Jumble Spoiler – 12/10/20 | Unclerave's Wordy Weblog

While trying to figure out how to put two green hydrogen plants in the Northeast region by 2025, Qair — a French independent power generation company — is expected to start the construction of a 440 MW solar farm, with an estimated investment of R$1.9 billion, in Icó, Ceará.

Gustavo Silva, the head of operations in Brazil said that the funds will come from local banks. The operation is expected to start by the end of 2023, with most of the power being destined for commercialization in the free market.

Qair has been operating in Brazil since 2017. It has already invested R$2.7 billion in four 600 MW wind and solar power projects in Ceará and Rio Grande do Norte. With this new investment, the company will total 1 GW of capacity in the country.

The company has been studying wind and solar farm projects to produce electricity to supply two green hydrogen plants. One would be located near the Port of Suape, Pernambuco, while the other is likely to be installed around the Port of Pecém, Ceará.

Each plant will require an estimated investment of $3.8 billion and an installed capacity of 8 GW of clean energy (wind and solar) to be supplied. This means, in practice, investments at about $12 billion.

From the technical point of view, the installation of green hydrogen plants is possible, but the financial equation will only be solved when “demand really grows.” In practice, the sector awaits the start of green hydrogen auctions in Europe, scheduled for 2025, an event that is expected to mark the opening of the zero-carbon fuel market. “Today we don’t have a price, because no one is willing to pay for green hydrogen, but there is a high expectation for 2025 and 2030,” the executive said.

One of the main sources for replacing fossil fuels in the energy transition, green hydrogen is produced from a process known as water electrolysis. Although the technology is already mastered, Qair is still seeking to perfect the processes. To this end, the company will begin a production test through a partnership with an autonomous ship, which will work as a laboratory for the next three years. The vessel, called Energy Observer, is the first ship powered by green hydrogen in the world and has been testing the technology with seawater in several wind and sun conditions worldwide since 2017.

Qair was one of the first companies to start studies for green hydrogen production in Brazil, in May last year, in Pernambuco and Ceará. Other multinationals have also signed letters of intent for investment with state governments. In Ceará alone, there were 15 companies — among them White Martins, Fortescue, Neoenergia, AES and Engie.

If all the projects prove to be economically viable, there would be around R$100 billion in investments in Ceará alone in the next 20 years, an unprecedent amount of investments in the state.

Earlier this month, the Ceará government unveiled the first resolution for environmental permit of green hydrogen plants. A working group has been set up to improve the resolution, which details criteria and parameters for obtaining authorizations by investors.

Source: Valor International


Vanusia Nogueira — Foto: Divulgação
Vanusia Nogueira — Foto: Divulgação

Coffee is part of the economy of every country in the world. Whether uniting production and consumption – or if there is only consumption –it is present in 196 nations and has growth potential in virtually all of them. Despite this, the International Coffee Organization (ICO), founded almost 60 years ago, brings together less than half of them, even though its members account for 97% of global supply and 67% of global demand.

With the mission to expand the sector’s engagement around the world, Vanusia Nogueira, a Brazilian born in Minas Gerais, takes over as executive director of the London-based organization in May, replacing José Sette.

The challenge will involve not only a rapprochement with non-member countries, but broad work on income gains, transparency, market relations and sustainability.

The ICO brings together 75 countries — including all European Union countries, and not just the bloc. Production totals 168 million bags of the Arabica and Robusta varieties, and consumption reaches 167 million bags each harvest.

Assuming that advances will take place “step by step” and without “megalomania”, Ms. Nogueira already indicates the horizon she seeks in five years, when her term ends. “I will be fulfilled if we have all the countries in the world within the ICO,” she said. Thus, the entity will fulfill the task of being a forum for discussion and resolution of issues in its view.

At the age of 60, Ms. Nogueira put aside the idea of retiring and responded to an industry call. Her name was suggested last year – although she says she never wanted the job – and her candidacy was supported by the Brazilian private sector, with the approval of the federal government, and by chain players in other countries — including Colombia. The Colombians, well-known competitors of Brazil, occupy the second place in the supply of Arabica coffee to the world. The election took place in February.

The executive from Três Pontas will face the challenge of defending the pleas of a number of dissatisfied with the entity’s performance around the world, according to sources in the sector. The first woman to lead the ICO, Ms. Nogueira will arrive in the United Kingdom knowing that she will need to shake up an environment that breathes political timing, due to its intergovernmental origin, and that had been the target of harsh criticism in the pre-pandemic years. During this period, the U.S., the world’s largest coffee consumer, left the organization.

“At the last face-to-face meeting, in 2019, we discussed whether it was worth continuing. ICO was heavy, slow, and did not give answers to anyone,” she said. “We concluded that the private sector and civil society should be invited to take part in the debate.”

From there, a public-private task force was created in 2020, led and facilitated by the organization itself, which created five working groups: one coordinator and four others focused on prosperity (income), transparency, the environment and commercial relations. Although they have been moving at a faster pace since last year, Ms. Nogueira arrives to give traction to the actions.

The aspect related to prosperity aims to find out what income is necessary for a coffee grower to “survive with dignity.” The idea is to carry out surveys by regions to discover the gaps between the producer’s current income and the amount he needs to live from the activity.

It is in the scope of the actions to find out what are the causes of the gaps so that problems can be tackled, ranging from lack of education and technical assistance, planted varieties and productivity, to the analysis of structural issues in each region and that reflect in the activity.

Ms. Nogueira also highlights that it is necessary to have serenity to deal with the fact that there will be cases in which the producer will need to think about diversification of economic activity. Depending on environmental and social conditions, she explains, it will not always be possible to live on coffee alone.

In the income-focused group, there are pilot projects underway in Africa and Central America. Local associations such as the African Iaco and Promecafé are taking part, and there is support from development banks from Germany and Switzerland. In addition, talks are underway with FAO and the United States Agency for International Development Support (USAID), as well as other interested parties. The plan is to complete the mapping in all producing countries by 2030.

Another line of action in the task force is the one that will focus on market transparency. A delicate chapter, it involves studying productive cost methodologies. This point, added to financial speculation, are aspects of coffee volatility, she reiterates. The production cost is “hazy” since “there is no common methodology in the world.”

The working group brings together 15 experts in the coffee chain. Brazil has Maciel Silva, a member of the Brazilian Agriculture and Livestock Confederation (CNA), as its representative. The objective is to propose a methodology applicable to different realities.

Other two lines are projects involving environmental recovery and commercial relations. “We thought about how to show the world that agribusiness is not a villain in environmental issues and the idea is to expose what is in progress, like the SOS Mata Atlântica project with Nespresso in Brazil,” she said.

With regard to the work of reintegrating the U.S. — an important consumer country that left the ICO in 2018, under former President Donald Trump — the strategy is to get closer to the Biden administration, involving producing countries that already have a system of lobbying the Americans. The ICO also has the support of the U.S. green, roasted and specialty coffee associations.

Source: Valor International


BR-381 auction has not attracted interest parties, and has been canceled — Foto: Alberto Ruy/Minfra
BR-381 auction has not attracted interest parties, and has been canceled — Foto: Alberto Ruy/Minfra

A multi-billion package of highway auctions and acquisitions is expected to make news in 2022. At least nine bids are scheduled for this year, with estimated combined investments of R$80 billion. At the same time, three negotiations underway among private-sector companies are likely to combine for R$12 billion, sources say.

Among the roads in the hands of private-sector groups, AB Concessões, which has Bertin and the Italian company Atlantia as partners, and Abu Dhabi’s sovereign wealth fund Mubadala are in talks to sell their assets. In addition, construction company Andrade Gutierrez’s stake in CCR – which operates airports, highways and urban mobility businesses – is the target of dispute.

The agreement in the most advanced stage is the sale of Andrade Gutierrez’s 14.9% stake in CCR. Highways alone account for 61% of the gross revenue of the company, whose control block also includes Mover (formerly Camargo Corrêa) and the Soares Penido family.

Last week, the Peruvian group Aenza, controlled by asset manager IG4 Capital, entered the battle to buy a stake in the construction company, competing with Itaúsa, Opportunity and Votorantim, sources familiar with the matter say. BTG is in charge of the sale.

Andrade’s stake is worth R$3.7 billion, excluding the premium for control of the business, a person familiar with the matter says.

IG4 had already tried to buy Andrade’s stake in CCR last year. The groups reached a preliminary agreement, which provided a disbursement between R$4.6 billion and R$5 billion. Yet, the talks fell apart in November.

BTG Pactual oversees two other operations: the sales of Rota das Bandeiras, a concessionaire controlled by Mubudala, and of Atlantia’s 49.99% stake in AB Concessões. The negotiation for the 50.01% in AB owned by Bertin is advised by XP.

In 2019, Abu Dhabi’s fund and asset manager Farallon acquired 85% (split half and half) of the concessionaire Rota das Bandeiras for R$1.65 billion. Rota das Bandeiras runs Corredor Dom Pedro, which includes key highways in the interior of the State of São Paulo and belonged to Odebrecht Transport (OTP). Odebrecht group’s infrastructure arm is under judicial reorganization.

Two years later, Mubadala bought Farallon’s stake for about R$2 billion and took over the concession. Now, it intends to sell the business for R$4 billion amid an asset rotation drive, sources say. The deal attracted the interest of CCR, another person familiar with the matter says.

In the transaction that involves the sale of the shares of Bertin, which is under judicial reorganization, and Atlantia, the talks are seen as more complex, a source in the financial market says, partly because the shareholders did not agree to sell their stakes as a block.

Of the three assets under management, only the concessionaire Colinas, whose highways crosses 17 cities in the interior of São Paulo, including Campinas and Piracicaba, is considered interesting and could yield R$4 billion to the shareholders, a source says. The Triângulo do Sol concession expires in September and highway MG-050 needs investment.

Huge regulatory liabilities are a major obstacle to unlock the sale of concessions, including disputes around rebalancing and fines for non-compliance with construction works throughout the contract.

The problem is that pending issues often become a snowball as values are adjusted by the return rate of the project – in the case of Colinas, this is 19.5%. Even when concessions change hands, regulatory agencies are usually unwilling to negotiate liabilities, which burden the operation.

Among those highways for sale in the Southeast region, market players believe that the range of interested parties is limited since the region is already dominated by well-established operators, and new entrants would not have much room for expansion.

Despite the challenges, the acquisition of concessions is still seen as an attractive way by groups that want to have presence in the country. This was the move made by Monte Partners, which set up its platform for the sector, Monte Rodovias, from the acquisition of Odebrecht’s concessions in the Northeast region.

The group is preparing to bid in some state auctions this year, focusing on the Northeast and Central-West regions, said Julio Zogbi, founder of the asset management company. The company also continues to look for buying opportunities in the target regions.

“The acquisition of concessions with a remaining term is a great entry point. It proved to be the right model for us, because it brings a team with a track record. It is riskier to enter directly via auction,” the executive said.

The difficulties of attracting new operators to highway auctions has indeed drawn attention in the sector, especially in view of the huge supply of projects scheduled for 2022. Some are concerned that there are not enough investors for so many bids.

This must be taken into consideration by governments, said Marco Aurélio Barcelos, head of ABCR, an association of highway concessionaires. “It is a good problem, because we have many projects. But it is a problem. It is important that authorities ensure that the market will be able to absorb so many auctions. Maybe this scenario signals the need for more players to come,” he said.

The lack of interested parties in projects is a risk that may force governments to postpone challenging bids, said Massami Uyeda, a partner at law firm Arap, Nishi & Uyeda Advogados. This situation became clear last week when the federal government decided to cancel the auction of BR-381, a highway between Minas Gerais and Espírito Santo, which was scheduled for next Friday, due to lack of interested parties.

The lawyer believes that some smaller state auctions have the potential to draw more competition, because they attract consortiums of medium-sized companies and more local operations – companies with a different profile of large groups like CCR and Ecorodovias.

There are also new groups analyzing the auctions. However, it is unclear whether they will take part, said Marcos Ganut, a partner at law firm Alvarez & Marsal. “We have new interested companies, with different profiles, including funds and firms from other segments. But I’m not sure that they will take part.”

For Rogério Yamashita, head of infrastructure and logistics in Itaú BBA’s project finance team, new operators are likely to emerge, but auctions are not an easy way. “It is not so simple to participate in a highway auction without having a platform. Foreign groups will have to make an effort to enter the country.”

In his view, political instability and high interest rates in the short term have a limited weight in the auctions. “Whoever invests in 30-year concessions has to be prepared to shoulder market hiccups. I think structural issues are more worrying, such as construction costs or a possible shortage of inputs,” he said.

For Mr. Barcelos, with ABCR, the elections are unlikely to affect the 2022 auctions so much. The question mark, he said, is how the pipeline of projects will look like from next year onwards, with the change of government.

Andrade Gutierrez, Arteris, Bertin, CCR, Mubadala, Votorantim, BTG and XP declined to comment. Itaúsa said it does not comment on market rumors. Atlantia and Opportunity did not immediately reply to a request for comment.

Source: Valor International


Climate Change | OSCE

The greenhouse gases emitted by the automotive industry are mostly caused by the very vehicles that the industry has sold over the past decades. Estimates range from 75% to 96%. But making a car also pollutes. The decarbonization of the production of cars and auto parts involves Brazil, as the factories installed in the country must report to their headquarters, which have global targets to meet. Neutralizing the carbon emitted by the entire chain that involves a vehicle – which includes 2,500 to 5,000 parts – is a complex task. Even with a giant challenge ahead, the industry is already starting to move forward.

As a way to show society that they care about the climate emergency, the largest companies in the sector have started to work with deadlines that move up by at least ten years the goal of the Paris Agreement, which establishes the neutrality of carbon emissions by 2050.

Decarbonization comes at a price. Jaime Ardila, founder of U.S.-based Hawksbill and a consultant in this field, recalled that investments unveiled to this end around the world total $200 billion, according to international studies, a figure that excludes the electrification of vehicles. “But, in the end, the investments will have to be larger,” he said.

In Brazil, there are no calculations of how much the automotive industry has invested in the decarbonization of its industrial processes and logistics. “It depends on the paths that each one will follow,” said Masao Ukon, a partner at Boston Consulting Group. If an auto parts company exchanges the entire fleet that transports its products for electric trucks, for example, it will spend more.

The sector’s great dilemma is how to find ways to involve the whole chain, as hundreds of suppliers deliver thousands of components daily. This is a system without stocks, a condition familiar to the industry for decades. If, on the one hand, just-in-time production has become a reference of lean manufacturing, on the other hand, the method consists of a daily shuttle of trucks to transport the parts.

For the carbon neutralization in this sector to be complete, it must also include car haulers, which take vehicles to dealerships and ports across the country. Among suppliers, the purchasing teams of the automakers have been instructed to include as selection criteria companies that stand out in sustainable practices, in addition to ESG (environmental, social and corporate governance) principles.

Scania has created a logistics laboratory that monitors the parts transportation routes. Guilherme Garbin, the company’s maintenance manager, said that this center helps truck drivers choose less congested routes and take advantage of the space in the trailers for maximum load occupancy. “It’s a constant learning process.”

Inside the vehicle factories, the picture is less complex. Brazil has the advantage of using hydroelectric energy, which gives these companies points in the global decarbonization race. Factories located in countries with low supply of renewable power sources have tighter targets. This lightens the burden on the Brazilian subsidiaries on the one hand. On the other hand, the water crisis has triggered warnings. Solar power panels are already in part of the factories of General Motors in São Caetano do Sul, São Paulo, and of Mercedes-Benz in Juiz de Fora, Minas Gerais. Iochpe Maxion, a Brazilian wheel manufacturer that has become a multinational, includes overseas plants to close its decarbonization account. The company’s line in Thailand already operates partly with solar power.

Iochpe, the world’s largest wheel maker, also has an example of how modifying products based on changing consumer – and industry – habits can help reduce emissions. The company realized that the production of aluminum wheels emits more than three times as much carbon dioxide as the same product made of steel. There are 9 kilograms of CO2 in every kilogram of aluminum wheels, versus 2.3 in steel wheels. The challenge is to offer alternatives or change the habit of consumers who see the sophisticated finishing of aluminum wheels as a consumption dream.

Another similar example comes from U.S.-based Cummins, which used to paint the engines it delivered to heavy equipment manufacturers, such as trucks. “We started to send engines without color, only with varnish, to customers,” said Adriano Rishi, the company’s CEO for Brazil. Nobody complained.

Not all changes, therefore, require high investments. Some ideas are simple and cost little or nothing. “We can stop painting more hidden parts in a car,” said Antonio Filosa, the chief operating officer of Stellantis for South America. The search for lighter materials has also helped, according to Iochpe Maxion CEO Marcos de Oliveira.

The challenge also involves reducing power and water consumption. Between 2003 and 2019, General Motors managed to reduce by 60% the electricity consumption per vehicle and by 2030 it intends to save 35% of the power spent in processes compared with 2010, according to Glaucia Roveri, GM South America’s energy, environment and sustainability manager.

Older plants have been adjusted. With more than 90 years, GM’s facilities in São Caetano do Sul, São Paulo, recently had the press system replaced by more modern technology, which reduced power consumption by 50%, Ms. Roveri said. Because it was located in the city at a time when the region was not very urbanized, this was one of the first factories, at the end of the 1980s, to install a water treatment system for industrial reuse. “Today, we are all living around the factories. People are going to start rejecting products from companies that are not environmentally correct,” she said.

Mercedes-Benz’s plant in São Bernardo, which started operating in 1956, has been receiving equipment that use less electricity and smart lighting systems. “We are in this transformation process since 2018,” said Rafael Gazi, the company’s process planning manager.

ZF, the German auto parts giant, has also adapted its Brazilian facility. According to the regional environmental manager, Celso Guerra, in addition to the exchange of engines and compressors, the company adopted power efficiency modules for the total shutdown or the secondary functions of the machines.

In newer factories, designed with greener solutions, the process is easier. A year ago, Stellantis announced that its plant in Goiana, Pernambuco, achieved carbon neutrality. The vehicle factory had already obtained, in 2017, the gold seal of the GHG Protocol Brasil program, which seeks to encourage companies to quantify and manage greenhouse gas emissions. By 2021, all 16 factories that make up the supplier complex were included. Toyota’s Sorocaba plant, in the São Paulo state, is about to achieve carbon neutrality. The company is, however, waiting for an audit result, said Viviane Mansi, head of sustainability for Latin America.

Waste disposal is another problem in industrial processes. Thanks to the recovery of packaging and better use of organic waste (such as food scraps consumed in the cafeterias, which serve as fertilizer for the gardens) Scania reduced the portion of waste sent to landfills to 6% from 14% in three years. “Our goal is to reach zero,” Mr. Garbin said. The company will soon start its own sewage treatment plant around its plant in São Bernardo.

In vehicle factories, painting is among the activities that demand the most electricity for the process and water for cleaning the equipment when changing colors. The team at Mercedes’ truck cab plant in Juiz de Fora has discovered a new way to clean the supports that carry parts during the painting process. A simple solvent will replace the thousands of liters of water that used to be sprayed when cleaning the parts.

Next to the factory building was an unused shed. There, the company now stores tanks with solvent where the parts are immersed. This is a sustainable process, said Marcos Marsola, process planning manager in Juiz de Fora. The solvent can be reused in the same process. And the leftover paint goes to the cement industry. To complete the process, the roof of the shed received solar power panels. Mr. Marsola even looked for international benchmark, but he couldn’t find any. “This project started from scratch,” he said.

In quality and safety tests of cars, the industry is beginning to replace part of the so-called “crash tests” (in which the vehicles are destroyed) by virtual simulations. This is done by Volks’s engineering team in São Bernardo, for example. Recently, Stellantis invested in a laboratory in the Betim plant that does from material analysis to the final product testing. “The crash test also pollutes as we often sent the cars for tests abroad, which involved diesel consumption in trucks and ships,” Mr. Filosa said. In this case, decarbonizing also helps companies reduce costs.

Financial operations are also starting to be part of decarbonization. At the beginning of the month, Volkswagen reached an agreement with Bradesco to raise debt with ESG commitments. In exchange for funds, the automaker commits to transfer 12% of its CO2 emissions in the production process from fossil to biogenic origin by 2024, and to increase the share of biomethane to 20% of the total gas used by the factories.

New ideas even include employee transport. Volvo intends to reduce CO2 emissions by 30% in employee transport by 2025. According to the company’s CEO, Wilson Lirmann, this involves chartered buses at the Curitiba plant and even remote working. “This is something that the pandemic taught us,” he said. Scania created, for employees who use fleet cars, a corporate card that only allows them to fill up with ethanol.

Despite the several efforts, for the time being, decarbonization plans in this sector have proven to be less organized than its historical and impeccable industrial production system. Companies acknowledge, however, the need to adapt not only the vehicles but also the chain that produces them to the climate urgency. “It’s a matter of survival,” Mr. Garbin said.

Source: Valor International


Vale's iron ore attract foreign investors — Foto: Agência Vale
Vale’s iron ore attract foreign investors — Foto: Agência Vale

Despite the good performance of the Brazilian stock market this year, the market gains are concentrated in a restricted group of stocks, the destination of foreign investment in recent weeks. The focus has been on consolidated, liquid companies and not always with fundamentals that justify a long-term bet.

In the year, Ibovespa, the stock exchange’s main index, rose 7.68%, while the Small Caps, which includes companies with smaller capitalization, dropped 0.43%. Of the 90 stocks that make up the Ibovespa, only 39% outperform the index.

The group comprises stocks from the financial, raw materials and energy sectors, which have been the target of global investors. But, according to Valor Data, only ten shares account for 94.4% of the gains accumulated by the Ibovespa in the year. These are securities from companies such as Vale, Petrobras, Itaú, Bradesco, B3, Banco do Brasil, Hapvida and BTG Pactual.

With the exception of Hapvida, all stocks are raw materials exporters or companies in the financial sector. Altogether, they have a total weight of 49.8% in the Ibovespa theoretical portfolio, a fact that further highlights this discrepancy – the other half of the index accounts for only 5.6% of the accumulated gains in 2022.

Also noteworthy is the fact that, of the 90 stocks that make up the Ibovespa, only 35, or 39%, outperform the index. This group also includes stocks from the financial sector and raw materials, in addition to energy shares, the destination of the global investor, who is zeroing out positions in growth stocks.In 2022, foreigners increased their long position in B3 by R$58 billion — institutional investors reduced their position by R$48 billion.

For analysts, part of the foreign flow arrives in the country because the bonds seem cheap, due to the exchange rate. Guto Leite, with Western Asset, says that foreign investors have returned, but have opted for more liquid stocks.

He explains that the external flow, at first, focuses a lot on purchases through ETFs [exchange-traded funds] and this ends up having a greater impact on more liquid companies. “As the scenario is opaque, in general, privileging this type of bonds also makes sense,” says Alexandre Cancherini, manager at Frontier Capital.

For Daniel Gewehr, portfolio co-manager with WHG asset, the Brazilian stock exchange is benefiting from the global movement to search for value stocks, and no longer for growth stocks, after the world’s central banks, especially the Federal Reserve, prepare the monetary policy normalization cycle. “Brazil is perceived as a value market, 70% of the Ibovespa is made up of this type of bonds,” he says. “Russia is also a value market, but due to geopolitical issues, part of the flow that could migrate to that market may be coming to Brazil.”

For André Lion, partner and CIO of Ibiúna Investimentos, it is also necessary to consider the global investor reduced exposure to Brazil, both on the stock exchange and exchange in 2021, and became “underweight”. This global adjustment of positions opened space, therefore, for this investor to return to Brazil, especially attracted by stocks with attractive valuations, such as commodities, banks and steel. “But not everything is cheap,” he warns.

According to Mr. Lion, the Ibovespa is currently traded at a price-to-earnings ratio of 8.5 times, below the historical average of 11 times. Stocks linked to commodities, in turn, are currently traded at 6.6 times, with Petrobras having a price-to-earnings ratio of 5.8 times. But when considering only the group of stocks that are neither of state-owned companies nor linked to commodities – companies that reflect more directly the local economy, therefore – the multiple is higher, at 13.6 times.

In any case, Mr. Lion considers that the conditions for the external flow to continue reaching Brazil is likely to remain in the coming months. He says that, in addition to the fact that the valuation remains relatively attractive, favorable conditions for the exchange rate may even increase, as the Selic policy interest rate rises and the carry trade expands. In addition, with the interest rate hike by the Fed, the movement of migration from growth positions to value stocks is expected to intensify. “The Fed has only started to reduce purchases, soon it will completely withdraw the stimulus. This will have an impact on the market,” he says.

Mr. Gewehr, with WHG, also believes that the flow of external capital is likely continue, but at a slower pace. And it will continue to focus on the so-called “blue chips” [companies with greater liquidity and capitalization]. He says that the Ibovespa’s fair price today is a little below 11 times, according to the price-to-earnings ratio metric, which means that the stock market is still attractive.

“The Ibovespa trades with a 30% discount, while the world has a 10% premium, Brazil is still cheap in relative terms,” he says. “Our global fund chose to have some exposure to Brazil because the stock exchange looks interesting today.”

The negative point, he observes, is the profits projections of the companies that make up the Ibovespa, a fall of 12% in 2022. “In the tripod that investors consider to invest in the stock market, we have a good valuation, and also low allocation. What is missing is an upward revision of profits,” he says. Another risk, he points out, is the behavior of commodity prices. “It’s an investment that makes sense, but it’s risky.”

Source: Valor International


Economy Minister Paulo Guedes said at a meeting of G20 finance ministers and central bank chiefs that Brazil is ready for growth, sources say. The two-day hybrid (face-to-face and virtual) meeting ends this Friday.

The debate on the global economy, in which Mr. Guedes and the Brazilian central bank President Roberto Campos took part, was focused on strategies to end stimulus programs adopted to mitigate the crisis generated by the pandemic.

The group of the largest economies is concerned about having a careful exit from support measures. Most G20 countries agree with the reduction of stimulus and gradual normalization of interest rates, sources say.

The Brazilian stance has been to support a gradual, well-communicated normalization of interest rates, sources say.

Observers note that Mr. Guedes has stated in international meetings that many central banks are “asleep at the wheel,” that is, unaware of the dangers of inflation as they should be.

But the minister did not say so this time at the G20, which is chaired by Indonesia. He focused on certain global issues and tried to use Brazil as an example.

Mr. Guedes told his peers that Brazil began withdrawing stimulus last year as it moved forward with overhauls, followed through on the investment partnership program by attracting a record amount of infrastructure investment, advanced on the digital government agenda by seeking to reduce red tape and improving the business environment.

According to Mr. Guedes’s remarks, the result is a more resilient country that is ready to grow – he cited the “best primary result in almost a decade.”

In its latest survey, UBS projected that Brazil’s GDP will grow 0.6% this year, compared with 2.6% in Mexico, 3% in Russia, 3.2% in South Africa, 3.8% in Turkey, 5.4% in China and 8.2% in India.

Source: Valor International


Green Recovery', recuperação económica é verde - Iberdrola

A post-pandemic green recovery can bring to emerging countries much more than a return to economic activity, but to attract companies and promoting sustainable development, especially in Brazil.

This was one of the conclusions of a study by the Global Wind Energy Council (GWEC). On the other hand, the agency also warns that the country risks losing hundreds of thousands of green jobs, billions of dollars and billions of tonnes of saved emissions if it chooses another path.

In an interview with Valor, the GWEC’s CEO Ben Backwell and the executive president of the Brazilian Wind Energy Association (Abeeólica), Elbia Gannoum, emphasize that a political commitment is needed to mobilize private investment.

In total, Brazil could add an additional $8 billion of gross value added (GVA) to national economies in the recovery scenario. “This is an activity in which most of the investments come from the private sector. In addition, the industry is a huge job creator,” says Mr. Backwell.

In GWEC’s calculations, Brazil could see 575,000 green jobs over the lifetime of the wind farms if it opted for a green recovery rather than a business-as-usual approach.

Ms. Gannoum adds that more companies could land in Brazil because of the attractiveness of the business. Today, there are only six wind turbine manufacturers and two wind blade companies, but this number could grow more.

She recalls that, unlike what happened in developed countries that made billion-dollar recovery plans, in the case of developing countries, government does not have the capacity for the recovery.

“The renewable energy sector has a strong attraction for private investment and Brazil, in this scenario, should look at the situation as an opportunity. We have an abundance of renewable resources, so the energy transition is a great business opportunity for companies.”

From 2022 to 2026, the report calculates a 40% reduction in carbon emissions, helping the country accelerate progress in meeting its Paris Climate Agreement targets.

The report focuses on five countries – Brazil, India, Mexico, the Philippines and South Africa – each of which face specific challenges due to Covid-19 but which have significant untapped wind energy resources that can unlock rapid economic growth under green recovery measures.

“Unlike Mexico, where the government has practically stopped investments in the wind sector, Brazil has better conditions to develop the wind industry”, compares Mr. Backwell.

The executive says that this energy source grows significantly in the world, but it should be between three and four times bigger to reach the decarbonization goals. “We should be installing around 400 GW a year, but we are installing just under 100 GW.”

Source: Valor International


Jewelry industry trends. Where does jewelry design go? - Stuttgart Gemstones

The Brazilian jewelry market showed a sales recovery in 2021, having closed the year with a 20% growth in revenues, reaching $4.5 billion. This year, the recovery trend continues, and the sector expects an advance of 10% to 15% in sales if there is no great instability because of elections in Brazil or geopolitical issues in the international market. The information is from the Brazilian Gems and Precious Metals Institute (IBGM).

“A lot of people stopped traveling abroad during the pandemic and this had a positive impact on the sector. The sector benefited from this situation in Brazil,” said Ecio Duarte, head of IBGM. The executive estimates that the sector will resume this year the sales level of 2019. According to data from the Ministry of Economy, imports of jewelry items grew 55% in 2021 compared with the previous year, totaling $64.5 million. Exports from the sector, meanwhile, grew by 10.9% to $146.4 million.

“Last year was a year of growth and market consolidation, with store expansion and omni-channel strategy,” said Otavio Lyra, Vivara’s chief financial and investor relations officer. In 2021, Vivara opened 41 stores, 21 of which are Vivara and 20 of which have the brand Life, reaching 246 stores and 29 kiosks. “This year we will have more openings than last year,” Mr. Lyra said.

Sales in the first nine months of the year grew 56.3% compared to the same interval of 2020 and 20% over the result of 2019, totaling R$916.9 million. Net income increased 220.4% over 2020, to R$171.4 million. The profit margin grew 9.6 percentage points, to 18.7%.

At B3, Vivara’s common shares did not follow the sales performance. In 2021, the shares fell 12.64%, a deeper drop than that seen by the benchmark stock index Ibovespa, which fell 11.93% in the period. This year until Thursday, Vivara is up 2.48%, while Ibovespa rose 8.31%.

Mr. Lyra noted that the company has increased raw material inventory since the end of 2019 and expanded production at the Manaus plant. “We bought the raw materials at the right price. In doing so, we had less impact on the average cost of products,” the executive said.

Another factor that helped the company’s results, according to Mr. Lyra, was the production of more traditional jewelry items, such as rings, half rings, solitaire rings and chains. For 2022, the company expects to have stronger growth than last year.

Monte Carlo Joias, which runs 50 stores in the country, also saw last year a firmer demand for more timeless pieces, such as half rings, chains, yellow gold pieces, and in the jewelry section, diamonds. “For us it was a year of record sales, it was very good. Consumers came back to the stores and online sales grew more than 30% after having a four-fold increase in 2020,” said Renato Balbi, CEO of Monte Carlo.

Monte Carlo reported that it ended 2021 with a 25% increase in total sales. Revenue is kept confidential by the company. For this year, the jewelry store projects growth of 15% to 20% in store sales and 25% in online sales. “The jewelry store that can offer an omni-channel experience gets better results. The larger chains have been more successful in this aspect,” Mr. Balbi noted. Monte Carlo opened five stores in 2021 and plans to open six to eight stores this year. “I believe there is room to get to 200 stores in the long term,” Mr. Balbi said.

Jewelry chain Antonio Bernardo, which operates 11 stores in the country, saw stronger demand for more traditional pieces. “In 2021, we had a stronger demand for gold and diamond jewelry. Jewelry to mark a moment and tell a story,” said Barbara Hermann, Antonio Bernardo’s industrial head. The company did not comment on its sales performance in 2021.

Already the Danish jewelry company Pandora, which has 120 stores in Brazil, saw more expressive sales of silver items and jewelry. The company invests globally in the adoption of artificial diamonds instead of natural diamond, for being more sustainable and having a better cost-benefit relation. “We expect the use of mixed materials such as artificial diamonds to grow. Consumers are already inclined to purchase jewelry made with sustainable sources of gold and silver,” said Martín Pereyra, Pandora’s general manager for Latin America.

The executive said that Pandora does not have results breakdown by country, but that Brazil may contribute to the company’s expectation of global organic growth of 3% to 6% this year. Mr. Pereyra said sales grew in Brazil last year, with “very strong acceleration at the end of the year, which will continue into 2022 and beyond.” Pandora opened five stores in Brazil in 2021 and has plans to open more units in the country this year. But the number is kept confidential.

Roseli Duque, CEO of IBGM, said that the price of jewelry tends to remain stable this year compared to 2021, because of the weakened real against the dollar and the prices of gold compared to last year, which would offset the 10% inflation in the sector over the past 12 months.

The executive added that the trend for this year is for jewelry combining stones of the same color, but with different shades. Rings with coats of arms, initials, cufflinks, cameos and jewelry with frames are among the trends in the current collections. “Jewelry has an air of nostalgia this year. Chains with links, jewelry in yellow gold, pieces made by goldsmiths, everything that refers to traditions gains strength,” Ms. Duque says.

Source: Valor International


Brazil's Amazon: Deforestation rises ahead of dry season - BBC News

Brazilian companies still fail to place deforestation at the center of their climate concerns. A survey by the consultancy Luvi One shows that only 16% of local companies listed on the stock exchange include the preservation of forests in their climate targets. In Europe, this percentage is 90%. When the specific targets are taken into account, with the definition of deadlines and the percentage of reduction to be achieved, the result is even lower: only 5% make commitments to contribute to blocking deforestation in the country.

“Brazil has debated for a while that the preservation of forests was a matter for governments. The private sector had a minor role in the discussion. Now, the consumer market itself requires that companies position themselves in relation to forests, especially with respect to deforestation in the Amazon,” said economist Felipe Gutterres, CEO of Luvi One.

In the survey, 384 companies listed on the B3 were analyzed. Among the sectors of the stock exchange, the wood and paper companies are among the best positioned – 67% of companies have goals in this aspect, followed by power companies, with 53%. The beverage sector also appears at the top of the list, represented at B3 only by Ambev, which has high targets. In agriculture, half of the companies are committed to reducing deforestation.

The methodology included the analysis of the published reports and the existence of open and specific goals to reduce environmental impacts. It was also verified whether the sustainable development goals of the United Nations and the Global Reporting Initiative (GRI) methodology, which addresses sustainability issues in their annual reports, are met, in addition to the companies’ environmental management acts.

The survey shows that 100 companies on the B3 have the worst performance on the issue of forests, from sectors such as personal use and cleaning products, fabrics, shoes and clothing, computers and equipment. These companies do not have any targets for deforestation reduction.

Despite the initially negative result, the tendency is that the picture starts to change, albeit slowly. Industries in more difficult situations, the issue may be left behind, Mr. Gutterres said. “Whoever is left out of the global trend will also start to notice difficulties in doing business and attracting investments. A natural selection will take place. ESG is not just an acronym, it is a stance,” he said. For the executive, there is a “great generation of value” to be discovered in the preservation of forests with the carbon credit market. According to the survey, 29% of the Brazilian listed companies have gas emission reduction goals. With regard to water-related commitments, the percentage is 24%.

Katerina Trostmann, head of sustainability at BNP Paribas in Brazil, said that companies are understanding that they need to embrace the transition agenda, and this has been happening. “We have seen an acceleration by our clients to adopt targets and be transparent. One trend for 2022 is climate transparency,” she said.

Source: Valor International


Ambev vai aumentar preço da cerveja em outubro

After leaving his job at the stock exchange, Alexander Creuz, 46, from São Paulo, met again ABEV3 — or rather, Ambev — in the countryside of the state of Santa Catarina, now as a supplier of hops for the production of the Brazilian company’s beers.

Leaving decades in the financial market and life in the largest metropolis in Latin America to study agribusiness and become a rural producer was not an easy decision, but Mr. Creuz says he only regrets not having done it sooner. And the accounts show that the choice was positive.

The production of hops has a significant cost to implement, but net profit projections varies between R$70,000 and R$ 80,000 per hectare, according to him. If all goes as planned, with the first full crop being harvested this year, the return on investment should come within 40 months.

The fact that the required area is small was decisive for the option for hops — Mr. Creuz’s property, located in Lages (Santa Catarina state), has 12 hectares. “To have this profitability with soy, for example, I would need much more area,” he explains. Research indicates that the profit with soy is around R$2,000 to R$3,000 per hectare.

Hop is a plant of the species Humulus lupulus, of the family Cannabaceae. It is native to Europe, western Asia and North America. Being a vine, it usually reaches between 4.6 and 6.1 meters in height.

In beer brewing, during the cooking process with malt, water and yeast, the plant releases bitter-tasting resins, giving the beverage its characteristic flavor. Hops are also a natural preservative. In the past, it was added to beer kegs after fermentation to keep the beverage fresh while it was being transported.

Today, practically all the hops used by the country’s breweries are imported. Last year, the industry spent $82 million on the purchase of 4,721 tonnes of hops from other countries, according to data from the Secretariat of Foreign Trade (Secex).

According to a survey by the Brazilian Association of Hop Producers (Aprolúpulo) released last year, the cultivated area in the country is just over 40 hectares, and production is around 24 tonnes.

The largest brewery in Latin America, Ambev wants to encourage an increase in hops cultivation in Brazil. Mr. Creuz says the help is more than welcome. “It’s one thing for me, an individual, to knock on the headquarters of Epagri [Santa Catarina’s technical assistance agency] and ask for technical aid. Another thing is Ambev”, jokes Mr. Creuz, a former president of Aprolupulo.

Mr. Creuz is part of Ambev’s Fazenda Santa Catarina project, which began in 2020 and, since then, has carried out management and varieties tests that increase productivity and guarantee income. In the second half of last year, Ambev started producing and donating seedlings to producers.

“We hope to foster these local economies, in addition to producing better quality beer by having fresher hops,” says Laura Aguiar, Ambev´s head of Knowledge and Brewing Culture. According to her, the project’s first significant crop is expected to be harvested this year, but there are no volume estimates.

The company is also recruiting help to boost cultivation. At the end of January, it announced a partnership with Silver Hops, an agtech created within Fazenda Pratinha, in the region of Ribeirão Preto (state of São Paulo), with focus on technologies for hops.

“Our role will be to complement the work that is already being done with family farming through the perspective of research and innovation”, says Silver Hops’ head José Braghetto Neto.

Source: Valor International