Fiocruz report shows success of vaccination against COVID-19

Published in 08/10/2021

Scientists say, however, people should continue to take precautions

The COVID-19 Observatory Report, published Thursday (Oct, 7) by the Oswaldo Cruz Foundation (Fiocruz), shows that the success of the vaccination in preventing serious and fatal forms of the disease is reflected in the number of cases and deaths, as well in the steady ICU occupancy rate for adults in public hospitals, low in most states.

Fiocruz researchers believe, however, that people must be careful and continue wearing masks and observing other preventive measures, like keeping hands sanitized and social distancing, as the rate

The recommendation was made as the home permanence rate has been near zero since July, which means people are circulating on the streets at a rate similar to pre-pandemic levels.

Despite the large number of immunized people, vaccines do not completely prevent infection with, or transmission of, the virus, the document points out. As a result, experts sill advocate social distancing and preventive measures, as well as the adoption of the vaccine passport until the country reaches the ideal level of vaccine coverage.

Activities involving a large gathering of people should only be carried out with proof of vaccination, the scientists believe. They also argue that it is still not reasonable to “talk about concrete estimates as to when the pandemic is likely to be over,” adding that the necessary measures must be maintained for the pandemic to end as quickly as possible.


As it stands today, the mortality rate for COVID-19 fluctuates near 500 cases a day. The document reports a steep decline compared to the peak observed in April, when more than 3 thousand deaths were registered daily. Despite the retraction, the figures still show that transmission lingers on, as well as the incidence of severe cases that require intensive care.

Over the course of last week, authorities confirmed 16,500 cases of COVID-19 and 500 fatalities from the disease per day. According to the report by Fiocruz, this shows a slight increase in cases (0.4 percent a day) and a reduction in the number of deaths (0.7 percent a day). The circulation of people on the streets and positive diagnoses remain high, nonetheless.

The report also indicates that, in most Brazilian states, according to data collected on October 4, COVID-19 ICU occupancy rates for adults in public hospitals show relative stability, with levels below 50 percent.

American Airlines to double Brazil-U.S. flights in December

Company highlighted demand for tickets are already high, in spite of lack of definition about which vaccines will be accepted

American Airlines will more than double the number of flights departing Brazil to the U.S. by December as the U.S. government announced that it will open its borders to vaccinated tourists from November.

Alexandre Cavalcanti — Foto: Leo Pinheiro/Valor

Alexandre Cavalcanti

The company now operated 16 weekly flights, but will reach 38 by the end of the year, said Christine Valls, managing director for Latin America, Caribbean and Florida, and Alexandre Cavalcanti, commercial director for Brazil.

“We see potential and demand,” said Mr. Cavalcanti, affirming the airline’s commitment to Brazil, which has been served by the company for 31 years. Among the expansions are the Guarulhos-New York route, which will have a daily flight at the end of this month, compared to three weekly flights currently, and Guarulhos-Miami, which will have ten weekly flights in November — today there are seven.

Before the sector virtually stopped because of the Covid-19 pandemic, the company operated, in total, 50 weekly flights between Brazil and the United States. However, three routes — São Paulo-Los Angeles, Brasília-Miami and Manaus-Miami — were closed (the first two unrelated to the health crisis). Excluding the 15 weekly flights on the three closed routes, the company will surpass the pre-pandemic level by December this year.

The executives highlighted that there are still doubts about which vaccines will be accepted when the U.S. open its borders. Even so, the demand for tickets is already high. In Brazil alone, search of tickets grew 125% compared to September 13 and September 20 (the day of the announcement), said Mr. Cavalcanti.

“The recovery in the Caribbean was relatively quick because many Americans were taking short trips to Florida, the Caribbean or Cancun,” said Ms. Valls, adding that the company already has 29% more flights in Mexico than it had in 2019. In Colombia, the airline doubled its capacity compared to the pre-crisis period, especially after launching new routes, such as New York and San Andrés.

The executive explained that the company ended up benefiting from the trips in the so-called “vaccine tourism,” in which people flew to the United States to get vaccinated. “We fly through Miami to most destinations in Latin America.”

The biggest challenge today is corporate travel recovery, although there is some volume today. “Big corporations haven’t returned yet and we don’t expect them to fully return until 2024,” Ms. Valls said.

American Airlines reported a $2.07 billion net loss in the second quarter of 2020, compared to a $662 million profit in the same period last year, with the pandemic still complicating results, especially the Delta variant.

In addition to expanding flights, the group took a step further in the Brazilian market by announcing, last month, a contribution of $200 million to Gol, which gave them the right to a seat on the board of Brazil’s largest airline. The step was an extension of a “codeshare” agreement started in February 2020.

Asked if there is room for expansion of this partnership, such as the creation of a joint venture with Gol, Ms. Valls did not rule it out, but said that new steps will take a while to happen. “We closed the deal and we have to feel it, see how it goes.”


Failed auction highlights new cycle for oil companies

Shell, Ecopetrol will pay R$37m for five blocks, the second-lowest in nominal values since round in 2003

By attracting only two companies and negotiating five of the 92 assets for sale, the 17th round of exploratory block bids, held last week by the National Petroleum Agency (ANP), became the weakest auction under the concessions regime in the country’s history in number of participants and areas negotiated.

The round interrupted a sequence of auctions that attracted major global oil companies since 2017, and shows that the Brazilian oil and gas industry will start to see more modest bids from now on, except the pre-salt rounds.

Amid the absence of Petrobras, Shell took the lead in the round. The multinational company bought all five blocks negotiated, four of them alone and one in partnership with Colombian Ecopetrol. There was no competition or premium on the signature bonus for any of the assets. In total, the two companies will pay a bonus of R$37.14 million to the federal government, the second-lowest level for a licensing round of ANP in nominal values, behind only the 5th round, in 2003, which raised R$27 million. For comparison, the last three bids under the same regime raised a combined R$20.7 billion between 2017 and 2019.

Aside from Santos Basin, none of the three basins included in the bidding (Campos, Pelotas, and Potiguar) received offers. The low number of areas negotiated was expected, although the small number of participants fell short of the modest expectations for the round. According to analysts, cyclical and structural aspects help explain the poor result: the favorable momentum of oil prices has been overshadowed, analysts say, by factors like the environmental sensitivity and the higher exploratory risks involved in the blocks offered; by Big Oil’s focus on energy transition; and by high investments these companies made in Brazil in the last years.

The 17th Round may mark a new cycle of auctions in Brazil, after the intense bidding calendar implemented since the Temer administration, in 2017. The most coveted areas, with potential for pre-salt, have already been practically all bid for over the past few years. There are still a few exceptions in the pre-salt, such as the surplus of the transfer of rights of the areas of Sépia and Atapu, which will be auctioned under the production sharing system in December and involve signature bonuses of R$11 billion.

This does not mean that oil companies have lost interest in Brazil. On the contrary, companies currently have a portfolio full of projects in the country. The expectation, however, is that the concession rounds will increasingly focus on new frontiers, areas without proven discoveries yet, with greater exploration risks involved and, therefore, less attractive.

This was the case of Thursday’s auction, especially in the bidding for the Pelotas and Potiguar basins, which, besides being less known, were at the center of campaigns by environmentalists against the exploration of the areas. On the eve of the round, there was pressure against the offer of areas near Fernando de Noronha and Atol das Rocas, off the coast of Rio Grande do Norte.

“The auction was considered aggressive to the environment and companies did not want to be associated with this image,” said Henrique Jäger, a researcher at the Institute for Strategic Petroleum Studies (Ineep).

The growing efforts of the big global oil companies with the energy transition have also squeezed the available budget for exploration activities. Now, in companies like Shell, Total Energies, BP and Equinor, oil projects compete for capital with investments in solar and wind.

Besides this, there is a pragmatic aspect, said Giovani Loss, a partner at Mattos Filho Advogados law firm. With the history of difficulties of companies in licensing new exploratory frontiers, oil companies are cautious about making new investments in these areas. “The government still doesn’t understand that the environmental risk has to be shared with the companies. The oil companies are not willing to take this risk, to pay for nothing [for blocks that in the future may not obtain an environmental license],” he said.

Even in the Campos and Santos basins, both “darlings” of the oil companies in recent bids and which are better known geologically, ANP has auctioned assets that are more and more distant from the coast and with increasingly higher exploration risks, including, for the first time, blocks beyond 200 nautical miles, in Santos, on the extension of the Brazilian continental shelf. In the end, the novelty did not attract interest.

According to Marcelo de Assis, head of upstream research for Latin America at Wood Mackenzie, the lack of interest from oil companies in the Campos Basin can be partly explained by the fact that the large multinationals have invested heavily in the acquisition of assets in the region in past auctions without having had a very clear return yet on the real potential of the area.

In addition, the auction of the transfer of rights surplus of Sépia and Atapu is scheduled for December. “It is possible that some companies have saved resources for the auction. Petrobras, for example, has already expressed interest in the two assets,” Mr. Assis said.

Anderson Dutra, an energy and natural resources partner at KPMG, points out that other opportunities for acquiring assets in Brazil, such as the divestment program of Petrobras and the permanent offer – ANP’s “on demand” bidding – may have reduced interest in the round.

The oil companies are coming from a financially difficult year as international oil prices plummeted in 2020. In 2021, the picture is much more favorable. The cash recovery of oil companies, however, has been directed, in many cases, to the distribution of dividends to draw investors increasingly averse to fossil fuels.

The general director of ANP, Rodolfo Saboia, resorted to the 2020 crisis to downplay the companies’ absence, and said the auction was a success. “Companies are recovering from a difficult period and are very selective in their investments”, he told reporters.

The plan, now, is that the unsold blocks enter the portfolio of assets in the permanent offer, waiting for a more favorable moment in the future. “With the pandemic scenario better defined, with more consistent global economic growth indicators, we can have these same blocks included in the permanent offer and acquired later.”

For Mr. Loss, the permanent offer allows for faster responses to oil companies concerning changes in the market. He believes the government was wrong in timing the 17th Round. “We are still in the middle of the pandemic, we are still experiencing instability, doubts about the delta variant, for example. Months ago, when companies began to decide on participation in the auction, the scenario was more uncertain,” he said.

Bento Albuquerque — Foto: Claudio Belli/Valor

Bento Albuquerque

Regarding the environmental risks of non-negotiated areas, Mines and Energy Minister Bento Albuquerque stated that the reasons for the low participation of bidders will still be duly evaluated by the government and that the success of the auctions in recent years confirms the attractiveness of the Brazilian market.

The Brazilian Petroleum Institute (IBP) highlighted that the result of the 17th Round shows that the search for a more stable business environment is key. Although without making direct references to the tax overhaul, the oil companies fear that the bill making its way in Congress will impact the industry. IBP defends the security of the legal, fiscal and environmental framework. Regarding new frontiers, it called for “a regulation compatible with the stage of each basin.”


Banco Inter to list shares in U.S. market

Bank will no longer have shares or units traded on B3

Banco Inter stocks surged Thursday as the company announced it will list shares on Wall Street. Analysts say the move is positive and shows the bank’s intention to internationalize the business, which can reinforce investment theses in the company.

Banco Inter’s units rose 12.06%, while preferred shares saw gains of 11.67%. The Ibovespa had a slight rise, of 0.02%.

Banco Inter will list its shares in the United States and trade Brazilian Depositary Receipts (BDRs) backed by stocks issued by Inter Platform, Inc. on the Brazilian exchange B3, the company said Thursday. According to the notice of material fact, Inter will no longer have shares and units traded on the B3.

Bank of America, Bradesco BBI, J.P. Morgan and Itaú BBA were hired as financial advisors for the shareholding reorganization.

“Shareholders are expected to receive the same proportion in the holding company shares, now that it will be listed. This shows the intention of making the bank international. Recently, they launched the app for non-accountholders and, in this same move, bought Usend, which is similar to a digital bank, but an American one,” said Lucas Cintra, a partner at Valor Investimentos.

According to Tiago Sampaio Cunha, an equity manager at Grou Capital, the shareholding reorganization carried out can be analyzed under two aspects. “The first, which moves the company’s headquarters to the Cayman Islands, is not so positive from a governance point of view, since the rules for Brazilian companies are stricter.” On the other hand, the manager pointed out that listing shares in the U.S. ends up being very positive. “It is a much more mature market in the view of technology companies, with more players, which facilitates the comparison of metrics and strategies, something that in Brazil we are still not that used to,” he said.

Banco Inter shares had been falling in the last few months. In September alone, the units fell 31.18%. “The bank suffered as technology stocks lost ground. Now, the news that the shares will be listed abroad is very positive,” said Fernando Bresciani, an investment analyst at Andbank Brasil.


Grain production to reach all-time high this season

Estimates indicate total volume of 288.6 tonnes, up 14.2% compared with last cycle


Brazilian grain production is likely to reach an all-time high this 2021/22 season, which is being sown, driven by the advance of cultivated area, more favorable climate forecasts and higher investments by farmers.

The first estimates by the National Supply Company (Conab) based on field research, released Thursday, indicate that the total volume should reach 288.6 million tonnes, up 14.2% compared to the 2020/21 season – which was adjusted for 252.7 million tonnes, 1.7% less than in 2019/20, mainly because of weather problems that affected corn crops.

The increase in 2021/22 is the result of a 3.6% growth in the cultivated area, to 71.5 million hectares, and an increase of 10.2% in the average productivity of crops, to 4,088 kilos per hectare.

The season will once again be driven by soybeans, whose production was estimated at 140.8 million tonnes, an expansion of 2.5% compared to the previous cycle – the result of a 2.5% larger area (39.9 million hectares) and stable productivity (3,526 kg per hectare) — but the main highlight is the recovery of corn.

Conab calculates an increase of 4.7% in corn’s total area (first, second and third crops), to 20.9 million hectares, a 27.7% rise in productivity, to 5,575 kilos per hectare, and with that, an increase of 33.7% at harvest, which could reach 116.3 million tonnes.

In its resumption after the harvest loss this year, the forecast for the second crop is 86.3 million tonnes, up 42.2%, but it is still too early to estimate with certainty what will be the cultivated area, currently estimated at 15.9 million hectares, up 5.8%.

According to Conab, climate forecasts are favorable for soy and corn. The start of the new season should be marked by the continued effects of La Niña. Irregular rains are forecast for the main producing states until the end of this year, but there are no indications of serious problems with excess or lack of rainfall.

“We have to wait a little for our first 2022 forecast, but according to the data we already have, rains are apparently more normalized this year and we should have a good soybean crop and first corn crop,” reinforced Carlos Alfredo Guedes, from the Systematic Survey of Agricultural Production (LSPA) of the Brazilian Institute of Geography and Statistics (IBGE). For this year’s total grain crop, the institute adjusted its calculation to 250.9 million tonnes, 0.3% less than in 2020.

Despite the positive situation for soybeans and corn in 2021/22, including prices, costs with fertilizers, pesticides and seeds, which show strong increases, may compromise profitability, according to Conab. Soy and corn exports, which are expected to grow, will be an advantageous option, given the high prices in dollars and the favorable exchange rate — Brazil leads global soybean shipments and is the second largest exporter of corn.

In the case of rice, the company estimates production of 11.6 million tonnes in 2021/22, down 1.3% from 2020/21, and for beans — which also have three crops per season in the country — the production is expected to advance 3.1%, to roughly 3 million tonnes.

If they harmed corn in 2020/21, the weather conditions were extremely favorable for rice, and there’s a return to a certain normality, with an impact on productivity, which should generate a reduction in the 2021/22 season, even with the increase in the cultivated area (1.6%, to 1.7 million hectares).

According to Conab, domestic consumption should reach 11 million tonnes, and the imported volume, 1 million tonnes. For exports, the perspective is an increase to 1.4 million tonnes from 1.2 million tonnes in the volume traded.


Corporate insolvency expected to surge in Brazil in 2022

Upward trend has stabilized at a low level and a drop in insolvencies is greater in larger companies than in SMEs


The number of company insolvencies in Brazil could close the year up 6% and jump by 32% in 2022, projected Euler Hermes, a global leader in credit insurance.

In 2019, the number of insolvency cases in Brazil was 2,887, falling to 2,078 last year, a drop of 28%. But this year the figure is expected to rise to 2,200 and jump to 2,900 next year.

Maxime Lemerle, head of insolvency research at Euler Hermes, notes that Brazil has so far not reversed the upward trend in insolvency over 2021, but rather stabilized at a low level.

He notes that despite highly volatile monthly figures, corporate insolvencies reached 1,318 cases from January to August this year compared to 1,391 in the same period in 2020. That means a limited difference (-5%). At the same time, there was a relevant drop compared to pre-Covid levels (-28% in 2019 and -30% in 2018).

“It is important to say that the drop in insolvencies has proven to be greater in large companies than in SMEs [small and medium-sized enterprises], leading the latter to account for more than 90% of the total number of insolvencies so far, compared to an average of 85% before the pandemic,” Mr. Lemerle said. “Still, we expect a moderate increase by the end of the year, which will bring the annual result to 2,200 cases, and a more notable increase in 2022, raising the number of occurrences to 2,900.”

Globally, after two consecutive years of decline (of 12% in 2020 and 6% in 2021), Euler Hermes economists project the corporate insolvency rate to reach a high of 15% in 2022.

Insolvencies are on the rise around the world, but still at a lower level than in 2019. For Euler Hermes, this is thanks to the extension of many government support measures and generally accommodative monetary policy, which helped manage pressure on corporate liquidity and creditworthiness.

“Massive state intervention prevented one in two insolvencies in Western Europe and one in three in the United States by 2020. Its extension will keep insolvencies at a low level in 2021, but what happens next depends on how governments act in the coming months,” Mr. Lemerle said.

To the extent of the withdrawal of support measures related to the Covid-19 pandemic, there will be a return to the normal level of insolvencies. But the trajectory will be asymmetric, illustrated by the multi-speed economic recovery, and also gradual “due to the delicate but pragmatic phasing.”

For Euler Hermes, five indicators will define how insolvencies may evolve in the coming months globally. First, the overall momentum of the economic recovery, which will be decisive for the pace of withdrawal of state support measures, and in turn will impact the pace of normalization of corporate insolvency.

Second, the pace of withdrawal of state support, as it will also influence the cash burn dynamics of firms. Third, many fragile firms will still be at high risk of default, such as the pre-Covid-19 “zombies” kept afloat by emergency measures and firms weakened by extra debt from the crisis. Fourth, the deterioration of firms’ finances, which increases questions of debt sustainability, and fifth, the rapid recovery of business start-ups, since the higher number of firms will increase the basis for potential insolvencies, particularly in sectors where start-ups are highly related to meeting new needs arising from the pandemic (i.e., home delivery) but with uncertain viability.


Brazil unveils wildlife protection program

Wildlife Conservation | National Geographic Society

Brazil’s Environment Ministry has introduced the National Wildlife Rescue Program, Resgate+ in short. The initiative will include operational bases with specialized staff and equipment, conducting wildlife control strategies and operations to rescue, recover, and protect vulnerable animals across all six Brazilian biomes.

Goals include reducing losses in biodiversity resulting from extreme natural events or man-made accidents as well as assistance in sending off rescued animals for the appropriate care.

The program also encompasses efforts in training, environmental education and conduct, as well as the development of plans for the prompt response to disasters and accidents that may impact wildlife, in addition to agreements and partnerships to meet those goals.

The program will be coordinated by Biodiversity Secretariat of the Environment Ministry, which should seek to forge collaborations with other governmental agencies, the private enterprise, and society, to reach its goals and establish rules and deadlines for project conditions.

Source: Agência Brasil

Amazon to give cash reward to sellers

Amazon lança serviços para PMEs venderem mais e enviarem para os EUA | Exame

Amazon announced Wednesday new actions to try to accelerate its marketplace in Brazil. One of the measures stir up the competition in the sector: as it already does in the United States, the company will give cash as a prize to sellers who, for example, use more of its services, including logistics. This movement coincides with a period of fiercer competition and sales slowdown in online commerce in the country since July, Valor has learned.

Shopee, in turn, has announced that it will offer R$3 million in coupons and vouchers for free shipping with no minimum purchase, and items up to 50% off next Sunday, as part of a campaign. Shopee is one of Asia’s leading marketplaces. Other Brazilian marketplaces have been reducing fees charged to sellers.

In the case of Amazon, starting this Wednesday, there are three programs that retailers can join: cash rewards for sellers, delivery by Amazon, and the sale of goods from Brazilian retailers on Amazon International. The idea is that those options will be fully operational by the fourth quarter, after an initial sign-up phase.

A fourth initiative has been open for membership since mid-September. It is the full service package (“fulfillment by Amazon”), available to small companies based in São Paulo state. All four initiatives were presented to the market Wednesday at the company’s event with retailers “Amazon Conecta”.

“Until then, the possibility of selling on the global site and the fulfillment program were options only available to invited retailers. Now this will be open to everyone on the website,” says Ricardo Garrido, head of Amazon’s partner seller store.

Among these programs, there are two that didn’t exist in Brazil – the “delivery by Amazon” and the compensation plan linked to goals set by the company. In this reward format, if the seller decides, for example, to use the company’s complete package of services – which includes storing products, picking up and shipping goods to the customer – he receives R$300 in his Amazon account. When adding a high-selling product to the online store, the benefit is R$6 per signup. The value will remain in a rewards balance and can be claimed by the seller at any time.

As for the delivery program, the company will start collecting the goods sold on the site and on the app from the retailers and will take care of the delivery procedures. The company will also give free shipping to all customers, in purchases over $79, for operations through “delivery by Amazon.” Rival Mercado Livre offers free shipping for purchases from R$79, if the delivery is carried out through Mercado Envios.

“The seller will issue our shipping label, stick it on the package and the next day the partner carrier collects the products,” he says. Mercado Livre, Magazine Luiza and Americanas already do this service of picking up goods at retailers, and all charge for the service within the commission rate paid by the seller.

Asked about the reduction in delivery time with this change, the executive did not want to inform. He says that Amazon makes deliveries in up to two days only for customers of its Prime program, in 700 cities, something the company has been reporting for some months. In the country, more than half of the deliveries of competitors Mercado Livre and Magazine Luiza take place within one day. Amazon reported in August that it delivers in up to 24 hours for Prime customers in 50 cities.

To pick up products daily at the seller, as it is announcing now, Amazon needs a large fleet and agility in the processes. Mercado Livre, for example, has about 10,000 vans and 600 trucks to collect and deliver to the customer in one day. When asked about this, Amazon does not inform its fleet (nor the number of stores in its marketplace), but says that, considering the launch of these programs just before Black Friday, when demand rises, it is possible that it will extend this one-day period for pickup. “There is an agreement with the seller and depending on that it can be revised in some cases,” says Mr. Garrido.

The main cost of the marketplaces is the commission rate on the sale. Amazon charges from 8% to 16%, and a logistics fee based on the weight of the item, according to tables published on its website.

Amazon says it expects a “regular” Black Friday, he said, but refused to give numbers. “Our challenge for the date is to move forward with the delivery and fulfillment by Amazon.”

Source: Valor international

EU mulls deforestation-free certificate for imported commodities


The European Union is expected to announce in November a proposal to require its importers of beef, soy, coffee, cocoa, timber and palm oil to certify that these six commodities come from lands that have not been deforested or contributed to land degradation after January 1, 2021.

The move, which Brussels sees as a way to tackle “imported deforestation,” will put more pressure on the Bolsonaro administration to take effective measures to protect the Amazon rainforest. Otherwise, it may cause more problems for the entry of certain products into the European market and hundreds of millions of dollars in damages to the agricultural sector.

The proposal put together by the European Commission, the EU’s executive arm, will be sent to the European Council, which brings together the leaders of the 27 member countries, and the European Parliament. It will then be examined mainly during the French presidency of the EU in the first half of next year. The French are among those pressing hardest for more environmental rules in the EU-Mercosur agreement because of Amazon deforestation.

The EU document seen by Valor makes it clear that only deforestation-free products and those legal according to the laws of the country of origin will be allowed to enter the EU market.

The EU is likely to define a so-called “cut-off date” of December 31, 2020. In other words, those commodities will not be allowed to enter the EU market if produced on land subject to deforestation after this date. This means that the EU will only punish deforestation after 2021, and that deforestation before that will not be considered in practice. “Anyone who cut down trees in the Amazon last year or in 2019 will not be affected,” said one EU observer.

This question has provoked major discussions in the EU. NGOs advocate the largest possible period to go against those who cut down trees, while the private sector has always argued that it is not fair to punish someone for doing something before the legislation came into force.

In any case, retroactivity may be a marginal feature in the European proposal. The big question will be the certification of products to enter the European market and the displacement of production chains, said Emily Rees, an international trade specialist in Brussels.

Therefore, Brazilian products risk losing space if exporters fail to prove they do not come from deforested lands. On the other hand, Ms. Rees notes that “there may also be a positive effect for Brazilian chains such as cocoa, coffee and palm oil, which are less targeted regarding deforestation.”

For Geraldo Vidigal, a professor of international trade law at the University of Amsterdam, it is necessary to ensure sustainable production globally, but the preferred way to do this should be positive reinforcement of this production. “It turns out that producers in developed countries are less interested in fostering low barriers to sustainable production and very interested in creating barriers to the competition using the goal – in itself correct – of promoting sustainability,” he said.

According to the European document, 420 million hectares of forest – an area larger than the 27 countries of the European Union – have been lost globally between 1990 and 2020, according to FAO data.

Source: Valor international

Embraer flies high, leads Ibovespa’s gains

Embraer – Wikipédia, a enciclopédia livre

After going down the valley in 2020, pressured by the damage of the pandemic in the aviation industry and by the end of the commercial agreement with Boeing, Embraer shares surged in Ibovespa’s highest increase this year and the second highest in 12 months. They have risen 164% since January, leaving behind the lowest price in the last 12 years, seen exactly one year ago. In 12 months, the shares traded on the B3 are up 250%.

In an interview with Valor, the company’s CEO, Francisco Gomes Neto, says there is a tailwind of market recovery, which was already expected after the paralysis caused by Covid-19, particularly in the second and third quarters of last year. But the construction of a “good strategic plan” and its execution were crucial for the turnaround. “This year, the big contribution comes from efficiency gains,” he said.

As Goldman Sachs recently said as it raised the recommendation for Embraer’s American Depositary Receipts (ADRs) from a “neutral” to a “buy,” the current story combines “executive and regional travel and improved operational performance.” In its September 23 report, the U.S.-based bank revealed a new target price for the ADRs, of $23 in 12 months, compared with $17 on Wednesday.

The resumption of air travel in the wake of the Covid-19 vaccination, although uneven in different regions, optimistic prospects for executive and regional aviation, and several internal adjustments breathed life into the shares, which went to R$23.38 Wednesday from R$6.03 on November 3, 2020.

To get out of the crisis, the aircraft manufacturer has defined a new strategic plan – of five years instead of previous 15-year versions –, cut its workforce by 17%, reduced inventories by $900 million since last year and wants to shorten the aircraft production cycle by 40% by next year, among other initiatives, including the ongoing liability management, which were well received by investors.

Analysts say there is room for more as positive expectations for business aviation are confirmed – Embraer’s output until the end of 2022 is already sold – and the recovery in commercial aviation materializes. Looking further ahead, promising prospects in the urban air mobility market and for the subsidiary Eve also contribute to the improved rating.

Embraer’s electric vehicle vertical take-off and landing (EVTOL) company has already secured more than a dozen delivery and leasing partnerships for the “flying cars” – there are agreements for at least 735 units so far – and development of the infrastructure and regulation required for the start of operations, scheduled for 2025.

According to Mr. Gomes Neto, the talks to merge Eve with the American Zanite, a company formed for the purpose of acquisition (Spac), continue and are advanced. In the operation, according to Bloomberg News, the subsidiary would be valued at $2 billion.

For Morgan Stanley, the global market for urban air mobility will turn over $1 trillion in 2040, reaching $9 trillion in the following decade. But there are relevant challenges that need to be overcome for the business to become concrete, including the certification of the aircraft.

“Eve comes as the icing on the cake at a time when commercial aviation and defense are not performing so well. Investors have come back to believe in Embraer’s ability to generate value even faster than expected,” said Ilan Arbetman, an analyst at Ativa Investimentos.

He says that, before the pandemic and the now litigation with Boeing, Embraer’s results were already not outstanding and the two events increased investors’ frustration. “Now, the evolution is fast and it is important to pay attention to Eve’s growth,” he said.

According to Mr. Gomes Neto, Eve is indeed heading to play a relevant role in Embraer’s business. However, without considering the subsidiary or new projects, the company is able to almost double its size by 2025. Last year, the planemaker’s net revenue was R$19.6 billion, compared to R$21.8 billion in 2019.

In the Defense segment, Embraer continues to renegotiate the KC-390 supply contract with the Brazilian Air Force (FAB), with a likely reduction in the number of units. While new sales campaigns in the field have a longer maturity period, executive aviation and support and services have seen performance in line or better than initially expected, the executive said.

In commercial aviation, still Embraer’s largest business, the challenges should persist for another year or two. According to the International Air Transport Association, global demand for flights in 2022 should account for only 61% of what it was before the pandemic.

Moreover, Airbus has strengthened after Boeing’s problems with the 737 Max, and competition for the few orders expected for fleet expansion or modernization is expected to be fierce, said Mr. Arbetman, with Ativa.

For him, executive aviation is likely to see the strongest growth among the Brazilian company’s businesses. The segment showed strength even during the pandemic, and Embraer’s Praetor and Phenom jets grabbed market share.

After the release of the second quarter results, in which the company reported the first quarterly adjusted net income since the beginning of 2018, BB Investimentos defined a target price of R$25 for Embraer shares at the end of 2022, with a buy recommendation. For analyst Renato Hallgren, the company began to “show some balance between short- and medium-term demand with favorable long-term prospects” and the partnerships closed by Eve brought the prospect of new deals.

Along with the earnings reports, the aircraft manufacturer resumed the disclosure of projections for the annual result, suspended because of the pandemic, and reported that it may reach breakeven in cash flow in 2021. In the first half, Embraer spent R$995.3 million, well below the R$5.4 billion seen a year earlier.

The CEO of Embraer emphasizes that the new strategic plan, the result of the work of more than 70 people, also includes business diversification and innovation. The Beacon platform, which speeds up aircraft maintenance time, a new turboprop aircraft, aircraft electrification and a partnership in autonomous spraying via drone are on the horizon.

Source: Valor international