Manufacturing industry worsens deficit; exports lose sophistication

Helping the manufacturing industry rebound from the pandemic | World Economic Forum

While the trade balance as a whole ended 2021 with a record surplus, the manufacturing industry saw its deficit deepen to $53.3 billion, the worst result since 2014. In the pre-pandemic period, in 2019, the negative balance was $42 billion, according to data from the Institute for Industrial Development Studies (IEDI).

In another type of calculation, by product class, a survey by the Brazilian Foreign Trade Association (AEB) shows that the deficit in manufactured goods reached $111 billion last year, the worst since at least 2000. The difference is almost $40 billion compared to 2019, when the deficit in this calculation was $82.7 billion.

The deficit in the manufacturing industry last year deepened even with the 26.3% increase in sector exports compared to 2020. In comparison with 2019, there was also a rise: 14%. Imports, however, grew at a faster pace. From 2020 to last year, it was up 35.1%.

“It is also necessary to point out that there is a low basis for comparison,” points out economist Rafael Cagnin, with IEDI. Even before the pandemic, he recalls, in 2019, exports from the manufacturing industry fell by 5.2% against the previous year, under the effects of the trade conflict between the U.S. and China and the already weakened Argentine economy.

More than the size of the deficit, says Mr. Cagnin, what is more, worrying is the sharp deterioration in sectors with greater technological intensity, important not only for providing economic dynamism but also for greater insertion in global production chains. IEDI’s series since 1997 shows that in 2013 the manufacturing industry had the worst deficit ($65.3 billion).

In that year, the medium-high and high-tech sectors accounted for 36.1% of total manufacturing industry exports. Last year the share was 27.6%. In these two technological bands are the aircraft, pharmaceutical, automobile and electrical machinery and material industries, among others.

High technology, specifically, highlights Mr. Cagnin, fell to 3.9% from 6.4% in the same period. In this group, he says, the aircraft industry is still experiencing the overall effects of the Covid-19 pandemic. The scenario shows, however, that the loss of space on the scale had already been happening before.

Mr. Cagnin draws attention to a kind of “mirroring” in the data related to the composition of the import and export agenda according to technological intensity. While 72.4% of manufacturing industry exports are of low and medium-low technological intensity goods and less than 30% are of high and medium-high technology, the opposite is true for imports. In the list of imports, 71.6% are typical goods from the medium-high and high technology industry, and the rest are medium-low and low technology.

“This pattern reflects lags in technology and innovation that have become more pronounced in recent years and that could become even more pronounced,” warns Mr. Cagnin. He recalls that the world is currently undergoing a process of transformation, such as digitalization, which redefines the technological standards that are used in the rest of the world and result in greater competitiveness.

For Mr. Cagnin, integrating into global value chains is crucial to keep in line with this evolution. For this, he says, an environment of modernization and technological innovation is needed, as well as conditions for this insertion. It is necessary, he argues, to advance in the competitiveness and trade integration agenda, which involves the discussion of old and unresolved issues (tax overhaul, for example), as well as new debates related to the technological race and the policies aimed at it.

Trade integration, says Mr. Cagnin, demands a commercial opening that should generate not only imports but also exports. An opening that goes beyond tariff issues, but that allows the country to be in harmony with various regulations, such as phytosanitary and technical standards, traceability mechanisms, seals, and certifications. “There is an opportunity to advance in this integration and set foot in the changing world.”

For Livio Ribeiro, a researcher at the Fundação Getulio Vargas’s Brazilian Institute of Economics (Ibre-FGV) and a partner at the BRCG consultancy, the IEDI data show that Brazil’s strategic position in terms of sectors, comparative advantages, and value-added research and development is very limited to specific segments that have a more global reach. “Furthermore, in the aggregate, our export-oriented manufacturing industry has an overly regional tone. In addition, there is a mid-chain industry that is not competitive in the world and is increasingly less competitive in our region.” A reflection of this, he says, is the loss of market in South America to Asian countries.

For Mr. Ribeiro, it is necessary to assess which sectors may be able to compete and could be the target of a policy in this respect. However, he says, this needs to be done carefully, which allows the sector to walk in its own ways. The evaluation, he defends, should consider the industry in a broad way, with a view to the best cost-benefit for the country.

The data compiled by AEB, based on a survey by the Foundation for Foreign Trade Studies Center (Funcex), also show that the loss of share of manufactured goods in total Brazilian exports is a long-standing phenomenon. In 2011, they accounted for 36.1% of shipments, a share that dropped to 27.4% last year. It was the basic products that advanced in the period, to 59.4% from 47.8% of Brazilian exports, almost seven percentage points more than in 2019. Semi-manufactured products had a very similar share, to 13, 2% in 2021 from 14.1% in 2011.

AEB’s president José Augusto de Castro points out that the share of manufactured goods was the lowest since 2000. The greater shipment of basic goods, a class made up mainly of agricultural and metallic commodities, is due to the high Brazilian productivity in these sectors, which has provided robust trade surpluses for the country. He argues, however, that greater conditions of competitiveness are needed to stimulate the export of manufactured goods with higher added value, which would also contribute to the generation of more jobs in the country.

Haroldo Ferreira, executive president of footwear industry association Abicalçados, says that exports contributed to the recovery of the sector last year. According to the association, the shipment of Brazilian shoes rose 32% in volume in 2021 compared to the previous year. In values, the high was 36%. The biggest foreign market was the U.S.

Daiane Santos, an economist at Funcex, points out that it is necessary to look at the main export destinations for manufactured goods. China, despite being Brazil’s main trading partner, with 31% of Brazilian shipments in 2021, consumed only 2.3% of exported Brazilian manufactured goods. The main buyer of goods in this class was the United States, which absorbed 21.6% of manufactured goods. Argentina was left with 12.9%. In total Brazilian exports in 2021, the two countries had a share of 11% and 4%, respectively.

Source: Valor International

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Petrobras analyzes opportunities to enter new markets

Política de Bolsonaro tornou Petrobras mais vulnerável a crises – RBA

Petrobras is analyzing opportunities in markets such as small nuclear power plants, geothermal energy and different types of wind and photovoltaic energy. While participating in the Latin America Investment Conference 2022, promoted by Credit Suisse on Thursday morning, the CEO of the state-owned company, Joaquim Silva e Luna, mentioned for the first time some of the areas that are under study by the company in the energy transition scenario. Side by side with the CFO and head of investor relations, Rodrigo Araujo, Mr. Silva e Luna also reiterated that the company maintains its intention to relaunch the processes of refinery sales that have been closed without success.

Mr. Araujo confirmed that the company’s idea is to relaunch the divestments of the Alberto Pasqualini Refinery (Refap), in Rio Grande do Sul, and for the Presidente Getúlio Vargas Refinery (Repar), in Paraná. The executive did not give details about the deadlines. Petrobras signed an agreement in 2019 with antitrust watchdog Cade to sell eight refining assets outside the Rio-São Paulo axis by the end of 2021. With the pandemic, however, the processes have been delayed.

With the changes in the energy market, Petrobras’ current focus is on “the best production with the lowest carbon level,” the CEO said. “We have a commitment, an ambition aligned with the Paris Agreement, in which we have a commitment to reduce emissions from our operations by 25% by 2030,” he said.

In the CFO’s view, the company has a competitive advantage in areas such as high technology and large-scale projects “We have to analyze what kind of investment we can make for the energy transition. I understand that petroleum will still be a source that will last for a long time,” added Mr. Araujo.

There are no specific resources allocated to new energy sources yet, but studies on the company’s entry into new markets are underway at the oil company’s research center.

The CEO said that Petrobras has an expected value for the decarbonization set as a whole and does not look specifically at one project. “We don’t think about any kind of investment without the clarity that it will have a return,” Mr. Silva e Luna added.

According to the executive, Petrobras has learned from past problems to strengthen governance. “We try to make technical collegiate decisions, building a collective will about our decisions and not letting external pressures influence them,” he said.

On fuel prices, Mr. Silva e Luna said that the company has social responsibility, but that it cannot make public policy. “Our focus is on generating value for our shareholders, investors, the federal government and for society in general,” he said.

According to him, Petrobras management is committed with the investors. In the last five years the company has paid more than R$1 trillion in taxes. According to the CFO, there is comfort with the leverage of the oil company in terms of capital structure. “We see possibility and dividend return much higher than in the past, to have a more consistent and robust distribution,” he said.

Source: Valor International

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Pepkor buys Avenida for R$1bn

Pepkor compra Grupo Avenida, de vestuário, para crescer fora da África | Exame

Pepkor, the largest fashion retailer in South Africa, with more than 5,500 stores in ten countries, controlled by Steinhoff International, has acquired 87% of Grupo Avenida, one of the largest fashion chains in the Center-West and North of the country formed by 110 stores of Avenida fashion retailer and 20 of shoe retailer Giovanna Calçados.

The foreign company did not disclose the exact value of the deal, which was around R$1.1 billion. The stake was acquired from funds of the manager Kinea, which is leaving the company after almost eight years, and the founding family, which kept 13% and will continue to manage the operation.

Part of the capital will go into the company’s cash flow, with part going to expansion projects, especially in areas already explored by the group.

Pepkor will face challenges in Brazil, such as a complex tax system and a highly fragmented and still informal market in many regions. “They operate in markets that have gone through wars, and we will continue in management [for seven years]. I don’t think there should be any problems for them [to settle] here,” Christian Caseli, chairman of the board of Grupo Avenida, told Valor.

With no progress on the initial public offering plan, after the market worsened last year, and with Kinea interested in exiting the business, Grupo Avenida and Pepkor began lining up a deal in 2020.

The Caseli family — formed by Ailton Caseli, founder of the company, Christian, Rodrigo, and Giovanna — previously held 51% of the common shares and 45% of the total capital. They will stay in the management of the operation for seven years.

This move is the entry into the country of Pepkor and its parent company, owner of the furniture and appliances chain Conforama and mattress retailer Mattress Firm Group. Pepkor Holdings is South Africa’s largest apparel retailer, with a market capitalization of $5.3 billion.

“They have extensive knowledge of integration processes and synergy gains because they have led an expansion in Poland and Australia,” said Mr. Caseli. In 2003, Pepkor entered the Polish market through the acquisition of Pepco.

Avenida is one of the largest fashion retail chains in the Center-West and North of Brazil. In 2020, it had revenues of R$641.3 million, down 5.3% year-on-year, impacted by the post-pandemic crisis. It also had a net loss of R$51.1 million, versus a profit of R$25.3 million in 2019. Net debt remained stable at around R$161 million.

Grupo Avenida had preliminary sales of R$773 million ($146.90 million) in 2021.

The operation involving the sale of the leading chain in the Center-West is the first transaction of foreign groups in the most affordable fashion segment (and with greater scale) in almost 24 years. The American JC Penney entered the country in 1998 after buying a stake in Renner, and left Brazil in 2005. The Dutch C&A has been in the country since 1976. All the other publicly and privately held leaders (Pernambucanas, Renner, Riachuelo) have local control. Several other companies have tried to occupy the Brazilian market but failed. Competition is strong with the informal market and with Asian sites.

Source: Valor International

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Inequality in rural areas may worsen, study shows

Hunger also affects people in the countryside in a dramatic way — Foto: Divulgação
Hunger also affects people in the countryside in a dramatic way — Foto: Divulgação

It is not new that, in Brazil, agricultural activities that generate billion-dollar results still share the corners of the country with extreme poverty. Just over 15% of the country’s rural population experienced severe deprivation in 2019, around 5 million people. Another 17.6 million people (52.9% of the total) were poor. A worrying picture, which may have become even darker with the economic degradation during the pandemic.

In order for the situation to improve, the study “Productive Inclusion in Rural and Inland Brazil”, prepared by researchers from the sustainability nucleus of the Brazilian Center for Analysis and Planning (Cebrap) in partnership with the Arymax and Tide Setubal Foundations and the Humanize Institute, proposes a long-term approach with public and private sector efforts.

The Household Budget Survey of the Brazilian Institute of Geography and Statistics (IBGE) shows that Brazil reduced the rate of people going hungry between 2004 and 2013, but the trend was reversed. In the last five years, the country has returned to the levels of food insecurity seen 15 years ago, according to data from the IBGE and the Brazilian Food and Nutrition Sovereignty and Security Research Network (Rede Penssan). In 2020 and 2021, the increase in severe food insecurity reached an average of 27.6%.

According to the group, the social problems in the countryside will not be solved with isolated actions of financing, technical assistance, digitalization and cooperatives. It is necessary to work on these different fronts to structure micro-producers. More than “teaching to fish”, the study defends the need to guarantee opportunities in the surroundings.

The research emphasizes that inequalities in the countryside are too complex a problem to be solved only by the government or the private sector. “It works better if we have coordination between these actors. The private sector has localized embryos and innovations, but it is far from being the rule. And it can’t be,” says researcher Arilson Favareto.

According to him, it is up to the government to stimulate, through fiscal policies, companies that prioritize the purchase of small producers, as in the biodiesel sector, in which a good part of the raw material comes from this group of farmers. The private sector, on the other hand, needs to understand that it is worth investing in the surroundings beyond the roads. The construction of schools, hospitals and commercial areas benefits the local economy, generates demand and also better qualifies the workforce, which can reduce costs later on.

Mr. Favareto says that the private sector is advancing in the environmental agenda, but social issues are in the background and can be aggravated in the process. The objective of the study, he reinforces, is not to demonize agribusiness, nor to encourage a dichotomous view. For example: if the mechanization of agricultural production is a reality, it is necessary to find ways out for the workers who lost their jobs along the way.

As modernization is an irreversible trend, according to him, it is necessary to create income alternatives in rural areas that are not directly associated with agribusiness. “There is, today, a faith that the strength of agribusiness will generate opportunities for everyone, but it will not. The trend is to save work. This problem will not be solved naturally,” he stresses. Mr. Favareto cites an article that identified a 67% drop in jobs in the sugar-alcohol sector between 2008 and 2018, to 213,400 from 652,900 employees.

Despite the fragility of the local economy in these more remote regions, 49% of the employed population residing in rural areas do not work in agricultural activity. In addition, 35% of those who work in agribusiness live in urban areas of municipalities. “It is necessary to look at the space and think about where the opportunities for inclusion of people through work are,” he says.

Finally, the researcher believes that the digitizalition of the segment also needs to be considered from a social point of view, so that there is no longer an abyss between large and small properties. The survey highlights that 71.8% of rural properties do not have internet access, according to the 2017 Agricultural Census. There are more than 3.6 million farms without internet connection.

In addition, much of the innovation for agribusiness is developed in the South-Central, focusing on the needs of producers in this region — only 7% of the almost 1,600 Brazilian agtechs are in the North and Northeast regions, according to the Radar Agtech 2021 report. “How will a researcher in the countryside of São Paulo develop a precise solution for a farmer in the up in Acre state? He won’t, it’s not his reality.”

According to the researcher, a strategy is needed to take agtechs to the peripheral regions of the country, as happened with large multinationals that opened operations in emerging countries to develop technologies suitable for those countries with very different conditions from rich nations, such as the United States and countries in Europe.

Source: Valor International

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Political wing of government acts to zero taxes on gasoline

Gasoline Poisoning: Symptoms, Causes, Effects & More

The political wing of the government acted on Thursday to approve a Proposed Amendment to the Constitution (PEC) that would allow President Jair Bolsonaro (Liberal Party, PL) to zero taxes on all fuels, including gasoline, without having to compensate for the increase in other taxes. In addition, it authorizes a reduction in the Tax on Industrialized Products (IPI) and Tax on Financial Transactions (IOF) on any products without counterparts. The project contradicts the position of Economy minister Paulo Guedes, who is concerned about the impact of this measure on public accounts and who defended a tax exemption restricted to diesel oil, with a lower fiscal cost.

Deputy Christino Áureo (Progressive Party, PP- Rio de Janeiro) filed the PEC on Thursday at the request of a part of the government. The text, as revealed by Valor, was formulated in the Chief of Staff Office, controlled by minister Ciro Nogueira (Progressive Party, PP), and allows for a partial reduction or even zero taxes in 2022 and 2023 to counter one of the main criticisms of voters to the current administration: the high price of gasoline, cooking gas and diesel oil, because of Petrobras’ pricing policy.

The cost, according to economic sources, will be around R$54 billion per year, higher than the total investments planned for 2022. The exemption on gasoline alone would bring a loss of almost R$27 billion to the taxpayer: R$23.8 billion from social taxes PIS/Cofins and another R$3 billion from federal tax Cide. Diesel, on the other hand, would cost another R$18 billion. If Congress resumes the idea, already defended by President Bolsonaro, of cutting taxes on electricity, the impact would rise to up to R$75 billion. In addition, the PEC authorizes a cut in IPI and IOF, among other taxes that had not entered the waiver calculation.

Tax laws require that the reduction of one tax be offset by the increase of others, but a wing of the government decided to propose the PEC to circumvent this rule temporarily. The country has been living with a primary fiscal deficit for seven years and in 2021 it recorded a deficit of R$35 billion in the central government. For 2022, the estimate is a deficit of R$79.3 billion – and that is before the idea to exempt fuel.

The Ministry of Economy did not participate in the elaboration of the PEC, says a source. On the contrary, the ministry considers it bad and. In the opinion of the technicians, it would not even be necessary to change the Constitution. The cut could be authorized by a supplementary law (which would amend the Fiscal Responsibility Law to allow it to happen without the need to create other sources of revenue to compensate for the loss) and adjustments to the Budgetary Guidelines Law (LDO).

The option for a complementary law would also allow Mr. Guedes to pressure President Bolsonaro to veto “exaggerations” approved by lawmakers. On the other hand, a constitutional amendment, although it requires greater support to be approved, is enacted by Congress itself, without this alternative. “PEC is very bad,” said a member of the ministry. The so-called “PEC dos Precatórios” — regarding writs that represent federal debts from loss of court disputes, voted on in December — had the space for spending doubled by congressmen.

The content was also far from what was advocated by the economic area. Until the day before, the perception in the ministry was that the proposal would be expensive to the taxpayer to generate relief in prices that could quickly disappear when faced with a depreciation of the Real against the dollar or the price of oil. Mr. Guedes even publicly criticized the removal of taxes on gasoline at a time of transition to a low-carbon economy. Diesel tax release, on the other hand, was seen as acceptable, given the importance of the fuel in the country’s logistics, not to mention that it pleases one of the president’s bases of support, the truck drivers.

The version filed by Mr. Áureo allows the full release of fuel taxes in 2022 and 2023 without the need for compensation – it would be enough to present financial estimates and adjust the budget laws to the new rates. The endorsement would be for the federal government and also the states and municipalities, giving strength to Mr. Bolsonaro’s strategy of pushing the burden of the gasoline price to the governors who refuse to accept the reduction of ICMS.

On Thursday, the governors declared support for the bill proposed by Senator Jean Paul Prates (PT-RN) to change Petrobras’ fuel price policy, creating a tax on crude oil exports and a fund to stabilize prices in the domestic market. “The bill is born from the problem itself, from the extraordinary profit from the increase in fuel prices,” said the governor of Piauí, Wellington Dias (Workers Party, PT), who coordinates the Governors Forum. The discussion about the ICMS on fuels would be left only for the tax reform.

According to the bill, the reduction of taxes will only have to respect the requirements of presenting an estimate of the budget and fiscal impact of the measures adopted, to comply with the annual goals of fiscal result (which can be changed by law), and to be part of the budget laws (such as the annual budget and the multi-annual plan).

Mr. Áureo told Valor that the text is of his authorship, negotiated with the federal government and that he will wait to discuss the project. “I will continue my dialogue with the government and with productive sectors and society”, he said. The document data, however, show that it was written in the computer of a government technician, the assistant sub-secretary of Public Finance of the Chief of Staff’s Office, Oliveira Alves Pereira Filho, and sent to the deputy to officially present it.

Initially, the idea of the federal government was that Senator Alexandre Silveira (Social Democratic Party, PSD of Minas Gerais) would file the PEC in the Senate if he accepted to be the government’s leader. But he has signalized that he will refuse the leadership after pressure from colleagues and the changing of government’s strategy, with the process starting in the House, where the government’s base is stronger. Mr. Silveira, in turn, is preparing an alternative PEC for the Senate that would contemplate the fuel tax release, and also the use of Petrobras dividends to finance a social fund to balance prices.

The text needs the support of 171 deputies to start being processed. As the Constitution and Justice Commission (CCJ) is not expected to be opened until after Carnaval [March 1], it is most likely that the speaker of the Chamber of Deputies, Arthur Lira (Progressive Party, PP of Alagoas), will decide on admissibility on a floor vote. After that, a special commission would be created and a rapporteur appointed to discuss an updated version of the PEC, within a period of 11 to 40 sessions.

For the economist and consultant Adriano Pires, president of the Brazilian Center for Infrastructure (CBIE), the PEC will have almost no impact on consumers, the same way that occurred with the exoneration of the PIS and Cofins on cooking gas, in effect since March, and diesel, which was valid for three months in 2021. “The government zeroed the PIS and Cofins on diesel, but as the barrel kept rising and the exchange rate kept depreciating against the dollar, the price went up,” he said. He believes that the PEC will also face opposition from the rural caucus and the states that produce hydrous ethanol, which today has a lower PIS and Cofins than gasoline. “If the tax is reduced for both, ethanol will lose a lot of competitiveness,” he said.

(Edna Simão and Estevão Taiar, from Brasília, and Marta Watanabe, from São Paulo, contributed to this story)

Source: Valor International

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Brazilian soy bag breaks new record price

Soya Beans In A Bag Isolated On White Stock Photo, Picture And Royalty Free Image. Image 36302303.

The soybean bag reached R$200 in Brazil, a record not imagined until last year, and premiums at the ports are also six times above the average for this time of year, as a reflection of a dispute between foreign and domestic markets. With a 15% increase accumulated in 2022 in Chicago’s stock market, the oilseed will is getting closer to the historical value reached in the first half of 2021, of $16.42 per bushel. And the coming months may be even tenser.

The persistent drought that affects the South of Brazil, Argentina, and Paraguay, caused by the La Niña weather phenomenon, tends to make production in the three countries lower than previously calculated. As a result, for fear of product shortages, soybean importers, mainly China, are intensifying purchases from the U.S.

“China needs to buy a sizable percentage in April and May. This has created an uncommon situation, which is the simultaneous increase in values and export premiums,” says analyst Cristiano Palavro, with Pátria Agronegócios.

On Wednesday, in Passo Fundo (Rio Grande do Sul state), industries were already offering R$202 per soybean bag, according to consultant Vlamir Brandalizze.

And the premium in Paranaguá (Paraná state) – national reference – was between $1.10 and $1.20 for March, when the prices for this time of the year usually stay between $0.20 and $0.30 a bushel, says Etore Barone, with StoneX consultant.

“With shortages from other suppliers, the 2020/21 ending stocks in the U.S. will be reduced. And with the smaller crop here, the 2021/22 crop is already tighter. If there is no area increase in the U.S. for the April season, or if something goes wrong during the cycle, we will have a worldwide problem,” Mr. Etore adds.

In the last few days, a new round of estimates pointed out that the harvest loss in Brazil will be even greater than expected. At the beginning of the cycle, 140 million tonnes were expected. Then, with the drought problem, the expectation went to a range between 130 million tonnes and 135 million tonnes. Now, it has dropped one more level, to 125 million tonnes, among the main consulting firms.

According to Mr. Barone, the harvest loss in Argentina may reach up to 6 million tonnes, and it may reach between 4 million tonnes and 5 million tonnes in Paraguay.

“The dream of the Brazilian producer was for the bag to reach R$100, which happened in August 2020. Last year’s average was between R$150 and R$170 and now we foresee that it may reach more than R$ 200,” he evaluates.

The producer also has the exchange rate in his favor, still attractive despite the recent fall. “The dollar at R$5.30 makes the Brazilian soy bag very profitable,” adds Mr. Barone.

There is a fight today to keep the product in the domestic market, since the main crushers are in Paraná and Rio Grande do Sul, the states most affected by the drought, according to Mr. Barone and Mr. Palavro. In Paraná, StoneX’s initial harvest forecast was 22 million tonnes, but now is 15 million tonnes. In Rio Grande do Sul it went from 22 million tonnes to 12.5 million tonnes.

With such attractive figures, Mr. Palavro says that soybean negotiations in Brazil have regained pace. However, part of the farmers is delaying business to wait for even higher prices.

Source: Valor International

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Nestlé launches social impact cereal bar

Nestlé inaugura Empório com produtos de todas as marcas em sua nova sede

Nestlé launched on Wednesday its first social impact food: a cereal bar with sale profits going entirely to NGO Gerando Falcões, which fights poverty in 1,700 poor neighborhoods in Brazil.

Called Gerando Falcões bar, the product is a global novelty of the multinational, present in 83 countries, and will initially be sold only on the internet, on platforms Mercado Libre and Empório Nestlé. “This is the first of many. My dream is to one day see, in supermarkets, exclusive shelves with all kinds of products, chocolates, cookies, coffees, whose profits are donated to social transformation,” said Nestlé Brazil CEO Marcelo Melchior.

The initial expectation, according to Carolina Sevciuc, head of digital transformation at Nestlé Brasil, is to generate R$1 million monthly, which will be allocated to the NGO´s iniciative Favela 3D.

The Favela 3D project — “dignified, digital and developed” — aims to restructure Brazilian poor neighborhoods to promote transformation through income generation, housing, citizenship, health, culture, education, and entrepreneurship programs.

This is the second major partnership announced by Gerando Falcões in less than two months. In December, Ânima Educação announced it will invest in courses in the communities where the project is being developed: Marte, in São José do Rio Preto (São Paulo state); Vergel, in Maceió (Alagoas state); Morro da Providência, in Rio de Janeiro; and the Boca do Sapo neighborhood, in Ferraz de Vasconcelos, Greater São Paulo.

“This initiative with Nestlé opens the way and will accelerate the development of social technologies. It can lead other companies to also want to create similar products, with actions that are institutionalized, that last,” said Eduardo Lyra, founder and CEO of Gerando Falcões.

According to Mr. Lyra, the NGO is supported by Kayma, an Israeli company run by Dan Ariely, a prestigious researcher in psychology and behavioral economics. The company specializes in creating digital solutions and methodologies that will help measure and assess the impacts of Favela 3D. “The goal is that it can be replicated in all the favelas in Brazil.”

The creation of the cereal bar involved the participation of 60 people, including employees of Nestlé and the NGO. There were more than 40 ideas presented, until reaching 12 final concepts that resulted in the bar. “We are starting sales through online channels because we don’t want to make this a chicken flight, but a hawk flight. We want all this learning, whether in distribution, in the price point, or in the investment made, to help us build something bigger, with sales that reach the whole of Brazil,” said Mr. Melchior.

According to Instituto Locomotiva, around 17.1 million people live in Brazilian favelas, equivalent to 8% of the population. Added together, they would form the fourth most populous state in the country, behind only São Paulo, Minas Gerais and Rio de Janeiro.

Source: Valor International

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Central Bank raises interest to 10.75%, indicates slower pace in new hikes

Interest rates expected to rise more slowly now — Foto: Pixabay

With a resistant inflation that tends to burst again this year’s target, the Central Bank’s Monetary Policy Committee (Copom) this Wednesday raised the basic interest rate by 150 basis points, to 10.75% per year. The Selic has not been in double digits since July 2017, when it went to 9.25% from 10.25% per year.

“The Committee judges that this decision reflects its reference scenario for prospective inflation, a higher-than-usual variance in the balance of risks and is consistent with the convergence of inflation to its target throughout the relevant horizon for monetary policy, which includes 2022 and, to a larger degree, 2023. Without compromising its fundamental objective of ensuring price stability, this decision also implies smoothing of economic fluctuations and fosters full employment”, said the Central Bank in the statement released after the meeting.

According to the committee, in spite of the more favorable public accounts data, “uncertainties regarding the fiscal framework maintain elevated the risk of deanchoring inflation expectations and, therefore, the upward asymmetry in the balance of risks”

Copom signaled that from now on it will reduce the pace of monetary tightening, but reinforced that the Selic rate should advance “significantly into the restrictive territory” on the relevant horizon.

“This indication [of a reduction in the pace] reflects the stage of the tightening cycle as its cumulative effects will manifest themselves over the relevant horizon,” justified the committee in the decision statement. In practice, this means that the Selic is already at high levels and that it will still take some time for the effects on inflation to be noticed.

The Central Bank highlighted that the increase is compatible with the convergence of inflation to the targets over the relevant horizon, which now includes 2022 and, to a greater extent, 2023. The next meeting, in March, is the last in which the BC considers this year’s target for monetary policy decisions.

“The Committee judges that this decision reflects its reference scenario for prospective inflation, a higher-than-usual variance in the balance of risks”, the committee highlighted.

Although it indicated a deceleration in the rate of interest rate hikes, the committee highlighted the increase in its inflation forecasts and the risk of de-anchoring expectations for longer terms. In addition, he emphasized that “it will persist in its strategy until the disinflation process and the expectation anchoring around its targets consolidate”.

The decision was in line with the market consensus, which was for an increase of 150 basis points, as signaled by the monetary authority at the previous meeting, in December. At the time, the Selic was raised by 150bp, to 9.25% per year, and the committee said in its statement that it anticipated “another adjustment of the same magnitude” for the meeting on Wednesday.

This was the eighth consecutive hike in the basic interest rate.

In a survey carried out by Valor on Monday with 112 financial institutions and consultancies, the expectation was unanimous that the Selic rate would be raised this week by 150 bp, to 10.75% from 9.25% per year.

The interest rate shock began in March last year — when the Selic was at 2% — and has been applied to cool the economy in response to rising prices and higher expectations of rising inflation expectations for this year. The reflexes of the Selic can be seen in the financing of home ownership, government debt, productive investments and consumption.

In the anteroom of the Copom decision, the stock market and the exchange rate had a correction movement after a sequence of positive results.

Pressured by the banking sector, in which Santander’s less-good-than-expected earnings balance published by the bank, benchmark stock index Ibovespa returned to operate at the level of 112,000 points. The commercial dollar, on the other hand, surpassed R$5.30, but ended up losing strength in the last hour of trading and closed practically stable.

After adjustments, the reference index of the local stock market closed down 1.18%, at 111,894.36 points. Negative highlight of the trading session, Santander units fell 2.99%, pulling with them other shares in the segment: Itaú Unibanco shares fell 1.57%, while Bradesco common and preferential shares dropped 1.68% and 1.81%, respectively.

In the case of the exchange rate, the prospect of a higher Selic rate, which increases the differential with the outside world, weighs positively – one of the components of the attractiveness of any currency. After hitting R$5.3145 at the maximum of the day, the dollar closed at R$5.2754, a rise of only 0.09%. As a result, it remains at the lowest levels since September.

(Marcelo Osakabe, Gabriel Roca and Victor Rezende contributed to this story)

Source: Valor International

https://valorinternational.globo.com

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Industry resumes growth in December, but is still weak

Luana Miranda — Foto: Ana Paula Paiva/Valor

The Brazilian industry resumed growth in December (2.9% compared to November), even more than expected (1.6%, according do Valor Data), which helps to sustain a more positive view of economists for the GDP of the fourth quarter of 2021. The result, however, does not change the balance that 2021 was a challenging year for the sector, nor the prospect that 2022 will likely be a new period of contraction.

Industrial production had not recorded growth since May 2021 (1.2%). Besides these two months, there was a positive result in January (0.2%) and stability in November. As released on Wednesday by the statistics agency IBGE, 20 of the 26 activities analyzed rose in December, with vehicles (12.2%) standing out — the sector grew 20.3% in 2021, but still behind the 27.9% drop in 2020.

With the December result, the industry managed to be stable in the fourth quarter of 2021, compared to the three months immediately before, after three consecutive quarterly declines.

Three of the four major categories advanced in 2021, especially capital goods (28.3%), driven by agriculture and construction. The exception was semi- and non-durable goods (-0.5%).

Industry as a whole accumulated a 3.9% rise in 2021, the first year of expansion since 2018 (1%) and the highest annual rate since 2010 (10.2%). It was not enough, however, to offset the entire 4.5% drop in 2020, coming from -1.1% in 2019. “It is necessary to relativize the advance of 2021 with the losses of 2020 and 2019,” says André Macedo, manager of the Monthly Industrial Survey (PIM).

The industry is still 0.9% below the pre-pandemic level (February 2020) and 17.7% away from the highest level of the series (May 2011). The numbers for 2021 reflect a year marked, on the supply side, by more expensive production costs – such as higher energy tariffs – and the persistence of problems in global chains. On the demand side, high inflation eroded the purchasing power of families, which became even flatter as the labor market recovers with low-paying jobs.“

It was a good result to end the fourth quarter,” says Luana Miranda, economist at GAP Asset, regarding the rise in the industry in December. She recalls that October was “very bad” for the major sectors (industry, retail and services) and November brought mixed numbers, with the industry still in decline. Before the December PIM, Ms. Miranda projected a GDP of around 0.1% for the fourth quarter of 2021, a number that, now, “should go up a little bit,” she says.

The numbers reflect a year marked, on the supply side, by higher production costs – such as higher energy tariffs – and the persistence of problems in the supply chains. On the demand side, high inflation has eroded the purchasing power of families, which has been even more pressured with a labor market recovery based on precarious, lower-wage jobs.

Source: Valor International

https://valorinternational.globo.com

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Brazil Industrial Production Grew in December for First Time in 7 Months

Industrial Production in Brazil Back to Growth in August, but Pace Still Below 2018 - The Rio Times

SAO PAULO–Brazil’s industrial production rose in December, the first increase in seven months, as output of durable goods jumped and production of capital goods increased.

Production rose a seasonally adjusted 2.9% in December and fell 5.0% from a year earlier, the Brazilian Institute of Geography and Statistics, or IBGE, said Wednesday. The IBGE revised the number for November to flat in the month from a decline of 0.2% and left the figure for November from a year earlier unchanged at down 4.4%.

Brazilian industry has been plagued by the same supply problems that affected businesses around the world in 2021 as backed up ports, a shortage of containers and higher shipping costs got in the way of production. In Brazil, high unemployment and rapid inflation have also cut into demand.

Production increased in all the major categories measured in the report, with output of durable goods rising the most in the month at 6.9%. Production of capital goods increased 4.4%, output of consumer goods rose 3.1% and production of intermediate goods grew 1.2%.

Source: Market Watch

https://www.marketwatch.com/

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