Development bank raises R$1.9bn with JBS block trade

A cruzada inócua e cara de Bolsonaro contra o BNDES

The Brazilian Development Bank (BNDES) pocketed almost R$1.9 billion on Wednesday with the sale of another slice of its shares in JBS. In a block trade coordinated by BTG Pactual, the state-owned bank disposed of 50 million shares. Since December, BNDESPar, the bank’s equity arm, has raised more than R$4.5 billion with the sale of JBS shares.

The shares were traded at R$37.52, the price of the firm guarantee given by BTG. A source who followed the operation said that JBS bought shares again, which signals that the meatpacking giant still sees a large discount on its market capitalization.

In December, when BNDES started divestments in JBS with the sale of 70 million shares, the company took virtually all the shares for R$38.01 each, disbursing more than R$2.5 billion. BofA was the coordinator of the block trade.

With this Wednesday’s sale, BNDES reduces the position in JBS to less than 20%. The bank’s bet on the company was quite profitable. Since 2007, BNDESPar has invested R$8.1 billion in JBS, overperforming Brazil’s benchmark stock index Ibovespa, interbank deposit rate CDI and the goal of the development bank’s pension fund.

As the BNDES continues to reduce its position in the company over the next few months, JBS will be able to get rid of the overhang that weighs on its shares.

Analysts believe that JBS is trading at a discount considering the positive moment, especially in the United States. Last week, analysts Thiago Duarte and Henrique Brustolin, with BTG Pactual, revised the target price for the stock to R$55 from R$50, which embeds a potential for appreciation of more than 45% over current prices.

According to the analysts, JBS shares trade at a multiple of 3.7 times the projected EBITDA for 2022 and 4.6 times for 2023, which is 20% below the historical level.

JBS is currently valued at R$88 billion on the stock exchange. The BNDES’s position is worth R$17 billion.

Source: Valor International

https://valorinternational.globo.com

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State governments investments grew 83.6% compared to 2020

Juliana Damasceno — Foto: Leo Pinheiro/Valor
Juliana Damasceno — Foto: Leo Pinheiro/Valor

State governments investments grew in 2021 at vigorous rates not only compared to 2020 but also to 2017, the year before last of the Michel Temer administration’s term. Investments in the 26 states and the Federal District Brasília last year totaled R$75.9 billion, with a real increase of 83.6% compared to the previous year. In comparison with 2017, the real increase was 46.6%.

The data shows that the growth in revenues due to extraordinary transfers in 2020 and the good performance of the collection last year provided resources for a resumption of investments at a higher level than in the previous term. For this election year, part of the states is already planning to go even further with investments. Roads and infrastructure in the areas of health, education and security are among the priorities.

The investments’ growth rate stands out even more taking into account the behavior of the main expenses groups. Spending on personnel and social charges by the states in total fell by 5.2% in real terms in relation to 2020 and 5% in relation to 2017. In the same comparison, current expenses rose 2.9% against the previous year and fell 0. 5% compared to 2017. Current revenues soared. Considering all the 26 states and the Federal District, these revenues totaled R$1.03 trillion 2021 — up 8.1% over the previous year and 13.5% over 2017.

For specialists, the investment scenario was provided by an extraordinary outlook that led to revenue growth and large cash balances. They point out that the factors that allow the increase in revenue are temporary and caution is needed in the application of these resources.

Juliana Damasceno, researcher at Fundação Getulio Vargas’s Brazilian Institute of Economics (Ibre-FGV) and economist with Tendências, recalls that the transfers of resources intended to combat the pandemic in 2020 to states and municipalities exceeded R$89 billion and ended up, in many cases, going beyond the recovery of lost revenue that year. Additionally, last year, she says, the combination of exchange rate, inflation and commodity prices also favored State revenues, both through their own collection and through mandatory transfers from the federal government.

“Many states saw their coffers full,” says Ms. Damasceno. The concern, she says, for future terms, is that the current situation will result in spending decisions that will permanently impact state expenditures. What can already be seen, she points out, are pressures for salary readjustments in this election year.

Gabriel Leal de Barros, chief economist at RPS Capital, points to similar fears. In addition to payroll expenses, some investments can also lead to an increase in mandatory costs. Works such as hospitals, he points out, are an example. The concern, he says, is that not all states have taken structural measures to contain spending. The evolution of personnel expenses, which fell in real terms in the total of last year, was favored by conjunctural factors. The expenditures of the previous term, he says, suffered with the contraction of resources.

And in the last two years, says Mr. Barros, personnel expenses ended up being limited by Complementary Law 173, of 2020, the same that determined the extraordinary transfers of resources from the federal government to tackle the economic effects of the pandemic. This law, he explains, restricted the salary readjustment until the end of 2021. He points out, however, that some states have implemented social security and administrative reforms that are already beginning to show results.

Part of the states that advanced with investments last year intend to continue on the same route this year. In São Paulo, according to data from the state’s fiscal report, investments stated in the reports totaled R$17.9 billion in 2021, with a real increase of 98.3% compared to the previous year and 35.4% against 2017.

State Finance secretary Henrique Meirelles says that if you add up the financial investment accounts, which, in the case of São Paulo, he says, corresponded to investments, the total amount comes close to R$26 billion. According to him, this should be increased to around R$40 billion in 2022. “There are 8,000 works already underway, including roads, schools, hospitals and in the area of public security, generating 200,000 jobs.” A good part of the investment this year, he says, will be financed by the state government’s cash balance. According to Mr. Meirelles, at the turn of 2021 the state’s cash position was R$47 billion. Contributed to this result, he says, the administrative reform, which helped to keep expenses contained.

Last year, according to fiscal reports, São Paulo’s current revenues advanced 9.4% in real terms compared to 2020. This year, Mr. Meirelles does not expect the same performance.

Source: Valor International

https://valorinternational.globo.com

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Foodtech raises $100m for “plant-based chicken”

The 49 Best Vegan Chicken Brands and Recipes

Next Gen Foods, a plant-based chicken startup founded by former BRF executive Andre Menezes and Timo Recker, has just written a new chapter in the global foodtech industry. Just over six months after celebrating the biggest seed of a plant-based startup, when it raised $30 million, the owner of the Tindle brand broke barriers again.

The Singapore-based foodtech has raised $100 million in the biggest series A round ever by a company of its kind. The round included the participation of Alpha JWC, a venture capital manager in Southeast Asia, EDBI and UK-based MPL Venturesa. Temasek, GGV Capital, K3 Ventures and Bits x Bites, which were already investing, followed suit. The valuation was not disclosed, but the startup claims that the amount exceeds “well” the $180 million valuation of the seed.

The round also marks the debut of Tindle in the United States, significantly expanding the footprint of Next Gen Foods. “Adding up the population of all countries, we could serve less than 50 million inhabitants. But the U.S. has more than 300 million. You can already have a sense of expansion,” Mr. Menezes, CEO of the startup, told Pipeline, Valor’s business website.

With a strategy initially focused on restaurants, a way to convince those attracted by famous chefs about the potential of cooking with plant-based chicken, Tindle was already in restaurants in Singapore, Malaysia, Macau, Hong Kong, Dubai and Amsterdam. The idea is to reach retail only in 2023.

Upon landing in the U.S., Next Gen Foods surprised skeptics who doubted the company’s expansion speed. “I came here at the end of September, after the launch in Dubai. Our crazy ambition was to make the launching in the first quarter, which we did, but a lot of people said it wasn’t realistic,” recalls Mr. Menezes.

Living in Chicago to prepare for the arrival of the startup, Mr. Menezes worked on the various fronts necessary to bring the product to the United States, which includes the import process — the outsourced factory is in the Netherlands —, definition of the storage and distribution structure and prospecting of restaurants that already have dishes with Tindle on their menu. “We already have dozens of restaurants we’ve talked to, and we’re in talks with hundreds,” he said.

Starting this Tuesday, Tindle will be in select restaurants in California, New York, Miami, Philadelphia, a process that included long conversations with chefs to develop recipes. Unlike the traditional plant-based industry, Tindle does not come in a defined format — a hamburger, for example — but as a kind of modeling clay that allows for several uses, from breaded and fried product to a chicken breast dish.

The ambition of Next Gen Foods is to become the benchmark in plant-based chicken meat for restaurants and consumers, just as U.S.-based startups Impossible Foods and Beyond Meat were to the plant-based hamburger, virtually inventing a category. To date, no plant-based chicken meat has achieved the consistency needed to establish itself in the market, a gap that Tindle wants to fill.

The United States are expected to become the biggest market for the startup in a short time. “The receptivity of the product tests was incredible,” Mr. Menezes said. The expectation is that Americans will represent 60% to 80% of the revenues of the startup – of undisclosed value – in 2022.

Next Gen Foods has an asset to gain broad bases in the U.S. The startup cut a deal with Dot Foods, the largest food redistributor in the U.S., which in theory allows it to take Tindle to any restaurant in the country. “A contract usually takes years because they only take companies that operate with an already reasonable income, which is not our case yet. They reach 3,000, 4,000 restaurants,” Mr. Menezes said.

The debut of Next Gen Foods in the United States will test the doubts of part of the market with the growth of the plant-based segment. After a jump in the first year of the pandemic, the category stagnated last year and sales even dropped in a few months, which put some companies in the hot seat. Beyond, once a reference, became the target of short sellers.

Mr. Menezes does not ignore the scenario, but considers that both the euphoria of 2020 and the disappointment of some with the slow growth of last year reflect hasty assessments. “Any analysis done with such a short lens is inherently wrong,” he said. The game is long term, measured in decades. In this trajectory, the company bets that products like Tindle will fill a more significant space in the $350 billion global chicken market.

For now, plant-based alternatives like Next Gen Foods still account for a tiny share of the market — in the case of chicken, less than 1% — and are more expensive. In restaurants, dishes with Tindle are up to 15% more expensive than the traditional chicken options on the menu. “The scale discrepancy is very bizarre. A very large plant-based factory produces in a year what an average chicken factory does in a month”, compares Mr. Menezes.

With the gains of scale that will come with time, however, the prices of the plant-based industry also tend to fall, becoming more competitive in the competition for consumers. In a world that will need more food using fewer natural resources, the expansion of plant-based meat seems inevitable. “Livestock cannot be the only tool to feed 10 billion people in 2050 because there is no natural resource available,” summarizes the CEO of Next Gen Foods.

Source: Valor International

https://valorinternational.globo.com

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Rappi goes back to antitrust watchdog against iFood

Thalyta Dalmora - Blumenau, Santa Catarina, Brasil | Perfil profissional | LinkedIn

Just over a month after Uber announced it will operate in the Brazilian food delivery market only until March 7, delivery company Rappi filed a new petition with the Administrative Council for Economic Defense (Cade), Brazil’s antitrust regulator, defending the termination of all exclusivity contracts held by iFood with restaurants and bars.

In the document, Rappi asks the watchdog to review a provisional measure from March last year, which establishes the blocking of new exclusive contracts of iFood with restaurants, keeping the agreements prior to the determination.

Until September last year, iFood had 80% of the food delivery market in the country, followed by Uber (25%) and Rappi (18%), according to data from the Brazilian Association of Bars and Restaurants (Abrasel).

Uber’s exit from this sector and the shutdown of the Delivery Center are Rappi’s main arguments to request the reopening of the case by Cade. The Delivery Center was a service focused on restaurants and shopping malls stores, which had BRMalls and Multiplan among its partners – it closed the operation in November.

According to Rappi, the moves are “evidence that, even with the preventive action of Cade, the practices of iFood continue to damage the market, requiring the adoption of new restrictions by the regulator.”

The president of Abrasel, Paulo Solmucci, criticized Rappi’s position in defending only the end of iFood’s exclusivity with stores because the company also operates with exclusive contracts.

“If Rappi was genuinely in a pro-market movement it should enter as an interested third party in our lawsuit and ask for the end of exclusivity as a whole,” Mr. Solmucci told Valor.

Abrasel filed its own request in December 2020, advocating for an end to all exclusive contracts between food delivery apps — in addition to enter as an interested party in Rappi’s lawsuit against iFood with Cade in September. “The genuine speech that Abrasel would applaud is that of a healthy market and free competition,” says Mr. Solmucci.

The new petition filed Tuesday by Rappi asks Cade to suspend the requirement of a termination fine for the breach of exclusivity of all contracts concluded by iFood with restaurants. “In the case of contracts that have specific investments in infrastructure, the rescission fine may not exceed the amount invested.”

The document also mentions a recent decision by the Norwegian competition authority to prevent Delivery Hero, which operates the online delivery platform Foodora in that country, from entering into exclusive contracts with stores for a period of three years.

In a note, iFood said that “the online delivery market is constantly evolving, with frequent entry of new competitors and the emergence of new business models,” that its commercial policies “are in strict compliance with the competition legislation” and that it “will continue to cooperate with the authorities in charge of the matter.”

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Veolia, Braskem to invest in renewable power

Renewables Power UK to New Carbon Emissions Record | ESGN Asia

French company Veolia and Brazilian Braskem, the largest producer of thermoplastic resins in the Americas, will invest R$400 million in the generation of thermal power from a renewable source in the Northeastern state of Alagoas.

By signing a 20-year contract, the petrochemical company has ensured the supply of steam produced with eucalyptus biomass for the industrial complex in Marechal Deodoro, where it makes PVC, replacing the use of natural gas and reducing greenhouse gas emissions.

Most of the resources, about 90%, will be provided by Veolia. Braskem will make investments to adapt the industrial complex to the new technology, increasing by 25% the participation of renewable power in its operations in the state. “This is a structuring project because it transforms the power generation mix in Alagoas,” Gustavo Checcucci, head of energy at the Brazilian petrochemical company, told Valor.

The project in Marechal Deodoro will generate 900,000 tonnes of steam per year, reducing CO2 emissions by about 150,000 tonnes per year. This is likely to accelerate the progress of Braskem towards the goal of reducing greenhouse gas emissions by 15% in scopes 1 and 2 and achieving carbon neutrality by 2050.

This is the first foray by Braskem, which already uses electricity from renewable sources in its operations in the country, into thermal power produced from biomass. On Veolia’s side, it is the second project of this nature in Brazil, but the first that starts from eucalyptus. In Rio Grande do Sul state, the French group was already operating a thermoelectric plant powered by rice husk.

To make the project possible, Veolia had to guarantee access to eucalyptus by leasing the land where the plantations will be made. There was already a planted base in the region, which was key for the investment – the talks between Braskem and the French multinational began over three years ago.

“We have 25 industrial units in Brazil, but this is the first agroforestry project,” said Pedro Prádanos, the chief executive of the Brazilian subsidiary of Veolia. The company will be responsible for managing 5,500 hectares of eucalyptus plantation, designing the engineering project, building the biomass processing and steam production plants, and operating the project over the 20-year contract period.

Another challenge, according to the executive, was to ensure the continuous supply of steam for the complex to operate uninterruptedly – a demand of the petrochemical operation in general. To this end, Veolia will put in place a proprietary digital solution, Hubgrade, which makes it possible to monitor and analyze operations in real time, with continuous improvement in performance and energy consumption.

During the construction phase, more than 400 direct jobs will be created. After the start of operation, there will be 100 new jobs. The operation is planned to start in 2023. Both Braskem and Veolia can use their own resources to finance the project, but they are also evaluating financing lines available in the market.

According to Mr. Checcucci, the eucalyptus biomass project adds a new source of renewable energy to the company’s generation mix and the company plans to expand its use. According to Mr. Prádanos, Veolia will also study opportunities of replicating the project in other states and may partner with Braskem in other efforts.

Since 2018, the Brazilian petrochemical company has already signed four partnerships for renewable power generation in the country and maintains its bet on the transformation of the power mix as one route to achieve carbon neutrality in 2050. This industry, in general, is engaged in energy transition initiatives because of the more competitive costs of renewable energy and the goals of reducing carbon footprint – which further down the road will represent costs to companies.

Source: Valor International

https://valorinternational.globo.com

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Regulator OKs price for sale of Eletrobras despite miscalculation

Vital do Rêgo — Foto: Divulgação
Vital do Rêgo — Foto: Divulgação

The Federal Court of Accounts (TCU), a public spending watchdog, approved Tuesday the first phase of the technical studies for the privatization of Eletrobras. The trial ended with six votes in favor of approval and only one against. The approved values will now be used to help define the share price that will be considered for the company’s capitalization, a phase that will still go through the TCU’s scrutiny.

TCU member Vital do Rêgo revealed on Tuesday an underestimation of R$34 billion in the value of the concession payment that should be paid to the National Treasury in Eletrobras’ privatization. Valor had already reported that there was a methodological error in the calculation of the value added to the state-owned company’s contracts.

With the adjustments requested by Mr. do Rêgo, the amount would rise to R$57.2 billion from the current R$23.2 billion. On the other hand, transfers to the Energy Development Account, which will be used to cushion the impact on electricity bills, would increase to R$63.7 billion from R$29.8 billion.

The bulk of the difference is due to the fact that the government did not consider in the model presented the pricing of the power of the 22 hydroelectric plants of Eletrobras. Another smaller adjustment was motivated by flaws in the definition of the hydrological risk criteria for the coming years.

“In an inexplicable and illegal way, the pricing of power was not presented. An absurd, huge mistake,” the TCU member said. “I understand that this is a non-negotiable situation.”

Despite Mr. do Rêgo arguments, the other TCU members chose to approve the model and proceed with the process. “I think we still don’t have the level of development enough for the proper appropriation of the power market,” said Benjamin Zymler, who is seen as an expert in the field.

His assessment is the same as that of the government, which justified the absence of values referring to power by the lack of a market for this asset. In this sense, claims the Ministry of Mines and Energy, it would be impossible to price the power.

Still, Mr. Zymler said he shared Mr. do Rêgo’s perception and did not see the company’s privatization ripe for development. “It is not yet at an adequate level of maturity. If Eletrobras were mine, I would not privatize it with these accounts,” he said.

Mr. Zymler also considered the possibility of determining the government to commit to include a clause in the contract providing for possible compensation if a power market becomes viable in the future.

The proposal, however, ended up reversed in recommendation, under protests from Mr. do Rêgo. “We are selling Eletrobras for half the price and the private sector is celebrating,” he said.

The other TCU members considered that the conclusion of the privatization would be more beneficial than postponing the process or keeping Eletrobras under state control.

“Any perception by the market of an overestimation of the value added to contracts would scare investors away, reduce share prices and make fewer resources available for investment. What people ask for and desire is investment for the sector,” TCU member Walton Alencar said.

The uncertainties surrounding the trial led the first level of the government to reach TCU ministers individually to avoid a setback.

Ministers Paulo Guedes (Economy), Ciro Nogueira (Chief of Staff Office) and Bento Albuquerque (MME) asked TCU members not to determine any change in the economic and financial model, sources say.

The government sought the members of the public spending regulator with the aim of letting them know how important the process is. If it moves forward, this would be the first privatization during the Bolsonaro administration.

Yet, if the sale takes a long way in the TCU, which can still happen, it will hardly end this year, which will be virtually all taken by the elections.

Source: Valor International

https://valorinternational.globo.com

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Expensive power drives investments in efficiency

Marcia Massotti — Foto: Divulgação
Marcia Massotti — Foto: Divulgação

Increasingly pressured by electricity costs, companies, large power consumers and even municipalities are betting on more efficient systems, more modern equipment and even their own power generation to remain competitive.

Enel Brasil invested almost R$89 million in 2021 in several projects that are part of its power efficiency program with concrete results. Liasa, an intensive industry that produces metallic silicon, has launched a plan to upgrade its furnaces and foresees an increase in efficiency of up to 10%.

On the manufacturers’ side, companies such as WEG and Onpower are being demanded for increasingly efficient equipment. Data from the 2030 Energy Expansion Ten-Year Plan by the Energy Research Company (EPE) show that power efficiency gains will reduce approximately 6% of the industry’s electricity in 2030.

The water crisis, high tax burdens and subsidies set precedents for a power efficiency investment agenda. In 2021, Enel Brasil, through its four distributors, invested R$88.8 million in projects that are part of its power efficiency program, obtaining as main results the service of approximately 331,000 beneficiaries, saving 62,257.81 MWh throughout the year and reducing end demand by 6,629.33 kW.

“In 2021, we invested more than R$88.8 million in projects supported by the program, with initiatives that combine economic benefits and positive effects for society and the environment. One of the highlights is the Public Call for Projects, held every year and which aims to benefit society as a whole. The Public Call projects achieve this vision of bringing power gains and making the services already offered by the beneficiary institutions more efficient, be they public, private or philanthropic,” says the Enel Brasil’s head of Sustainability, Marcia Massotti.

The industrial sector is perhaps most interested in power efficiency targets. The segment consumes approximately one third of the final electricity to service its production processes. Liasa expects to have a gain in production with the repowering of the furnaces. The company is an electro-intensive industry that produces metallic silicon and began to modernize its equipment in January.

“At the moment we consume 100 average megawatts (avgMW). The idea is to increase production by reducing the amount of energy per ton of silicon metal. The repowering of the ovens is likely to bring an increase in efficiency between 5% and 10%”, says the company’s head of Energy, Ary Pinto Ribeiro Filho.

If in the past the great attraction for industries to settle in Brazil was the availability, quality and price of electricity, over time those advantages were diluted and today the industry has difficulties in being competitive. The president of the Association of Large Energy Consumers and Free Consumers (Abrace), Paulo Pedrosa, says that companies have an ESG agenda, global commitments to emissions, in addition to competitiveness in the market.

“There is a movement of great interest towards power efficiency, such as the contracting of subsided power and self-production to seek competitiveness and meet this global agenda of commitments. Companies are also preparing for a carbon market, which will be a reality”.

What Mr. Pedrosa says is present in the Brazilian reality. A survey carried out in 2020 by the Instituto Clima e Sociedade (iCS) initiative coordinator, Kamyla Borges, with the ten companies with the highest scores in the Corporate Sustainability Index (ISE B3) showed that power efficiency is considered to meet environmental goals.

“Although most claim to implement efficiency measures, few [companies] were those that set specific goals to reduce electricity consumption or power intensity,” says the researcher.

In this high demand, manufacturers are surfing the good times. WEG has demands for performance improvement services, operation automation and equipment preventive maintenance. At Onpower, the demand is for more efficient generator sets. In 2021, the company had the biggest growing curve in sales since 2013. According to sales manager Fernando Lemos, the year was the best in history, with a growth of 92% compared to the previous year.

“We see a greater demand for natural gas and biogas machines, which is another mix. What we noticed is the lack of conductors and semiconductors in the market, an important input in the production chain”.

With an eye on efficiency gains, several cities are betting on partnerships with concessionaires for public lighting services. More than 50 business groups were interested in the sector. There are currently 56 Brazilian municipalities with public lighting service concession contracts for the private sector, with estimated investments of around R$18.3 billion.

According to the Brazilian Association of Private Public Lighting Concessionaires (ABCIP), 12% of the Brazilian public lighting park is being updated by private companies under public-private partnerships (PPP) regime. More than 400 projects are underway in the country, including about 220 municipalities that intend to form consortia.

“The modernization of public illumination parks with LED luminaires has generated savings of up to 70% in electricity consumption,” says Pedro Iacovino, president of ABCIP. “When the park is equipped with telemanagement resources, savings can exceed 80%”.

Source: Valor International

https://valorinternational.globo.com

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Joint auction of airports is opportunity for Rio

Rio de Janeiro: Aeroporto Galeão ou Santos Dumont?

The joint bidding of Santos Dumont and Galeão airports in the second half of next year is positive not only for Rio de Janeiro state, but for the civil aviation system in Brazil as well. There is enough time to design a model for the auction of both assets in 2023. This is the view of experts consulted by Valor, according to whom the auction is possible next year even with a possible shift of government. According to them, the merger of the two airports into a single block will create a system capable of strengthening the city as a hub of internal distribution, without running the risk of increasing fares.

The decision to auction the two airports in a single block in 2023 was announced on Thursday evening by Infrastructure Minister Tarcísio Freitas after the RioGaleão concessionaire, whose controller is Singapore’s Changi, confirmed it had requested the re-bidding of the airport.

For Delmo Pinho, former Secretary of Transportation of Rio de Janeiro and representative of the commerce federation Fecomércio-RJ in the working group that discussed with the federal government the model for the Santos Dumont tender, “it is very bad for the country when a major international operator leaves” a concession. However, Mr. Pinho says that the departure of Changi from Galeão has created a more favorable scenario for Rio to become a relevant hub once again in national civil aviation.

“The new owner of the concession will not shoot himself in the foot, and the result of this can be excellent for Rio and for Brazil. We will have a major competitor in a very important market, which is Rio, and working in a cooperative way”, he says.

According to Mr. Pinho, it is possible to bid the two airports together in the second half of next year even considering the election of a new president. “Nobody will change a modeling that is consensual and well accomplished,” he says, adding that a barrier clause is needed to prevent the participation of concessionaires of assets such as Guarulhos, Viracopos and Brasília in the auction. “We have to impose barrier clauses to avoid a private monopoly.”

Lawyer Luiz Felipe Graziano, partner at Giamundo Neto Advogados, says that the bidding next year is “totally feasible”, even with the dependence on further steps to be taken, such as public hearings and the analysis of the public spending watchdog TCU. “The fuel for making this bid feasible is the convergence of interests,” he says.

Mr. Graziano reminds that the airport assets concession initiative started to be modeled and carried out still in the administration of former president Dilma Rousseff, went on through the Michel Temer term and continued in the Jair Bolsonaro government. “As this went through three administrations with very different profiles, it is possible that the project will survive a change in the presidency.”

Maurício Menezes, partner of the Moreira Menezes Martins law firm, says that uniting the airports will be “a solution in the end,” but ponders that there is a need for a “very broad” dialogue with the private initiative. “It is an opportunity to reflect on the best way [to do the modeling] not only from the public sector’s perspective, but mainly from the private point of view.”

Source: Valor International

https://valorinternational.globo.com

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Despite pressure for clean energy, Brazil extends use of coal by 2040

Renewables surpass coal in US energy generation for first time in 130 years | Grist

The transition to cleaner energy sources to reduce carbon emissions and limit the impacts of climate change puts more pressure on highly polluting coal-fired power plants. Despite the commitment made by 21 countries since the Paris Agreement in 2015 to gradually eliminate the use of this energy source by 2030, there are actions that go in the opposite direction. In Brazil, President Jair Bolsonaro sanctioned, in January, a law that extends until 2040 the contracts of coal-fired thermoelectric plants in Santa Catarina, a decision criticized by industry experts.

Santa Catarina and Rio Grande do Sul concentrate 99.97% of the national coal reserves. The region’s deposits are sufficient to generate 18,600 megawatts (MW) for 100 years, but there is pressure on the plants operated by the two largest generation companies in the country: Eletrobras and Engie Brasil Energia (EBE), the national arm of the French group.

Sanctioned by Bolsonaro on January 5, Law 14.299 creates the Fair Energy Transition Program (TEJ), whose goal is to prepare the coal region of Santa Catarina for the “probable” end, by 2040, of the national coal-fired thermoelectric generation activity. By law, the TEJ seeks to promote a “fair” energy transition for the coal region of this state, observing the “environmental, economic and social impacts and the valorization of energy and mineral resources in line with the carbon neutrality to be achieved under the targets set by the federal government”.

The law benefits the Jorge Lacerda thermoelectric complex, in Capivari de Baixo (state of Santa Catarina), via electrical energy contracting. The complex was sold, in 2021, by EBE to the asset management company FRAM Capital. EBE is also in the process of selling the Pampa Sul plant (state of Rio Grande do Sul), closing the fossil generation portfolio in the country. The project in Santa Catarina has 857 MW of capacity and is formed by three plants, the first one operating since 1965, and the last one since 1997, all with supply contracts until 2028. This is the date agreed with the Brazilian Electricity Regulatory Agency (Aneel) for the end of the contract. But with the sanction of the new law, the Jorge Lacerda complex can produce energy at least until 2040.

The sale of Pampa Sul, with 345 MW, is still under negotiation. With an investment of more than R$2 billion, the project, in Candiota (state of Rio Grande do Sul), on the border with Uruguay, started operating in 2019 and is considered the largest of the South region. The plant’s supply contract runs until 2050. Located in the city of Pampa Sul, Candiota III, of 350 MW, is operated by CGT Eletrosul, a subsidiary of Eletrobras. The plant has been in operation since 2011 but also received investments between 2018 and 2019.

According to the CGT Eletrosul, the plant has “fundamental importance” for Brazil and Uruguay, as it helps control the voltage of the transmission system between the countries. The Candiota Pole was the subject of controversy in the past, due to complaints from Uruguayan communities about the incidence of alleged “acid rain,” a phenomenon caused by air polluted by sulfur and nitrogen emissions.

Environmental concerns have led investors to divest coal-fired power plants, accelerating the growth of renewable sources in Brazil. By 2021, centralized solar power, generated in plants, will surpass coal-fired thermal plants in capacity.

Since 2013, CGT Eletrosul has deactivated three coal-fired thermal plants in Rio Grande do Sul state: São Jerônimo, Nova Usina Termelétrica Porto Alegre, and Presidente Médici plants. Together, they had more than 600 MW of capacity, but face criticism for their environmental impacts. This month the Federal Court annulled the environmental licensing process of the Guaíba Mine (state of Rio Grande do Sul), after a lawsuit by indigenous and environmental defense associations.

The federal government recognizes that new large projects in the sector should no longer arise. The EPE forecast is that the coal source will not receive investments in new projects until 2031, according to the ten-year expansion plan put out for public consultation last month. With this, the installed capacity of this source will fall by almost half over the decade.

For the professor at the Federal University of Rio de Janeiro (UFRJ) and former president of the EPE, Maurício Tolmasquim, it makes no sense to extend the contracts of coal-fired thermal plants. He says that, despite not having such a big impact on Brazilian emissions, the end of the use of coal for energy generation in Brazil could bring significant image gains for the country.

“Any initiative to contract or expand contracts for coal-fired power plants goes against what the rest of the world is doing. Brazil can be one of the first countries to decarbonize the power generation mix. At a moment in which we are being so badly evaluated for environmental issues, making the mix liquid in carbon would send a positive signal to the world and would bring geopolitical gains to the country,” he affirmed.

In Brazil, coal has marginal participation in electricity generation and emissions. By the end of 2021, coal-fired plants had an installed capacity of 3 gigawatts (GW), representing less than 2% of the Brazilian power generation mix, compared to an 80% participation of renewable sources, such as hydroelectric, solar, and wind power, according to the Energy Research Company (EPE).

The scenario is different from other countries. In China, coal accounts for more than 60% of electricity generation, a percentage that reaches almost 70% in India. In U.S. case, the source’s share in the power generation mix fell by almost half between 2010 and 2020, according to the U.S. Energy Information Administration, but still represented almost 20% at the end of the last decade.

According to the International Energy Agency (IEA), a group of large countries, including Brazil, have plans to zero emissions, but not eliminate coal. Also, part of this group is China, Japan, South Korea, South Africa, and the United States. The list of 21 countries with commitments to ban coal by 2030 includes European nations as well as Canada, Chile, Israel, and New Zealand.

Interest in coal-fired generation projects is waning since ESG (environmental, social, and governance) criteria have become more prominent in the choice of investments. The commitment to reduce the use of fossil fuels was reinforced last year in the final agreement of the Climate Conference (COP 26), signed by 196 countries, including Brazil.

“Brazil needs to build a transition plan for a low carbon economy. The issue is increasingly complex and influences more tied to the direction of capital in the world. It is becoming more expensive for capital to finance fossil projects and there is a tendency to price products that are more carbon intensive,” says Márcio Pereira, partner of the environmental and climate change area of law firm BMA Advogados.

An eventual end to the operations of coal-fired power plants would affect, however, the supply of electricity in the South, which would depend more on receiving energy from other regions, say specialists. This would require new investments in electric transmission.

The president of the Brazilian Association of Mineral Coal, Fernando Zancan, believes that coal can still have space in a decarbonized world, with the evolution of technology to compensate and capture carbon emissions. “Brazil is going to grow, demand more energy per capita, and for this, the country needs reliable and safe sources. The cheapest thermal plants are coal-fired, and if you shut them down, there will be an increase in cost,” he says. He believes that there is geopolitical interest in keeping part of the generation tied to coal, more stable in terms of prices, which is produced domestically in several countries.

Despite the environmental issues, there are still investments in coal projects in Brazil. This is the case of Copel, which in 2021 signed contracts to modernize the Figueira thermal plant (PR), with investments of R$37.3 million to expand the plant’s capacity without having to increase coal consumption. Eneva has stakes in the coal-fired plants Itaqui (state of Maranhão) and Pecém II (state of Ceará).

Source: Valor International

https://valorinternational.globo.com

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Retailers prepare attacks against foreign online marketplaces

Why Some Retailers Are Thriving Amid Disruption

There is a movement organized by the main Brazilian retailers that is likely to lead to a series of actions against online marketplaces that, in their view, sell counterfeit items and or without the proper collection of taxes. The focus is on foreign companies that bring products from Asia, through cross-border online commerce, or across platform borders, Valor has learned. Those companies rebut criticism and already have lines of defense to react to this move.

The meetings on the issue have been led by the Retail Development Institute (IDV), which represents 75 retailers, such as Americanas, Casas Bahia, Magazine Luiza, Renner and Riachuelo. Last week, there was a virtual meeting with at least 50 associates to address the tax impact of evasion and discuss aspects in which “judicial and administrative proposals” against the platforms are viable, according to IDV material presented at the meeting.

Sources say that there is a long-standing discomfort of the chains with the operation of groups such as Aliexpress and Alibaba (based in China), Shopee (part of Singapore’s Sea Group), Wish and Shein (based in the U.S.), Mercado Libre (based in Argentina), and OLX Brasil, with 50% of the business in the hands of South African Naspers. The decision to harden the tone came from the growth of the activity of these companies in the country, say sources.

The material, prepared with the support of McKinsey consultancy and Mattos Filho law firm — and obtained by Valor — mentions, as main areas of action, competition, tax, criminal, consumer relations and the Civil Rights Framework for the Internet.

Regarding the competition aspect, the IDV is considering filing, in the coming weeks, representation at antitrust regulator CADE, alleging violation of the economic order by foreign platforms. This topic is controversial and former CADE advisers are divided on the hypothesis of success in the strategy.

A meeting with the National Council for Combating Piracy (CNCP), of the National Consumer Secretariat (Senacon), linked to the Ministry of Justice, must still be requested this month. The idea is to present the institute’s study to the CNCP. “There have already been contacts with high levels of the government, informally, and with state leaders to see if there is room to work on changes in state legislation, on tax collection by marketplaces. We’ll start with CADE and then strike harder to change the law,” says the head of one chain.

“Only 5% of shipments were inspected by customs in 2020 and 7% of shipments are effectively stated. In other words, there is a flood of products that enter the country without any analysis, and this increased even more after the pandemic,” says a source close to IDV.

“As the purchase of up to $50 is exempt from import tax, informal shopkeepers or individuals buy from other informal stores, up to this limit of $49.99 per package to avoid inspection”, says the source. “Thousands of packages arrive up to this limit, further favored by the free shipping offer offered by these platforms”.

A proposal being analyzed by the retail chains is the issuance of tax receipts, by the Individual Micro-Entrepreneurs (MEIs), in the sale to individuals. This is only mandatory when selling to companies. But a change would have to involve the general law on micro and small companies.

Another path for IDV is to work with state lawmakers to pass a law that assigns to marketplaces joint liability for tax disputes of their sellers regarding the payment of sales tax ICMS. Some states already make them responsible through specific legislation, but the idea is rejected by platforms outside Brazil because they consider they are only intermediaries in the sale.

The text being discussed still mentions acting on the change in article 19 of the Civil Rights Framework for the Internet, which deals with freedom of expression. According to the article, an internet provider can only be held civilly liable for damages resulting from content from shopkeepers if, after a court order, it fails to take action.

For the IDV, the text is being used in a distorted way to exempt the online marketplaces from responsibility, and the platforms, in turn, say that it is about freedom of expression (of publishing content).

As it is an election year, retail chains linked to the IDV told Valor that they do not believe there is room to put the entire agenda on the table of the federal and state governments today, so the path followed now would be to toughen the demand for greater customs controls, and in greater pressure on states and on regulatory agencies, such as telecom regulator Anatel, which can fine companies. A source close to the Ministry of Justice says that these inspections have grown since the pandemic, as well as the approximation between some websites and agencies, in the search for greater cooperation.

The IDV document calculates a tax evasion of R$19 billion to R$20 billion in the sale of international retailers in 2020 — 80% to 90% of them are from Asia. In the Brazilian chains, this evasion ranges from R$4 billion to R$ 5 billion. There were 47 million orders from Brazilians to international stores, brokered by online marketplaces in 2020, says the document. It is as if one in five Brazilians had placed an order in the year.

For the foreign platforms, the issue is commercial. “They [Brazilians] are saying that because they are losing sales and, in a more difficult consumer environment, they do not have access to the competitive sellers base that others have. Because there are sellers that sell cheap items and within the law, as they have a lower cost structure abroad than in Brazil,” says the head of market relations at a Chinese website. “We are bringing to Brazilians thousands of stores that work correctly. Are there illegal products that pass through controls? Yes, but there is work to improve that.”.

Goldman Sachs estimated, in a recent report, that Shopee is expected to reach a 20% share of the Brazilian online market by 2025. Other analyst reports have highlighted Mercado Libre as the biggest competitor today for Magalu, Americanas and Via.

A point highlighted by three lawyers heard by Valor, focused on antitrust legislation, is the possible legal strategy of Brazilian retail chains. “If they claim unfair competition, this is a subject covered by the 1996 Intellectual Property Law, that is, it is something in the civil or even criminal sphere, and not in CADE,” says a former counselor at the antitrust watchdog.

“You can say that it is a violation of the economic order within a broader idea, as defined in article 36 of the law that structures the Brazilian competition defense system. And claim that tax evasion generates an asymmetry of competitive conditions and market imbalance. But CADE has already made clear, on several occasions, that it does not assess tax matters, even though it is necessary to analyze violations of the economic order,” says a lawyer with 23 years of experience in the area. Sought by Valor, CADE did not return requests for comment.

Local retailers and foreign platforms have had a series of differences for years, which became explicit in 2019, when the sector discussed a self-regulation guide, with Senacon’s direct intermediation. In this debate, foreign companies objected to holding platforms responsible for advertising counterfeit products, claiming freedom of expression. Shopee, Aliexpress, OLX, Wish, Shein did not adhere to the guide. Mercado Livre joined in 2021

In the end, the guide assigns responsibility for enforcing property rights only to the companies that own the products and brands. The IDV was in favor of co-responsibility, and the divergence resulted in tense meetings between the parties in 2019. On February 23 there will be a meeting at the CNCP, and the idea is to tell companies that those who do not act according to the guide’s recommendations or meet suggestions will have to leave it.

Sought by Valor, Mercado Libre says it supports actions to inhibit the entry of pirate and counterfeit products, and that invested $100 million in machine learning technology, which helps in the analysis of data and identification of wrongdoings. It also states that only 5% of the sellers in its base are not formal companies. “We’ve formalized 135,000 new small entrepreneurs since the pandemic, and that’s more [than the total number of member stores] in the IDV. So we generate income and jobs,” says Ricardo Lagreca, head of the legal department of Mercado Libre in Brazil.

According to him, the group has digitalized the control structure to identify “as much as possible” sellers and products. “About 95% of the write-offs we make are already automated.” Mercado Libre has been reinforcing, behind the scenes, sources say, that it cannot be compared to platforms without a local distribution structure and that do not generate employment or tax payments. And they don’t see themselves as a foreign operation.

According to Mr. Lagreca, R$1.2 billion in taxes were collected by the group in 2020, and this year it will be “almost twice as much”. The platform had R$48 billion in transacted value in Brazil. The company said last year that from January 2020 to July 2021 an internal brand protection program allowed the deletion of about 30 million irregular ads — there are 360 million ads in the database.

Shopee says it has “proactive screening measures” to identify violations and “provides procedures” for brand owners to request removal of infringing listings. It says that “it is committed to helping small and medium-sized companies grow and prosper online”. Shopee states that more than 85% of its sales are from local sellers, and that selling counterfeit or intellectual property infringing items is prohibited and requires sellers to follow local laws. “Our team in Brazil serves more than 1 million registered local sellers,” it said in a statement.

Shein says it “operates and will continue to operate in compliance with all local laws within its business operations.” Wish did not return requests for comment. OLX states it helps in the development of the country and provides a space to users “always respecting the terms and conditions of use”, with direct negotiation between seller and buyer. According to the company, there are free advertisements and its revenue comes from optional spaces to highlight the offers.

OLX also informs “it welcomes initiatives that promote a healthy environment of competition and any measure that helps in the fight against illicit practices,” and understands that there are always improvements that can be implemented in the sector and in the legislative environment. It acknowledges that the “IDV plays an important role in the discussion of improvement measures and says it is available for a conversation with the institute”.

Sought by Valor, IDV confirms that there is an internal study on the subject, but does not comment on actions in progress.

Source: Valor International

https://valorinternational.globo.com

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