March 2022 - Murray Advogados

Economy Brazil unemployment at 11.2% in February

The unemployment rate in Brazil reached 11.2 percent in the mobile quarter encompassing December 2021 through February this year. The index is lower than in the quarter ended in November (11.6%) and in the one ended in February last year (14.6%).

The figures can be found in the Continuous PNAD (National Household Sample Survey), released today (Mar. 31) by the Brazil’s official statistics agency IBGE.

The jobless also declined in number to 12 million in the quarter ended in February, down 3.1 percent from the previous quarter (ended in November), or 389 thousand fewer people. Compared to the same quarter last year (ended in February 2021), the drop was 19.5 percent, 2.9 million fewer people.

The employed population (95.2 million) remained stable from the previous quarter, but rose 9.1 percent against the same quarter last year.

Source: Agência Brasil

https://agenciabrasil.ebc.com.br/en

31 de March de 2022/by Gelcy Bueno

Murray News

States spent less on security during pandemic

Ursula Dias Peres — Foto: Silvia Zamboni/Valor

Unlike health and education, states’ total spending on public security in 2021 was below that seen before the pandemic period. Spending on public security, considering the 26 states and the Federal District, was 3.4% lower than in 2019, despite the favorable situation for revenues in the last two years. In addition to fueling demonstrations that are still taking place in some states to use up the last days of the deadline for adjustments above inflation in an election year, the situation also shows, according to experts, the need for a new model of organization and financing of public security.

In Minas Gerais, the Legislative Assembly approved on Tuesday a 24% adjustment for public security. Also on Tuesday, the government of São Paulo raised salaries of civil servants in public security by 20%. In Rio Grande do Sul, the police will hold a new demonstration on Thursday to ask for salary adjustment for inflation of the last three years. According to the Superior Electoral Court (TSE), due to the elections, raises above inflation to public servants can be granted this year only until April 5.

The drop in spending on public security compared with health and education. The health crisis naturally increased health expenditures, which ended 2021 with a real increase of 15.9% compared to 2019. Spending in this field exceeded the 10.8% growth in current net revenue in the same period. Expenditure on education grew at a slower rate than revenue, but ended last year with a 7.1% increase compared to the pre-pandemic period.

The data collected by the Solidarity Research Network consider the expenses committed to public security reported by states. The 2019 and 2020 values were updated by the IPCA, Brazil’s benchmark inflation index. Expenses consider costs, payroll and investments. States represent about 80% of public sector expenditure on public security.

The real drop in expenses with public security in 2021 compared to 2019 occurred in 14 of the 27 federative entities, according to the data collected by the Network. For Ursula Dias Peres, a researcher at the Center of Metropolis Studies of the University of São Paulo (CEM/USP) and the Solidarity Research Network, the decline in security expenses in the total of the states is not large, but relevant because salary adjustments are restricted since 2020 and, in view of the increase in state revenues last year, the situation favored pressure from servants this year.

The higher collection of sales tax ICMS last year was not anticipated and led to an adjustment of spending by the states during the year, the researcher said. At the same time, Complementary Law 173 of 2020, which restricted salary adjustments, was in force until the end of 2021.

“This has heavily affected fields more dependent on human capital, such as public security, civil and military police and fire departments,” Ms. Peres said. She recalled that, in general, it was not necessary to cut programs, since the effect of the lack of adjustments naturally led to a reduction in expenses. She considers that there is heterogeneity between the states. There is no standard governance model, which results in different payroll weights for expenditures.

The good financial situation of the states did not go unnoticed by security civil servants. Cláudio Wohlfahrt, financial director of Ugeirm, a union of police clerks, inspectors and investigators in Rio Grande do Sul, says that the state’s GDP grew 10.4% in 2021, more than double the federal rate of 4.6%, and that the collection last year exceeded the budget forecast.

“The government’s coffer is full,” he said. The claim of security civil servants, who organized a strike on Tuesday and are expected to demonstrate again on Thursday, is to ask for adjustments that have not been made since 2019, says Mr. Wohlfahrt.

In a note, the Finance Department of Rio Grande do Sul says that, in recent years, it had no margin to guarantee any adjustment to civil servants, having delayed salaries for 57 months. Only in 2020, with reforms and adjustment measures, it was possible to catch up on salaries. The fiscal situation has improved, the government said, but the only issue that can currently be discussed is a general revision. The Rio Grande do Sul government announced that it will send to the Legislative Assembly a proposal for a general 6% adjustment for public servants, with an annual impact of R$1.5 billion.

What is not yet known, says Ms. Peres, is how ICMS will behave this year. Last year, revenue from the main tax collected by the states increased, partly due to the recovery of the economy and also driven by inflation and fuel prices. This year, she recalls, there are already changes in the tax levied on fuel. And any adjustment given in an election year for public security will be permanent.

Ms. Peres explains that, unlike health and education, security does not have a minimum constitutional allocation that obliges states to spend according to the level of revenue growth. In addition to the issue of destination, there are also important differences with other public services. Health, for example, says Ms. Peres, in addition to having been more impacted by the nature of the Covid-19 health crisis, in some states it is also operated largely by third parties, through social organizations, which makes spending less subject to restrictions on salary adjustments.

For sociologist Samira Bueno, executive director of the Brazilian Forum on Public Security (FBSP), an NGO that collects and monitors data in this field, one of the great challenges for associations that represent security civil servants is to claim salary adjustments at a time when indicators show a reduction in crime rates. According to the Violence Monitor, a partnership between FBSP and news outlet G1, there were 41,100 murders in 2021 in the country, down 7% from the previous year and the lowest number since 2007.

Source: Valor International

https://valorinternational.globo.com

31 de March de 2022/by Gelcy Bueno

Murray News

Credit Suisse sees room for stronger real

The favorable global environment for commodity exporters and the double-digit interest rates in Brazil, which already outpaces recent inflation figures, have provided much support for the Brazilian real since the beginning of the year. When assessing the terms of trade, in particular, it is possible that the real has room to appreciate further in the first half of 2022, said Luciano Telo, the chief investment officer of Credit Suisse in Brazil.

Mr. Telo told Valor that the scenario may be more favorable to the dollar in the second half of the year. Among the reasons are the uncertainty brought about by the presidential elections and the monetary tightening by the U.S. Federal Reserve, which may accelerate the pace of interest rate increases.

Read the main excerpts from the interview below:

Valor: What explains the recent strong appreciation of the real?

Luciano Telo: When the real was not appreciating, we attributed this to two factors: fiscal risks and interest rates. The strong rise [of the Selic, Brazil’s benchmark interest rate] was projected, but it was confirmed over time. The real started to strengthen when interest rates went to double-digit levels because we reached the point of having positive real interest rates, and from then on it was interesting to keep the currency. A second factor was the additional commodity price shock. The scenario, which was already favorable for commodity exporters, became even stronger, especially after the conflict in Ukraine. In fact, that shock will help Brazil’s external accounts. Despite the fact that all countries lose with the war, we will have a commodity effect that favors the terms of trade.

Valor: Does the real have room to appreciate further?

Mr. Telo: If we compare the real with a basket of emerging currencies, the gap has already closed at R$4.80 to the dollar, and this has also happened with currencies of developed countries. When we look at it from another angle, of the terms of trade, we think it can appreciate further. The market has been talking about [a foreign exchange rate of] R$4.50 to the dollar. The real is surfing a more favorable short-term wave and a lot of inflows.

Valor: Wouldn’t Fed’s monetary tightening be a limiting factor for the depreciation of the dollar?

Mr. Telo: The second half of the year is a different story. At least six interest rate hikes [on the American curve] are expected, but there is a discussion about whether the Fed is going to accelerate the pace to 50 basis points and there is a great possibility that this will start in the next meeting. The second half of the year is likely to be favorable to the dollar. As for commodities, the discussion may be about how long this shock will last. We have the war issue, but this shock is likely to take a little longer. Sanctions will continue in the same way even as there is a resolution of the war, and deglobalization is expected to remain. The real has its best chance in the first half of the year.

Valor: What about the domestic scenario? What could influence the behavior of the currency?

Mr. Telo: The election will bring uncertainty. It is natural that the market wants to reduce positions, and dollar positions usually hedge the portfolio. Before the election, the domestic market may suffer if you reduce the volatility of the portfolios by having dollar positions. If one is going to set up a more defensive position, it would be closer to the third or fourth quarter, but not until the middle of the year. Historically, we start to have election discussions in March, but since we are in a favorable flow environment, it seems to me that this discussion has been postponed.

Valor: With high interest rates over the entire horizon, are foreign investors likely to be more attracted to fixed income in Brazil?

Mr. Telo: It is possible that we will draw foreign funds back into our fixed income. It would even be easier than has been the case. We are seeing investments in stocks. The flow is coming to the stock market, and we have seen an increase in foreign participation. Foreigners have brought R$91 billion to the Brazilian stock market. In the whole of last year, excluding IPOs, they brought R$70 billion.

Valor: Do you see an opportunity in the domestic fixed-income market now?

Mr. Telo: The NTN-B [National Treasury note] rate for 2035 is now around 5.6%, but it has been higher. The fixed rates are above 12%. These are levels that, if we compare them to what we expect for nominal and real interest rates in Brazil, are attractive. Since we still don’t know the extent of inflation and we have always had surprises of more inflation, we can’t see the end of the cycle. The Central Bank has signaled that it is near the end, but this also depends on the perspective that you are going to have for the price of oil and commodities. I can’t clearly see a catalyst for the fall of future interest rates, but it seems that there is plenty of premium. When it becomes clear that the adjustment of interest rates is near the end, it will be an opportunity in fixed income. We don’t increase our positions. We have a light position in NTN-Bs and a small one in fixed rate notes maturing in 2025.

Valor: There is a strong discussion in the market about the direction of inflation and our own implicit rates are at quite high levels…

Mr. Telo: The market, in fact, has increased inflation projections a lot – the long ones as well. The market is not irrational, but it has a hard time knowing how long-lasting the commodity and oil shock will be. And there are deeper medium- and long-term discussions, such as whether globalization will start to slow down. Probably the market will go a little stronger in one direction to eventually correct the excesses, but no one can have such an accurate forecast. Inflation convergence ahead would have to correct the implied inflation downward, but we are in a time of a lot of uncertainty.

Valor: How is your portfolio doing?

Mr. Telo: At the beginning of the pandemic, we had maximum stimuli in the world and we had to have an additional allocation in Brazilian and global equities well above what we would normally have in our portfolios. Last year we reduced the stock positions. Today, we have 20% in stocks in our portfolio, of which 12.5% in Brazil and 7.5% abroad. We have 15% in NTN-B notes, which we consider to be a historically neutral level, but has the potential to increase this year. The real interest rate is at high levels. We need to see the moment in which the market will be sure that it doesn’t need such a high level of premium. We still have 30% in hedge funds, 7.5% in fixed income and the remainder we put in credit and post-fixed fixed income.

Valor: You are more optimistic about the Brazilian stock market than about global equities. Why are you so optimistic?

Mr. Telo: We had a very big rally in the global stock markets, especially the S&P 500, and the Brazilian stock market had a performance of -11% last year. By valuation, it was a very different situation. Brazil’s valuation was heavily discounted in relation to any emerging peer. In practice, we are now seeing a very large flow, but it was not well distributed. It is the commodity stocks that are rising and this eventually extends to other stocks that make up the index. It is not the Brazilian stock market that depends on the domestic economy that is rising, but the stock market that receives foreign flow due to the global pro-commodities wave.

Source: Valor International

https://valorinternational.globo.com

31 de March de 2022/by Gelcy Bueno

Murray News

Organic food industry projects 10% growth

The Brazilian organic food market grew 12% in 2021 and handled R$6.5 billion, estimates the Organic Food Promotion Association (Organis), which expected a 10% expansion. Growth in 2022 is again expected to reach 10%, in a conservative forecast, or range from 12% to 15%, in a more consistent demand scenario.

The association head Cobi Cruz points out that the segment would have grown between 15% and 20% in 2021 were not for the economic downturn and the easing of sanitary restrictions in the second half of the year, which reduced food consumption at home.

“Government purchases could have been better if the pandemic were milder. Restaurants would have been bought more as well. Also, as the economy reopens, people are not cooking at home as much and have lost access to organics. Wages have also flattened out,” he said.

Mr. Cruz recalls that the number of organic food ventures in Brazil grew 11% in 2021, surpassing 25,000 production units, according to data by the Ministry of Agriculture. He says that revenues are far from the plateau, the point where there is a stagnation of growth, since the country accounts for only 1% of the $145 billion-a-year global market.

Organis is working to expand its international activities. Exports represented 20% of revenues last year, mainly thanks to the exchange rate. “There is a very large demand for organic grains and fruits,” he said, citing that Brazil is the largest exporter of acerola cultivated without the use of chemicals. Organic sugar shipments are also a highlight – the product is exported to over 25 countries.

Organic soy, coffee, yerba mate, açaí, palm oil, guaraná, cocoa, mango and acerola are also highlights in exports. About 90% of the sector’s revenue comes from food and beverages, Organis projects. “Yet, we produce and export processed raw materials for both the food and cosmetic industries,” Mr. Cruz said.

According to him, the main pillar of growth of organics is the search for a healthier diet. Vegetables and greens stand out among the products that are advancing the most. Fruits saw a more modest increase because the consumption decision is still more linked to the satisfaction of taste.

The head of Organis points out that the organic animal protein sector is also growing significantly, with the entry of large companies such as Seara and BRF, which can leverage the segment by training and encouraging producers. “When the two parties are partners, you can reduce the cost of uncertainty,” he said.

Source: Valor International

https://valorinternational.globo.com

30 de March de 2022/by Gelcy Bueno

Murray News

Revolut, Europe’s most popular digital bank, arrives in Brazil

Revolut, Europe’s most popular digital bank and always cited by analysts as one of the best in the world, is finally arriving in Brazil. Glauber Mota, a very seasoned executive partly responsible for creating BTG’s digital bank, will lead the local operation. The group has not revealed its projected user base in the country, but Brazil is expected to be among the five largest markets for Revolut, which is already in more than 35 countries.

The operation will initially offer an international account and card with access to multiple currencies, and gradually bring the full experience of the global super app to Brazil. The full offer is expected to be available by the second half of the year. “I would really like that by the Qatar World Cup [which starts in November] Brazilians are already taking advantage of the full potential of the Revolut app. I think we will arrive well before that,” Mr. Mota said. The app is already available for download, but only for those on the waiting list.

With more than 18 million customers worldwide, Revolut was valued at $33 billion in its last investment round and competes with Nubank for the position of the most valuable digital bank in the world. In June, in its last round before the IPO, the Brazilian bank was valued at $30 billion. At the IPO in December, it reached $41.5 billion, but Nubank has a market capitalization of $36.9 billion after the stocks fell at Nyse.

“Brazil is the largest market in Latin America and a strategic priority for Revolut’s international expansion. With his vast experience in the financial sector and an excellent track record, we are very pleased that Glauber will join Revolut and help us in our mission to create the first truly global financial super app,” Nik Storonsky, CEO and co-founder of Revolut, said in a statement.

Mr. Mota points out that Brazil has one of the most active populations in the digital field, with over 112 million users with mobile devices and a growing number of people using digital banking as their primary account. However, when traveling abroad and shopping online, Brazilians still use credit cards and exchange houses paying high fees. “This represents a huge opportunity for Revolut to bring its product and service offering so Brazilians can shop.”

Mr. Mota joins serial entrepreneur Felipe Lachowski, who leads Revolut’s strategy and operations team in Brazil, and will set up the team. In addition to the local headquarters, Brazil will have a technology hub for Latin America – the digital bank landed a few months ago in Mexico – and serve as support for Brazilians who already work remotely for Revolut’s global operation.

“We are just finishing setting up the team and putting the structure in place,” Mr. Mota said. According to him, initially, the local operation will leverage the global structure, but soon afterward Revolut is likely to also apply to the Central Bank for a direct credit society license. He does not rule out an acquisition but says that it would not be to obtain a license, but to bring in expertise, perhaps along the lines of an acqui-hiring (an acquisition focused on bringing in the acquired company’s team). Still, Revolut’s tradition is to grow organically.

The executive says that Revolut virtually does not invest in marketing, relying on the good user experience and word of mouth, but it may have to change this strategy a little to make the brand known in Brazil. Asked about the potential of the customer base here, he says that, even by the fact of starting with an international account, the public is more restricted than that of Nubank, for example, which has 54 million customers. “Am I going to have 50 million customers? Probably not. In the first year, we will be something like a mix of Avenue, Nomad and Wise. When we have a local account, credit, insurance and everything else, we will be more like C6’s high-income business,” he said.

As for the competitive scenario in Brazil, Mr. Mota acknowledged that there are many digital banks, but he believes that the customer experience at Revolut is something that will make the difference. “We deal with products and clients in an outstanding way, which is why our NPS [Net Promoter Score] is high. It is all based on technology, with data analysis. Our suggestions to customers are very assertive and we offer several benefits. The UK is a pioneer in open banking and Revolut leverages a lot on this, and now we will be able to do the same in Brazil.”

As it is a private company, there is no detailed information about Revolut’s financial performance. In its last round of funding last July, the fintech revealed that it had revenues of £261 million in 2020, with a growth of 57%. The company was still operating in the red, but getting very close to breakeven. In the fourth quarter of that year, the gap was only £6 million.

Source: Valor International

https://valorinternational.globo.com

30 de March de 2022/by Gelcy Bueno

Murray News

Lula defends investment in refineries

Former President Luiz Inácio Lula da Silva (Workers’ Party, PT) has suggested changes to Petrobras’s business plan, such as reversing the divestment policy started in 2016, after the impeachment of Dilma Rousseff. He also criticized again the state-owned company’s price policy and defended new investments in refineries.

In a debate organized by his party and the oil workers federation (FUP) in Rio, Mr. Lula da Silva avoided any reckoning of his government. Refineries planned by Petrobras during the Lula da Silva administration were at the center of scandals about embezzlement of state funds that shook the administration of his successor, Ms. Rousseff, and contributed to impeaching her in 2016.

The Abreu e Lima refinery (Rnest), in Pernambuco, was the target of investigations not only of Operation Car Wash, but also of lawsuits in the Securities and Exchange Commission of Brazil (CVM). The unit is now operational and is likely to be finished by Petrobras itself, which was unable to sell the facility. Another project investigated for irregularities under Car Wash was Comperj, a complex of refineries and the current Polo Gaslub, which got off the drawing board with only a fraction of the size initially imagined and today is focused on receiving and processing natural gas from offshore wells.

Encouraged by the fuel crisis that destabilized the command of the company, Mr. Lula da Silva signaled he could expand the oil company’s refining policy again. “This country needs to have new refineries. Or renovate the old, scrapped ones, as we have already done in Paraná and Rio Grande do Sul,” he said. “We need to produce more and improve the quality of the fuel. Brazil needs to be an exporter of oil products,” he added.

Mr. Lula da Silva also said Petrobras must be profitable, and that he never accepted a deficit in the company’s earnings reports when he was the president. He said, however, that profits “must be shared with those who are responsible for the state-owned company” — the population, through affordable prices.

Under the Rousseff administration, Petrobras announced losses of R$23.6 billion in 2014 and R$34.8 billion in 2015 as it had to write off losses caused by corruption.

Mr. Lula da Silva said he preferred not to speak ill of the consultant for not knowing him. But he did not spare him any criticism. “I don’t know this person [Mr. Pires], so I’m not going to speak badly of him. But the two snippets that I read out of the news today say that he is a lobbyist. And that he is much more connected to foreign companies than to ours.” He then indirectly criticized Mr. Pires’s preference for the privatization of assets. He defended “using what is happening today in Petrobras” in the electoral campaign. Mr. Lula da Silva, the leader in the polls, seeks to associate the high prices of gasoline, diesel oil and cooking gas to President Jair Bolsonaro.

With the exception of the governor of São Paulo, João Doria (Social Democratic Party, PSDB), who has made no public comments, the front runners for the presidency have also spoken out about Petrobras. Former minister Ciro Gomes (Democratic Labor Party, PDT) preferred to record a video to say that “the corporate governance of the thievery that Lula implanted in Petrobras” cannot return.

About the subject, former Justice Minister Sérgio Moro (Podemos) said that “our goal is to privatize, as much as possible, all state-owned companies. Petrobras is one of them,” he said. “How do you solve the question of price and product and reduce inflation? It is market competition. So you have a public monopoly, as is practically the case with Petrobras, or you have a private monopoly if you privatize in the wrong way, it won’t solve the problem,” he said.

(Julianna Granjeia contributed to this story.)

Source: Valor International

https://valorinternational.globo.com

30 de March de 2022/by Gelcy Bueno

Murray News

Pix beats cards in transactions for first time

The number of transactions through Pix surpassed those with credit or debit cards in the fourth quarter. It was the first time that the Central Bank’s instant-payment system took the first position among the most used payment methods.

Most transactions represent transfers between individuals, but the figures indicate the widespread use of the system. For specialists, Pix is likely to grow further, but there are factors linked to security and technology, for instance, that may restrain this advance.

According to the most recent data from the Central Bank, transactions via Pix totaled 3.89 billion in the last three months of last year, up 34% over the previous quarter. In cards, transactions also grew, but at a slower pace. There were 3.85 billion transactions using debit cards (up 9%) and 3.73 billion through credit cards (up 12%). Prepaid cards advanced 20%, to 1.92 billion transactions.

Options to transfer funds like TED and DOC, as well as intra-bank transfers, lost ground since the launch of Pix, in November 2020, figures from the monetary authority show. In the last quarter, there were 294 million transactions using TED, for instance, down almost 50% in one year.

Ricardo Vieira, the executive vice-president of Abecs, an association of credit card companies, says there is no competition between transfer options and that “there is room for everyone.” “All arrangements are welcome because they bring competition and make available to the market solutions that help to insert the population in electronic means of payment.”

According to Abecs data, the volume transacted with credit, debit and prepaid cards totaled R$2.65 trillion in 2021, up 33.1% year over year. The association projects a growth of 21% this year, to R$3.2 trillion.

Mr. Vieira stresses the fact that the average ticket for card operations is much lower than that of Pix. This confirms the greater use of cards in daily payments by individuals, he said. The average value of transactions through Pix in the fourth quarter was R$495, compared with R$126 for credit cards, R$67 for debit cards and R$21 for prepaid cards, data by the Central Bank show.

The use of Pix is likely to grow further considering the low cost and speed of transactions, said José Luiz Rodrigues, founding partner of the consulting firm JL Rodrigues, which is specialized in the regulation of the financial system. This is especially true as new functionalities are included, such as the possibility of installment payments. The Central Bank has a wide list of functions to be put in place, but sources say that the schedule may be hindered by a strike scheduled by the bank’s servers.

The specialist added that, at some point, the instant-payment system is likely to start affecting cards more directly, especially debit cards. “The credit card has other advantages, such as points and cashback rewards, but then we are talking about a wealthier public. Pix has included a lot of people in the system.”

The instant-payment system is already widely used for transactions between people, but it has also been growing among companies. In February, 72% of the transactions were made between individuals, and individuals transferred funds to businesses in 18% of them. A year earlier, these shares were 79% and 9%, respectively.

João Manoel de Lima Junior, coordinator of the Nucleus for Advanced Studies in Regulation of the National Financial System at FGV Direito Rio, also believes that Pix is likely to advance further over the space of other means of payment. Yet, he sees factors that may limit this growth.

The first one is technological. “One factor is the potential institutional incapacity to, for example, face the needs of technological innovations precisely to keep the system always ahead and updated,” he said, recalling Pix was operationalized by the Brazilian state.

He says there are still risks related to fraud and operational problems. In a little over a year of operation, three data leaks occurred. In the researcher’s view, despite that, the system has not yet had to face any “scandalous” problems. “There is a very big novelty factor in Pix, it is a kind of cultural phenomenon, but it has not yet been exposed to a major crisis, such as a crash, for example. In technology, operational risk is always present.”

The Central Bank did not comment on the subject.

Source: Valor International

https://valorinternational.globo.com

30 de March de 2022/by Gelcy Bueno

Murray News

Carapreta gains space in premium meat market

A fine meat company controlled by the Brazilian company ARG Group, Carapreta — with three farms in the north of the state of Minas Gerais — advanced its plan to invest R$1 billion in seven years to consolidate operations, saw its results surpass initial expectations and now is putting together a new set of projects to gain market share in Brazil and abroad.

Focusing on the heavy construction segment, ARG was founded in Minas Gerais in 1978 by brothers José, Rodolfo and Adolfo Géo. In 2017, with the start of the expansion plan began, which will be completed in 2023, the family already had two farms (Jequiti and Santa Mônica) with traditional livestock farming for decades, but they saw a chance to improve and transform the activity into a truly profitable business.

Then came the professionalization, expansion of production, diversification, investments in genetics and marketing and, of course, a whole new sales strategy to expand the commercialization of Carapreta meat cuts in retail, food service and abroad.

“When we structured the project to add value to the business, we evaluated the production chain and studied the main sales channels. In this work, we saw that the market wanted quality, regularity and standardization,” says Carapreta’s CEO Vitoriano Dornas.

With revenues of around R$400 million in 2021 and a forecast to reach the level of R$500 million this year, the company, which has 1,400 employees, is currently present in the beef, sheep and fish segment, in addition to agricultural operations.

The Santa Mônica farm, in São João da Ponte, has cattle herds, agriculture and power generation; in Santa Terezinha, in the same municipality, there are slaughterhouses, sheep, agriculture, fish, and solar and biodigesters power generation; and the third farm, incorporated in the expansion and located in Jequitaí, has agriculture and beef cattle.

In cattle breeding, Carapreta gathers a total of 70,000 heads of cattle, and to compete in the market for premium Angus cuts, it invested in genetic mapping and closed a partnership with Alta Genetics. In sheep farming, it has 30,000 heads — the largest in Latin America, according to Mr. Dornas.

Last year, the company produced 8,500 tonnes of beef, and the goal is to reach 12,000 tonnes in 2022. The supply of sheep meat, in turn, should increase to 1,500 from 1,200 tonnes. For the fish area, the expectation is to maintain the rhythm, at around 3,000 tonnes.

Source: Valor International

https://valorinternational.globo.com

29 de March de 2022/by Gelcy Bueno

Murray News

Brookfield to invest $40m in Ouro Verde in 2022

Ouro Verde — one of Brazil’s largest vehicle fleet outsourcing — announced Monday that Canadian investment fund Brookfield, which owns 100% of the company since 2019, will contribute $60 million to the business this year. The new contribution is 50% higher than last year’s $40 million. The first part of the investment ($35 million) will immediately go into the cash flow, while the remainder was left for the second quarter.

According to the company’s CEO, Cláudio Zattar, the injection will help in the expansion of the fleet, especially in the segment of vehicle subscription. Today, the business serves small and medium-sized companies, but the goal is to open it to individuals by January.

“The new investment demonstrates the confidence of the shareholder. It gives us a more solid base to continue investing”, the executive told Valor.

Ouro Verde, the fourth largest rental company in number of fleets, had last year a net operating revenue of R$917.2 million, up 12.4%. Net income totaled R$35.4 million, compared with a negative result of R$5.6 million in 2020. The company ended the year with 35,447 vehicles and equipment available (only light vehicles were 26,372), a growth of 51% compared to 2020.

The challenge today is to buy vehicles on the market. Mr. Zattar said that on the heavy-duty side the negotiations with automakers have been more favorable. “We have managed to close a delivery schedule,” he said. The car industry has had problems to produce, especially because of the shortage of electrical components.

Even so, the group has managed to expand its subscription business. The segment’s total fleet had about 5,000 vehicles registered in February. “Our ambition is to double this number by the end of the year,” he said.

The group’s goal is to complete a technological upgrade by the middle of this year and with that prepare the subscription model to be scaled also for individuals by January.

The car subscription segment has been pointed out by the car rental companies as the apple of the eye in the sector. Among the leaders (Localiza, Movida and Unidas), all have already launched services to attract this public. None of them, however, give details. Executives from Movida at one point said that the segment may surpass even car rental in the future.

The Brazilian Association of Car Rental Companies (Abla) estimates that the segment accounted for between 8% and 9% of the total fleet of car rental companies in the country last year, of 1.136 million.

Mr. Zattar said that the group also intends to expand Ouro Verde Smart to the heavy vehicle segment, offering the service to small and medium-sized companies. Simultaneously, the group has been studying an alternative to offer some kind of subscription to individual truck drivers.

The plan is to develop a program in partnership with transportation companies in which their independent truck drivers will be classified – not only by how long is the relationship, but also by efficiency. The guarantee, in this way, will be a risk to be shared between Ouro Verde and the transport company.

The market has considered Ouro Verde one of the main candidates to evaluate the assets to be divested by Localiza to get the approval of the antitrust watchdog Cade to buy Unidas.

Mr. Zattar also said that Ouro Verde does not have the capital for an asset of this level. “At the moment, only Brookfield could have this capacity. And they are discreet, they don’t comment on speculations,” he said.

Sources pointed out that the divestment in vehicles alone is likely to be between 45,000 and 50,000 units, besides branches and sites in airports. The total value of the package has been estimated behind the scenes at about R$4 billion, but there are still several question marks, since the decision to close the deal, approved in mid-December, has not yet been published.

Source: Valor International

https://valorinternational.globo.com

29 de March de 2022/by Gelcy Bueno

Murray News

Auren Energia debuts on B3 with eye on renewables

Auren Energia, a power generation company created from assets of Votorantim and CPP Investments, debuted in Novo Mercado, the strictest governance segment of the Brazilian exchange B3, valued at R$16 billion. Auren plans to expand and be among the leaders of the industry and says it is ready for acquisitions of renewable assets, a segment defined as its business focus.

Among the operations is Companhia de Energia do Estado de São Paulo (CESP), which became a subsidiary of Auren and accounts for a relevant share of the company’s generation portfolio.

With pro-forma net operating income of R$6.5 billion last year – including Votorantim Energia, VTRM (wind power assets) and CESP – the power company closed its first day on the B3 up 1.91%, encouraging investors who bet on the strategy.

The portfolio has 3.3 GW of capacity, with some ongoing projects expected to start operating this year, and the company is flush of cash. There is about R$1.5 billion to be invested in new projects. The company’s goal is to reach 5.2 GW by 2026, reducing the exposure to hydro sources, which today accounts for more than 70% of the pipeline.

CEO Fabio Zanfelice told Valor he intends to grow in renewable energies and in the free energy market. He also said that the new company was created to invest in assets in the electric sector.

Besides being capitalized and net debt-to-EBITDA ratio of 1.5 times, the company says it is able to take debts for mergers and acquisitions. However, in the current context of escalating interest rates and high capital costs, the company is likely to go shopping with its own capital.

In the market there is a menu of power generation companies for sale, such as the assets of Eletrobras – and the state-owned company itself, which may be privatized – , Ibitu, Rio Energy, Renova and EDP plants. “We are prepared to make any acquisition of any size in the sector today,” said Mr. Zanfelice, without elaborating. “We are capitalized, we have financial and technical capacity to make acquisitions and we will continue to evaluate assets, besides organic growth.”

One way is through solar generation, with ongoing projects that will add 1.7 GW. According to the company’s goal, the source will account for 34% of a 5.2 GW portfolio in four years.

Auren has two solar projects to develop in Brazil, but the challenge in reaching this goal lies in the pressure from the production chains. Last year, the cost of solar panels rose about 8% driven by the cost of freight, the surge in commodity prices and exchange rate volatility, which may cause some generation companies to revise investments.

“We have time to observe the evolution of prices and we consider that the prices of solar panels were impacted by the pandemic, production factors in China, and logistics, but within our strategy we have time to acquire equipment. But if this scenario of equipment costs persists, both solar and wind, sooner or later we will see an increase in the price of power in the long term,” he said.

In wind power generation, Auren currently operates farms in Piauí that have an installed generating capacity of 600 MW. Another 400 MW are expected to start operating by the end of the year. CESP’s generation capacity, with emphasis on the Porto Primavera plant, is 1,624 MW, of a total of 2.3 GW of hydro sources in operation and 160 MW (small plants) under development. The company is also setting up a 68 MW hybrid complex (wind and solar) in Piauí, alongside its assets.

In the commercialization activity, the company’s executives believe that the current business has conditions to be much bolder. The company has 2.6 average GW of power commercialized and about 500 clients.

With the modernization of the electric sector, through bill 414/2021 (currently making its way in Congress), in which one pillar is the growth of the free market, the strategy for this segment goes from power management for new smaller clients, digitalization of commercialization, and even low power clients.

“The expectation is that we will have smaller customers with a slightly higher margin on those products they will demand. Our goal is to increase twofold the number of customers and reach 1,000 customers in a year’s time,” he said.

In the restructuring and incorporation of assets for the formation of Auren, the controlling shareholders are Votorantim S.A., with 37.7%, and CPP Investments, with 32.1%. The remainder (30.2%) are held by minority shareholders in CESP who migrated to the new company, now robust and with a diversified portfolio of assets.

Source: Valor International

https://valorinternational.globo.com

29 de March de 2022/by Gelcy Bueno