activity in both North and Northeast during the second quarter, says Mr. Pereira.

The Southeast, Brazil’s most populous and wealthiest region, saw its economy negatively impacted by the agribusiness performance “below the expected” caused by climatic factors. According to the analyst, the tendency is that these factors will continue to damage the economy of the Southeast in the third and fourth quarters, harming mainly the coffee, sugarcane, cotton and orange crops – all “very important for the region.”

For the second half, Mr. Pereira expects that the five regions will benefit economically from the advance of vaccination. The analyst points out that, unlike 2020, services should be boosted by immunization, while sales should lose prominence. Last week, 4E Consulting revised upwards its projection for the growth of GDP this year, to 5.3% from 4.5%.

Source: Valor international


corn | History, Cultivation, Uses, & Description | Britannica

The Brazilian grain output should find the path to growth and reach new all-time highs in the 2021/22 harvest, whose planting period is in its initial phase, driven by the recovery of corn and investments by producers in their crops amid high prices.

The harvest should total, in the average scenario outlined by the National Supply Company (Conab), a record 289.6 million tonnes, up 14% from the 2020/21 cycle, which should end with a slight decrease compared to the previous one. In the worst-case scenario, projected by the state-owned company, Brazil will reap 269.6 million tonnes; in the best-case scenario, 301.8 million tonnes.

These figures are the result of increases expected both for the planted area and for productivity. In the average scenario, the area should increase by 4%, to 71.4 million hectares, and the average yield, damaged by the harsh climate in 2020/21, tends to grow 10%, to 4,058 kilograms per hectare, according to Conab.

For soy, the flagship of the Brazilian agriculture industry, Conab foresees a record harvest of 141.3 million tonnes, up 3.9% from last year. The area should increase 3.6%, to 39.9 million hectares, and productivity should be 0.3% higher.

For corn, the grain most affected by the weather last season, the state company estimates a total harvest of 116 million tonnes, a new record that will reflect advances of 3.9% in areas, to 20.6 million hectares, and of 28.8% in productivity. The highlight is the expected recovery of the second yearly crop, which in 2021/22 should recover and increase by 44.7%, to 87.3 million tonnes.

For rice, Conab projects a total harvest, in the average scenario, of 11.8 million tonnes, up 0.4% from 2020/21. For beans, the expected production is 3.2 million tonnes, up 8.1%. For cotton lint, the volume should reach 2.7 million tonnes, up 15.8%.

Source: Valor international



China, the main destination for Brazilian agriculture exports, still holds good opportunities for the industry, as long as tariff and non-tariff barriers for some products are overcome. Corn, whose production is growing in Brazil, is among the candidates to strengthen sales dominated by soy, meat, pulp, sugar, tobacco and cotton. The grain is already gaining prominence in Chinese imports.

This scenario is explained by a recent study by the Applied Economics Research Institute (Ipea) and the Chinese Academy of International Trade and Economic Cooperation (Caitec), which outlined pillars and opportunities for bilateral trade relations. The work by researchers Marcelo José Braga Nonnemberg, Uallace Moreira Lima, Mateus Azevedo Araujo, Fernanda Pedrosa and Scarlett Queen Almeida Bispo is scheduled to be published this week.

Agricultural exports to China totaled $27.9 billion from January to July, or 38.4% of all Brazilian exports, data from the Ministry of Agriculture show. The share grew with the advance of soy and meat shipments. Brazil is already a large foreign supplier of agribusiness products to the Chinese market, but it can expand further: besides corn, Ipea and Caitec have found opportunities for Brazil in the trade of fruits (fresh and canned), fish, crustaceans, vegetable juices and extracts, among others.

In these segments, in which Brazil has an exportable surplus and China is an importer, however, there are tariff barriers to overcome, considering that competing countries have agreements with Beijing that guarantee zero tariffs for their products. Government and private sector are aware of the obstacles and trying to lift them, but there are few signs of real progress in the short term.

Then corn comes into play, along with the needs of China, which will certainly play a role. The Asian country’s food security plans include the expansion of domestic production of pork and chicken. Although it was a corn-exporting country until a few years ago, China, with its growing demand, is already expected to import 26 million tonnes of corn in the 2021/22 harvest, according to estimates by the U.S. Department of Agriculture (USDA). The country’s gigantic corn output will approach 270 million tonnes.

For now, Ukraine and the U.S. are the largest suppliers of corn to China, but the increasing imports from the Asian country should bring an important market share for the Brazilian grain. “Corn stands out among the products of which Brazil is a great exporter and China imports a lot,” economist Marcelo Nonnemberg said. But to unlock this door, it is necessary to sign phytosanitary agreements. From the supply standpoint, Brazilian agriculture is fertile, since there are still large areas available for the second yearly crop, sown after the soybean harvest.

Already driven by the second crop, Brazilian corn exports should total 43 million tonnes in 2021/22, according to the USDA. The volume is lower only than that estimated for the U.S. (61 million), and exceeds by 7 million tonnes the projection for Argentina.

Last year, Ukraine accounted for 55.8% of China’s corn imports, according to the report “China Agricultural Outlook – 2021-2030,” published last week by the National Confederation of Agriculture (CNA) and Investe São Paulo, the investment promotion agency of São Paulo state. U.S., Laos, Myanmar and Bulgaria are also in the list of the five largest suppliers. Chinese imports totaled 11.3 million tonnes in 2020, up 135.8% year over year – already a record.

Source: Valor international


DTZ | NewsPetrochemical Industry Day

The Brazilian petrochemical industry is going through a new consolidation cycle and is expected to draw foreign capital – unlike most other economic sectors in the country. The shift reflects, to a large extent, the growth difficulties faced by traditional groups after the stimulus to the so-called national champions.

Braskem, for example, was the result of this model with the formation of a partnership between Petrobras and Odebrecht (now Novonor). Furthermore, there were structural problems that undermined the sector’s competitiveness in recent years.

In addition to the sale of Novonor’s 38.3% stake in Brazil’s largest petrochemical company, the Geyer Abubakir family, Unipar’s controlling shareholder, has hired Essentia Partners and is considering combining its assets with a rival or attracting a private equity fund. Asset manager Apollo presented the holding company a proposal for the asset before the Geyer family sought an advisor.

Petrobras is also selling its almost 28% stake in the Deten chemical company and may get rid of Copenor, a petrochemical company. Meanwhile, Unigel, owned by the Slezynger family, has filed for an IPO to raise $500 million, sources say.

The expectation is that, in the next 12 months, mergers and acquisitions in this sector will total $23.4 billion, sources say. The figure includes the value of Novonor’s slice in the petrochemical company – excluding premium payment for the sale of the business – and the estimates of how much Unigel can raise with the IPO and a possible combination of assets of Unipar. The combined amount may reach R$40 billion, should Petrobras decide to sell its stake in Braskem, also without considering the premium.

The main bet is that private equity funds with historical bets in the sector and foreign chemical groups strong in the global market will play a prominent role in the reorganization of the local industry. The most recent example is the acquisition of Oxiteno, which belonged to Ultra, by the Asian group Indorama, for $1.1billion.

The challenges to the new players will not be few. According to a businessman of the sector, many Brazilian petrochemical companies are in their best shape in terms of results and operation, but macroeconomic and political instability weighs on negotiations.

“To a good extent, the industry has done its part to ensure competitiveness, and this attracts investors. But some issues are beyond our reach and end up hindering the fair valuation of assets,” said the businessman, who spoke on condition of anonymity. The absence of structural reforms – such as a tax overhaul, which would reduce the costs of industrial production in the country – and the slower-than-expected pace of the opening of the natural gas market are used as a bargaining chip by potential investors, added the source.

For the founding partner of the consultancy Maxiquim, João Luiz Zuñeda, the petrochemical industry is in the last chapter of a book. Investment funds and multinationals with operations in the sector will be the main characters of the story from now on, which according to him proves that foreign investors once again have an appetite for the Brazilian chemical industry.

This shift of characters poses some risks, though, Mr. Zuñeda said. Initially, these “entrants” are buying “market share” – and Brazil is the sixth largest country for the chemical sector in the world. And they will only make new investments in Brazil if conditions are favorable. “Most of these companies are global, with plants around the world and overcapacity abroad. If it is not attractive, they will not invest to expand their operations further. They will just keep the market,” he said.

The changes of the petrochemical industry are directly linked to Odebrecht’s exit due to the group’s difficulties after the anticorruption task force Car Wash. Petrobras, its partner, hired J.P. Morgan to evaluate the strategic options it may have with its 36.15% stake in Braskem. Novonor, which is advised by Morgan Stanley, has not yet received a firm offer for the sale of its stake.

There has been more interest from potential buyers for certain assets than for Braskem’s full operation – and the initial expectation of fiercer competition for the company has not yet been confirmed, Valor found out.

There are three possible scenarios: the set of assets may be acquired by an investor or consortium of investors; operations could be sliced to be sold by region; and an exit through a secondary offering. The model may be defined in coming weeks, sources say.

The petrochemical company’s two largest shareholders, Novonor and Petrobras, have been holding informal talks about the format that will bring more value to their stakes. Creditor banks of Novonor are also participating in these discussions. In case the best option is to sell shares on the stock exchange, provided that the prices are trading at near all-time highs, the petrochemical company would first migrate to the so-called Novo Mercado – the strictest governance segment of B3 –, a process that will require about four months, a source said.

Besides Braskem’s stake, Petrobras plans to get rid of its stakes in Deten, the Brazilian market leader in biodegradable detergent inputs, and Copenor (Companhia Petroquímica do Nordeste). In Deten, the sovereign wealth fund Mubadala is seen as the main interested party in the 28% stake in the business – the Abu Dhabi-based asset manager already controls the company through Compañía Española de Petróleos (Cepsa). Bank Santander is advising the state-owned company in the sale process. The divestment in Copenor is in its initial phase.

Petrobras’s exit from the sector may be temporary, said Mr. Zuñeda, with Maxiquim. “Now the focus is on the deep-water oil. But I don’t rule out that, later on, Petrobras will look at petrochemicals again, as other oil companies are doing.”

Two other traditional Brazilian companies, Unigel and Unipar, want to take advantage of the good moment of the petrochemical cycle to raise capital from new partners. Unigel has already hired banks for its IPO after a failed attempt in 2017, and is waiting for the best scenario to go public.

Vila Velha Administração e Participações, parent company of Unipar Carbocloro, has been sought by private equity funds and chlorine-soda and PVC industries. Valor also found out that the preference of the holding company owned by businessman Frank Geyer Abubakir is to draw investors and stay in the business as a controlling shareholder after a possible merger.

Mubadala, Novonor, Petrobras and Unigel declined to comment on the matter. Unipar and Apollo did not reply to a request for comment.

Source: Valor international


Age of Asian passport power | TTR Weekly

After several years of freezing or shrinking Brazil’s diplomatic missions abroad, with the closing of embassies opened during the Workers’ Party (PT) administrations, Brazil’s Foreign Ministry, known as Itamaraty, plans to expand its network again. The plan is to open three or four consulates-general and consular offices in 2022.

To make new missions possible, Foreign Minister Carlos França asked the economic team for a budget of almost R$2.3 billion for the next year. This year, the Itamaraty has R$ 1.7 billion – not counting mandatory expenses, such as salaries. About 90% of this budget is executed in dollars.

Two new consulates are to be created in the United States and China, in cities known as technological development and innovation hubs where important companies are based.

One will open its doors in Chengdu, in Sichuan Province, one of the high-tech regions of the Asian country. Today, besides the embassy in Beijing, Brazil has consulates in Shanghai and Guangzhou.

In the United States, although the final decision has not yet been made, Seattle has the best chances of receiving the new diplomatic mission for being home to industrial and technological heavyweights like Microsoft, Amazon, Boeing and Expedia.

According to Foreign Ministry’s aides, the choices reflect more pragmatic diplomacy, focused on attracting investments and economic partnerships. They see no relation with the fast opening of missions abroad seen during Luiz Inácio Lula da Silva and Dilma Rousseff administrations (2003 to 2016).

At the peak of these previous administrations, Brazil had a network of 223 diplomatic missions – including embassies, consulates, offices and missions in international organizations. During the period, there was a significant expansion of diplomatic missions in Africa and the Caribbean.

This wider network was seen as key not only to support the internationalization of Brazilian companies and to strengthen commercial ties, but also to increase the chances of success in the country’s campaigns abroad, which could range from the election to head multilateral entities (such as WTO and FAO) to the dispute to host the Summer Olympic Games. Brazil also had as a priority getting a permanent seat on the United Nations Security Council.

The Bolsonaro administration closed eight missions, including seven embassies. Five of them were located in the Caribbean (Saint Kitts and Nevis, Saint Vincent and the Grenadines, Antigua and Barbuda, Dominica, and Grenada) and two in Africa (Sierra Leone and Liberia). The consulate-general in Mexico City was also closed down, and now operates jointly with the embassy in the country.

In the new expansion plan, besides Chengdu and probably Seattle, two consular offices (with leaner structures and without the same degree of autonomy of the consulates-general) should be opened. One is planned for Orlando, Florida, in order to relieve the burden on the consulate in Miami and speed up services to Brazilian citizens facing loss of passports and immigration problems, for example.

The other office would be in Jerusalem, where evangelical tourism had been skyrocketing before the pandemic, generating this same type of demand. In addition, the opening of the mission would support the government narrative that the embassy in Tel Aviv has not yet been transferred to Jerusalem, as Mr. Bolsonaro promised in the 2018 presidential campaign to please his voters, but some steps are being taken. The Brazilian Trade and Investment Promotion Agency has already set up a commercial office in the city.

If Mr. Bolsonaro is reelected, Minister França plans to open other missions starting in 2023. On the list is a new consulate in the United Kingdom as all activities are now concentrated at the embassy in London and the Brazilian community has grown in the country.

The construction of a new Brazilian embassy in Beijing is also in the plans. The current building, inaugurated as a diplomatic mission in 1974, is located in an older area of embassies in the Chinese capital and far from where the missions of the United States, Canada and European countries are located today. “It looks more like a house that used to be big and had some small buildings added on to become an embassy,” one diplomat says.

Source: Valor international


The relative stability expected for the Brazilian economy in the second quarter of this year reflects the heterogeneity of sector dynamics in Brazil, with industry and agriculture feeling the negative shocks, while services benefit from the reopening of business. These movements are expected to continue through the second half of the year, which, despite representing continuity in the recovery, is not exempt from risks that are already clearer for 2022, such as worsening financial conditions and the water crisis.

The median of the projections of 61 financial and consulting firms consulted by Valor points to an increase of 0.2% in the GDP between April and June 2021 compared with the first quarter, when activity surprised and rose 1.2%. In the comparison with the same period in 2020, the expected growth is 12.8% due to the low base of comparison. The official data from the National Accounts will be released by the Brazilian Institute of Geography and Statistics (IBGE) on September 1. For 2021, a 5.3% increase is expected.

Estimates for the second quarter GDP range from a drop of 0.3% to a rise of 0.8%. Consulting firm Tendências recently revised its projection to -0.1% from 0.1%, in seasonally adjusted terms, but maintained the assessment that it will be a relatively stable level, resulting from very different behaviors among GDP components.

On the supply side, agriculture and industry are expected to show contractions of 2.5% and 1.5%, respectively, after increases of 5.7% and 0.7%, respectively, in the first quarter. Services, on the other hand, should accelerate to 0.9% from 0.4%.

Tendências notes that the expected drop in agriculture should be more intense than initially forecast, with weather effects damaging especially the corn crop. The industry, in turn, is going through a delicate moment, with the disorganization of the global chains restricting inputs and pressuring prices, problems intensified in Brazil by the increase in the cost of energy and by the upward revision of interest rates.

The industry’s performance would be worse were it not for the extractive and construction segments, highlights Lucas Maynard, economist at bank Santander, which projects a 0.2% increase in the second quarter’s GDP, but a 2% drop in industry, in the seasonally adjusted series. While construction shows “resilience,” he says, the extractive industry may not maintain the same pace in the second half, although it is expected to continue to contribute positively to the sector as a whole.

“Leading indicators [from the third quarter] and news from the sector indicate a loss of strength in the industry. This is one reason for our GDP projection [in 2021] to be closer to 5% than to 6%,” says Thiago Xavier, economist at Tendências.

In the case of services, the second quarter represented only the beginning of a more consistent process of recovery after the second wave of Covid-19, which raised social restriction measures between March and April. “Circulation rates fell, but they came back fast,” said Igor Velecico, chief economist at Genoa Capital, which projects growth of almost 1% for services, compared to the first quarter, and a 0.3% rise in GDP between April and June.

A good part of the effects of the reopening of the economy, reflected precisely in services, will be captured by the third quarter, says Flavio Serrano, chief economist at Greenbay Investimentos. He sees an advance of only 0.1% for the GDP in the second quarter, but a high of 0.7% in the third. Mr. Velecico estimates that around 1.5 percentage point of economic recovery should still appear in the GDP in the second half. “The second quarter was just the beginning of that process.”

On the demand side, the median expectation of analysts is that household consumption will advance by 1.2% in the second quarter, and government consumption by 0.8%, compared to falls of 0.1% and 0.8% in the three months immediately before. The Gross Fixed Capital Formation (GFCF) – a measure of how much is invested in machines and equipment, civil construction, and research –, which grew 4.6% in the first quarter, should retreat 2.2% in the following quarter, amidst the uncertainties with the pandemic in the period.

Source: Valor international


The Supreme Federal Court (STF) voted 8-2 on Thursday to keep valid the law that instituted the autonomy of the Central Bank (BC). For most justices, there was no formal defect in the way the bill was passed by Congress.

The votes of justices Luís Roberto Barroso, Dias Toffoli, Nunes Marques, Alexandre de Moraes, Edson Fachin, Carmen Lúcia, Gilmar Mendes and Luiz Fux prevailed. The rapporteur, Justice Ricardo Lewandowski, and Justice Rosa Weber were defeated. The STF has one less member since the retirement of Marco Aurélio Mello.

The controversy lies in the fact that the bill initiated by the federal government — which would have exclusive competence for this type of regulation, according to opposition parties — was joined to a similar one, authored by Congress, and only the latter was voted by the Legislative.

Justices Lewandowski and Weber understood that, by keeping valid a law that was not properly processed, a dangerous precedent would be created, possibly provoking an “undesirable turmoil” in the management of public administration, which would be subject to the “changing moods” of parliamentarians.

The rapporteur, who voted in the Wednesday session, limited himself to pointing out the formal unconstitutionalities that he considers having occurred in the processing of the bill, without addressing the merit of the effects of the Central Bank’s autonomy for the country’s economy.

On Thursday, in the continuity of the trial, only the deputy chief of the court followed his vote. For Justice Rosa Weber, the matter “is, indeed, of the exclusive initiative of the president.” Therefore, the bill by senator Plínio Valério (Brazilian Social Democracy Party, PSDB, of Amazonas) could not have been signed in law.

However, the majority defended that the bill made its way through Congress in a regular way and that the version signed in law in February by President Jair Bolsonaro is constitutional. There were specific differences between them, but the general conclusion was the same.

For Messrs. Barroso, Toffoli, Marques, Fux and Mendes, for example, the matter was not the exclusive competence of the President of the Republic, since the law does not deal with the legal regime for civil servants, nor with the creation or extinction of public bodies.

Justices Moraes, Fachin and Lúcia disagreed on this point but stated that the defect of the initiative was overcome by the fact that Mr. Bolsonaro had sent to Congress a bill practically identical to the one that was already underway, which reveals his political interest in the topic.

Furthermore, for justices who voted for the confirmation, the way Congress interprets and applies its internal regulations and rules is not subject to interference by the Judiciary and although the issue is controversial, that is a political choice made by Congress, which the court must defer to.

Although the debate was mainly about formal issues, some justices spoke about the importance of the Central Bank functioning with a fixed four-year term for its president and directors.

One of them was Justice Marques, for whom the measure is a “requirement for confidence in international relations” and a “strong indication of transparency, accountability, and governance,” fundamental to maintaining “a stable economic environment favorable to the country’s growth.”

Citing the example of the United States and European countries, he added: “This will attract investment and, therefore, greater economic development to society. The autonomy generated by the existence of fixed mandates is analyzed internationally as an essential factor for the economic development of democracies in the world.”

Chief Justice Luiz Fux, the last one to vote, was succinct in his manifestation for the validity of the law. Before the session, however, during an event promoted by XP Investimentos, he gave a “spoiler” on how he would position himself: he stated that the alleged defect of the initiative was “a defect of minor importance.”

“Central Bank deals with monetary and financial policy and must have a transnational vision and act with total independence. This is a fair demand of the market today, and, in my view, one that should be met,” he says.

The lawsuit had been filed in February by the Workers’ Party (PT) and the Socialism and Freedom Party (PSOL), for whom the autonomy of the Central Bank could harm the economy in the face of a lack of coordination of monetary and fiscal policies.

In a rare disagreement within the government, the Attorney General, Augusto Aras, defended that the law had formal defects capable of bringing legal insecurity and harming the market.

Federal Attorney General Bruno Bianco said it was not possible to talk about defect of the initiative because Mr. Bolsonaro was actually “co-author” of the approved bill.

Source: Valor international