Suzano buys forestry assets in four states

Suzano vai montar megafábrica no MS

Pulp and paper manufacturer Suzano announced Thursday the purchase of a package of forestry assets with a total area of 206,000 hectares, in four Brazilian states, for $667 million. Those assets originally belonged to Fibria, a merger between Aracruz and Votorantim, which was incorporated by Suzano in 2019.

The operation is strategic and ensures the world’s largest producer of eucalyptus pulp access to wood at lower costs, in addition to ownership of land in São Paulo, Mato Grosso do Sul, Bahia and Espírito Santo states, that could be of interest of other pulp producers or investors — and will serve the company’s own projects in the long term.

Almost all of the operations purchased had already been exploited since 2003, through forest partnership contracts signed by the former Fibria. That year, pressured by high indebtedness, Fibria sold 210,000 hectares of land and forests to Parkia Participações and secured wood purchasing contracts, inherited by Suzano.

In the evaluation of analyst Daniel Sasson, with Itaú BBA, the financial statement position of Suzano is comfortable and the company’s debt cost is lower than Fibria’s 7.5%, which was paying around $50 million per year to purchase wood.

In addition, Mr. Sasson says, Suzano has interest in the regions where these areas are and there is a defensive aspect to the operation: “206,000 hectares are enough for a competitor to install a new pulp mill in the country with a capacity of more than 2 million tonnes per year,” he wrote.

In a statement, Suzano said the operation aims to expand operational efficiency, “as well as improve the use and cost of forest base in strategic regions to its operations in the long term.”

“Suzano currently has a very competitive cost of debt and cash availability to acquire these assets and thus ensure greater operational efficiency and less dependence on third-party wood in the long term,” said the CEO Walter Schalka, in a statement.

The forestry assets were sold to Suzano by the investment fund Investimentos Florestais (FIP) and Arapar Participações. The payment will be made in two installments, the first paid in the closing of the operation and the second 12 months after the closing. The deal still depends on approval by the Cade, the antitrust regulator.

Source: Valor International

https://valorinternational.globo.com

PetroRio agrees to buy Albacora Leste field from Petrobras

PetroRio (PRIO3) faz "compra transformacional" e ação fecha em alta,  enquanto analistas esperam por próxima aquisição - InfoMoney

PetroRio agreed to buy a 90% stake in the Albacora Leste field, in the Campos Basin (Rio de Janeiro), from Petrobras. The company will dirburse $1.91 billion, of which $293 million have been already paid upon signing, and up to $250 million more depending on Brent prices in 2023 and 2024.

The company estimates a proven economically recoverable reserve close to 280 million barrels for the field, with a net reserve of over 240 million barrels, expected to be abandoned after 2050.

In the first 18 months of operation, PetroRio plans to invest about $150 million to increase the operational efficiency of the FPSO P-50 rig, and reap $90 million a year in synergies.

Subsequently, the field redevelopment will begin, involving the drilling or connection of 17 producing wells and five injection wells over five years, with estimated investments from $70 million to $75 million per year.

The development will be carried out in two stages. The first is the connection of three producing wells already drilled, eight new producing wells, and one injection well, increasing the field’s production to above 50,000 barrels per day.

After that, six new producing wells and four injection wells will be drilled. The company is also expected to carry out the anticipated decommissioning, until 2027, of five producing wells and one injector, with an investment of $15 million per well.

Besides the Albacoa Leste field, PetroRio is still in negotiations with Petrobras for the purchase of the Albacora field, also in the Campos Basin.

PetroRio CEO Roberto Monteiro said the sale is taking longer because of the discovery of the Forno reservoir, located in the pre-salt within the field. The area is currently undergoing a long-term test for estimates of production potential, which showed better-than-expected results, according to the executive.

“We still have a while to reach an agreement, especially regarding the amount. It is taking a little more time because this reservoir is larger than expected,” he said.

The sale of the asset is part of Petrobras’s divestment plan and began in September 2020. According to Mr. Monteiro, a binding proposal was delivered around September 2021, but in November Petrobras asked the bidders to revisit the estimates for the size of the reservoir. In addition to PetroRio, there are other companies competing for the area.

Source: Valor International

https://valorinternational.globo.com

Mercado Pago, Órama team up in investment platform

Mercado Pago e Órama vão criar plataforma de investimentos em parceria |  Serviços Financeiros | Valor Investe

Mercado Pago — the digital wallet that was born in Mercado Libre and is now a big provider of several types of financial services — has teamed up with investment manager Órama to create an investment platform. The commercial agreement — there is no equity participation involved — has a minimum term of five years and provides for exclusivity. The offering will start for a small slice of the 34.5 million user base next week, but the idea is to scale up quickly, replicating the success that Mercado Pago had when it offered the option to buy cryptocurrencies late last year.

Known for working with classes C, D and E, Mercado Pago says there was demand from its customers for investment products. The offer will start with simpler options, and then will be expanded. The debut product is a certificate of bank deposit (CDB) from the group’s financial institution, with investments starting at R$1, which delivers yields of 150% of the CDI (the interbank short-term rate), in a promotional yield valid for those who make the investment in May and limited to R$5,000. The strategy is very similar to what other investment platforms are doing, such as XP, Toro and Genial, which advertise on social networks CDBs with eye-popping returns.

“Even today we still have almost R$1 trillion invested in savings, with a very low yield, and that from all social classes. We already have the cryptocurrency offer and the interest-bearing account, but our users were asking for more investment options, with better returns and even longer terms,” says Túlio Oliveira, vice president and country manager of Mercado Pago in Brazil. “We seek to promote real democratization, with accessible investment, without fine print. It will be a simple and safe experience,” he says.

Habib Nascif, CEO of Órama, says the partnership marks the beginning of a complete and integrated investment platform. “We specialize in creating solutions so that more people have access to quality investments. But besides offering good products, we also have to democratize the distribution channels. With this in mind, the Mercado Pago marketplace puts the financial market in people’s day-to-day lives,” he says.

He says that the management company was one of the first financial institutions to be born totally in the internet cloud and that it is fully prepared, from an operational and technological point of view, to serve Mercado Pago users. “We were the first to offer zero fees, investments with no minimum values, and to adopt a less formal language in marketing campaigns. The democratization of investments, including financial education, is very important to us, and that’s why we had such a good connection with Mercado Pago,” he says. Today, the management company has more than 3,000 partners in its “white label” platform and 370,000 accounts.

Later this quarter, Mercado Pago will offer a solution to help users with financial planning. “With our investment marketplace, we will have options so that Brazilians can concentrate their lives in one place, as well as organize their finances, keep emergency reserves or have a savings account with defined life goals,” says Mr. Oliveira. For Mr. Nascif, Mercado Pago’s user base has a huge potential for investments and, with financial education and the possibility of designing specific products for them, the expectations are very positive. “They need to start investing, get into the habit. It is a short, medium and long term construction.”

SEC says Vale misled investors over safety before dam collapse

Regulator accuses Vale of misleading investors about safety issues before the Brumadinho dam collapse — Foto: Agência Brasil
Regulator accuses Vale of misleading investors about safety issues before the Brumadinho dam collapse — Foto: Agência Brasil

Vale is in the crosshairs of the task force set up by the U.S. Securities and Exchange Commission to identify flaws or distortions in information provided by companies regarding ESG. In a document released Thursday, the regulator accuses the mining company of misleading investors about safety issues before the Brumadinho dam collapse in 2019, which killed 270 people and caused environmental damage.

According to SEC’s view, Vale manipulated safety audits and obtained fraudulent stability certificates since 2016. The regulator claims that Vale knew for years that the Brumadinho dam did not meet internationally recognized safety standards, but still ensured its stability certification in its sustainability reports.

The SEC’s complaint, filed in court in the Eastern District of New York, accuses Vale of violating antifraud and reporting provisions of the U.S. federal securities laws and seeks injunctive relief, disgorgement plus prejudgment interest, and civil penalties.

“While allegedly concealing the environmental and economic risks posed by its dam, Vale misled investors and raised more than $1 billion in our debt markets while its securities actively traded on the NYSE,” said Melissa Hodgman, associate director of SEC’s Division of Enforcement. “Today’s filing shows that we will aggressively protect our markets from wrongdoers, no matter where they are in the world.”

Vale denies the allegations, including the claim that its disclosures violated the U.S. law, and said in a statement to the market that it will vigorously defend itself. “The company reiterates the commitment it made right after the rupture of the dam, and which has guided it ever since, to the remediation and compensation of the damage caused by the event.”

It is the second accusation by the SEC involving a Brazilian company in 10 days. Last week, the regulator and the U.S. Department of Justice filed suit against the former CFO of IRB, Fernando Passos. IRB is listed in Brazil, but did a road show in the United States with false information about Warren Buffett’s investment in its stocks.

The ESG task force was created by the SEC in March. In the document, the SEC thanks the collaboration of the Brazilian Federal Prosecution Service, the Prosecution Service of Minas Gerais, and the Securities and Exchange Commission of Brazil (CVM).

The accusation did not affect Vale’s stocks, as investors seem to be more interested in the large buyback program launched by the company. Vale announced a buyback of up to 500 million shares, which corresponds to 10% of the shares with the public – a program that could cost it more than R$40 billion.

The company shares are still discounted compared with international peers precisely because of the negative history in ESG – the Brumadinho disaster was preceded by the one in Mariana, also in Minas Gerais – and its consequences in financial and regulatory terms.

The original story in Portuguese was first published on Valor’s business website Pipeline.

Source: Valor International

https://valorinternational.globo.com

Risk assets see good streak end in April

Stock index Ibovespa and the real lost steam as the flow of foreign capital slowed dow — Foto: Pixabay
Stock index Ibovespa and the real lost steam as the flow of foreign capital slowed dow — Foto: Pixabay

The appreciation of Brazilian risk assets this year was interrupted in April. As the U.S. Federal Reserve signals interest rate hikes amid the perception of unchecked inflation in Brazil, the local benchmark stock index Ibovespa and the real lost steam as the flow of foreign capital slowed down.

The Ibovespa is down 8.4% this month to the 28th, and the consumer goods index declined 11.6%. The foreign exchange rate, which put the dollar at the bottom of the ranking of investments until March, was up 3.8% in the month. Among the fixed-income indexes, the IMA-B 5, which represents a basket of government bonds pegged to inflation with maturity under five years, outperformed its peers and is up 1.5%. On the other hand, the IRF-M, of fixed-rate bonds, lost 0.18%.

Persistent inflation and rising interest rates make fixed income prevail as a safe haven for investors. As a result, this option has received most funds with products ranging from the simplest ones – certificates of bank deposit (CDBs), financial bills and DI funds – to corporate bonds, said Luciane Effting, executive head of investments at Santander. The recommendation is not to concentrate risk, especially when allocating in debt securities – agribusiness and real estate receivables certificate (CRA and CRI) – or debentures, a group of assets in which the individual has the benefit of income tax exemption.

As for variable income, a falling Ibovespa is seen as reflecting the lower confidence in the global economic growth and also in Brazil, the executive said. With the expected acceleration of monetary adjustments by the Federal Reserve, the interest rate differential in relation to Brazil will be lower and part of this translates into a slower flow of foreign capital. “But for any investor who accepts the volatility and is willing to keep the money there for longer, either in the local or international market, [stock] prices are discounted. They can reap good rewards in the long term despite short-term swings.”

Depending on the investor profile, Santander’s asset allocation model provides for a portion in the stock market, even for retail investors, Ms. Effting said. Santander Corretora, the Spanish bank’s broker in Brazil, estimates that the Ibovespa will end the year at 125,000 points, up 14% from the current level. Although inflation and rising interest rates are a concern for those who invest in stocks, some assets benefit from this environment.

Hedge funds, which are seen as having flexibility and agility to change their positions according to the scenario, are also a way to capture gains in moments of uncertainty, Ms. Effting said. After the strong migration to fixed-income alternatives from multimarket and equity funds, she said, investors are again interested in hedge funds after good results in the first months of the year.

Brazil went through a three-and-a-half-month lull, an environment that did not seem favorable to emerging markets given the potential for interest rate hikes in developed countries, said Marcio Schalck, a managing partner at Neo Investimentos. “The local stock market saw a large investment inflow that influenced the exchange rate as well, and assets appreciation. This was not foreseen as interest rates were expected to rise abroad. As time goes on, that impacts prices more,” he said. “Now we are back in the middle of the road, as Brazilian assets start to get a little cheaper.”

That doesn’t mean that prices will not fall further. Because of the external and local scenarios, there is room for additional worsening, Mr. Schalck said. Inflation is the main culprit of the season, with the Fed calibrating its hawkish communication. What is now priced in assets and derivatives linked to U.S. interest rates seems to be insufficient to control the rise in the cost of living. “The Fed may go further than the market anticipates.” The shutdown in China to contain new cases of Covid-19 could bring problems in production chains and keep inflation high.

The environment will be one of volatility, but also of opportunities. As central banks have a reduced capacity to intervene after the interruption of asset purchases and shrunk balance sheets, poorly valued assets will find their most appropriate prices, Mr. Schalck said. “There is no freedom in price when there is strong action by the monetary authority because it [the Central Bank] is the final buyer at any cost.”

As for Brazil, his perception is that the closer the beginning of the election campaign is, the more contaminated the domestic assets, because the candidates’ remarks will not be focused on fiscal austerity, one of the market’s main agendas.

Neo believes that the benchmark interest rate Selic, now at 11.75% per year, will remain high for the next 12 months. “The return has to be great to compensate being structurally long on something,” he said. The company holds very specific stocks, with potential to rise between 20% and 30%, in the financial industry, including insurer Porto Seguro. And it has been combining the sale of some securities from industries more sensitive to interest rates with positions in real rates, a bet that the inflation that is projected in the assets today will decrease to 5% from 7% in six months to a year.

For individuals who like to move on their own, Mr. Schalck thinks that long inflation-indexed Treasury bonds are an opportunity for those who want to build up capital. “You can have volatility in the short term, rates can go up, but looking at longer maturities, these ones have interest rates that you don’t see in the world. And no matter what happens, you have some protection.”

While the presidential election has yet to affect local prices, Brazil is influenced by the external scenario, a journey that includes tackling inflation with tighter monetary policies, the war in Eastern Europe, and the Chinese economy further shutting down to fully contain Covid-19, said Carlos Calabresi, chief investment officer at Garde Asset. The appreciation of commodities has driven the country, a raw materials exporter, but also brought adverse effects on inflation. “And raising interest rates to a restrictive level slows down economic growth.”

This adjustment is even more complex in a year of presidential election. “The economy is likely to be the main topic [of the campaign], and bringing down growth due to inflation is bad, but unchecked inflation is even worse,” Mr. Calabresi said.

He cites that the Central Bank began correcting the monetary excesses made during the pandemic slowly, first signaling a partial adjustment, but then “it had to accept reality and hasn’t stopped until now because inflation continues to surprise upward.” Meanwhile, the Fed and economic agents abroad are learning to deal with price pressures they haven’t experienced for a long time and are slow to understand that the tightening will be greater than anticipated, Mr. Calabresi added. The European Central Bank (ECB), for its part, “remains in denial.”

While the Fed assumes a hawkish stance, the Brazilian central bank signals that the adjustment cycle is near the end, and this sounds rushed, said Marcelo Ferman, CEO of Parcitas. “It should position itself more firmly because the fight against inflation seems to be not well resolved, especially when you look at the world. It is not a solved problem and Brazil is not an island of prosperity,” he said. “Without firm decisions, it ends up having to raise interest rate even more and failing to anchor inflation expectations as it would like.” Despite the fact that the Brazilian central bank has started adjustments early, the quality of Brazil’s official inflation index IPCA remains poor, with greater diffusion.

The asset manager has favored positions in the international market and likes stocks of large technology companies, including Alphabet, Amazon and Microsoft. In Brazil, it holds short positions on the dollar and also on Ibovespa.

Source: Valor International

https://valorinternational.globo.com

Joint venture Raízen Geo Biogás bets on biomethane

Europeans confront biomethane cost reduction challenge – EURACTIV.com

Eight months after holding the largest domestic IPO in 2021, Raízen, the country’s fourth largest company by revenues, is once again presenting to the market the reason that led it to seek the good graces of investors. With the support of the funds raised in the market, Raízen and its partner Geo Biogás e Tech will start to build a new biomethane plant made of residues from ethanol production in Piracicaba, São Paulo.

This is the second industrial investment Raízen has unveiled since going public – the first was in a cellulosic ethanol plant in Guariba, São Paulo – and the first investment in biomethane since then.

The Raízen Geo Biogas joint venture plant has already left the engineers’ desks with guaranteed customers. The first is Norwegian company Yara, the world’s largest fertilizer producer, which will use biomethane to produce “green” hydrogen and ammonia, according to a contract signed in September 2021.

The second customer is Volkswagen, which will use the product in its plants in Brazil. Raízen had already announced a partnership with the German automaker in October, which also involved the delivery of electricity and the development of new ethanol formulas, but only recently closed the biomethane delivery contract. With the two clients, the Piracicaba plant’s entire production is already sold.

The unit will consist of two biomethane production “modules” and will have the capacity to produce 26 million cubic meters of the renewable gas per year. Yara will receive 20,000 cubic meters of biomethane per day, while Volkswagen will receive 50,000 cubic meters per day. In both cases, the product is one way the companies have found to reduce the greenhouse gas emissions footprint of their industries.

The stillage that will be used to produce biomethane is already used today as organic fertilizer in the sugarcane fields that serve Raízen’s Costa Pinto mill. The biomethane plant, however, does not change this story. The difference is that, before being distributed to the fields, the biodigestion of the stillage will reduce the amount of residual raw material, but the levels of potassium and nitrates that serve as fertilizer for the sugarcane fields will be preserved.

Raízen’s choice of Piracicaba for this project is symbolic – it is where Cosan started its history in the sugar-and-ethanol industry – but it is mainly of a practical nature. To guarantee delivery of biomethane to customers, it was necessary to build a plant close to the gas distribution network – in this case, Comgás’s network.

With the construction of yet another production unit in the Piracicaba hub, Raízen CEO Ricardo Mussa argues that the site is now a “bioenergy complex,” and no longer just a sugarcane mill. “It has cellulosic ethanol plant, it has cogeneration, it has biogas. It’s like a biorefinery.”

In the plan presented to investors before the IPO, Raízen promised 39 industrial biogas modules by 2030/31 – a deadline that Mr. Mussa promises to meet. The perspective is that the first units will be built near the gas distribution network, either from Comgás or GásBrasiliano.

In those plants more distant from the grid, the plan is to use renewable gas to replace diesel in their own fleets of agricultural machinery. “There is no bottleneck. The future demand for biomethane has low risk.”

There is also the possibility of producing only biogas for electricity generation, offering a third market alternative. In the unit that will be built in Piracicaba, part of the biogas will be used for this purpose, with a capacity of 5 megawatt-hours.

“This production flexibility is interesting. We are delivering what we promised, and with greater profitability than we imagined,” Mr. Mussa said.

The executive also expressed optimism with the plans for new cellulosic ethanol units, although so far only one new plant out of the 26 promised to investors has been announced. According to Mr. Mussa, the qualification of suppliers – an essential step to ensure the protection of industrial patents held by the company – is advancing “with good surprises.” “We are racing to surprise the market,” he said.

Source: Valor International

https://valorinternational.globo.com

Developers report positive quarter in some segments, face higher costs

Commercial segment in São Paulo saw positive net absorption in first quarter — Foto: Edilson Dantas/Agência O Globo
Commercial segment in São Paulo saw positive net absorption in first quarter — Foto: Edilson Dantas/Agência O Globo

The cost to build remains high and continues to be the sector’s biggest concern in the quarter, pointed out the Construction Industry Survey held by the National Confederation of Industry (CNI). It was the seventh consecutive semester in which this concern was the most cited by businesspeople.

High interest rates are the second-biggest concern, and they directly affect the sale of medium-and high-end properties, since affordable units included in Green Yellow House, a revamped My House My Life program, follow their own financing line with funds from the Workers’ Severance Fund (FGTS).

The public in the range immediately above the one benefiting from the housing program is very much targeted by the developers who work with low income. Since Green Yellow House has a ceiling on the value of homes sold, serving those outside the program allows them to reach a higher sales value.

It is the strategy adopted by Cury, which has 30% of the units outside the program, sold at up to R$500,000. The company’s quarterly performance was considered “impressive” by BTG analysts.

A giant in the low-end segment, MRV also had positive, but timid results, in the quarter, with the growth of 7.6% in net sales and 1.4% in launches, driven mainly by the good performance of its U.S. subsidiary.

The developer has been able to pass on part of the increase in construction costs to the consumer, something also done by Cury, which increased the average price of units launched by 20.7% year over year.

Other players in this field reported positive results in their operating previews as well, such as Plano&Plano, with a 10.8% increase in net sales and 161% increase in launches, and Direcional (21% increase in net sales and 4% more launches), compared to the same period in 2021.

The negative highlight was Tenda, which again saw launches and net sales drop 23.5% and 17.8%, respectively.

The commercial segment in São Paulo saw positive net absorption in the first quarter of the year, according to consultancies JLL and Newmark, good news for an industry that suffered from the pandemic and the adoption of working-from-home policies. The first quarter is usually more challenging for the segment.

The vacancy rate is still high in the city, at 24.6% on average, said JLL, but varies substantially according to the region. While in Faria Lima Avenue, a prime area for offices, it is at 8%, it is 30.7% in Alphaville, an affluent neighborhood in Greater São Paulo.

By 2022, the delivery of new stock is expected to be below the city’s annual average, according to Newmark, which may help the occupancy of existing spaces recover.

In the logistics centers segment, absorbing stock is not a problem. The vacancy rate in the country fell to 11.4% in the first three months of this year from 13.6% in the first quarter of 2021, despite an average annual growth of 1.5 million square meters of leasable area.

The growth of e-commerce, something that is not likely to slow down as the pandemic situation improves, because it has become part of consumer culture, drives the segment.

According to Newmark CEO Marina Cury, the eyes are currently focused on opportunities for “last-mile” developments, within a radius of 15 kilometers from the so-called expanded center of São Paulo, which enable deliveries in a matter of hours.

This type of development is starting to be delivered now, and the demand is great, which is expected to encourage new deals.

Source: Valor International

https://valorinternational.globo.com

Analysis: Inflation projected for 2023 poses challenge to Central Bank

inflation expected by the market was 4%, well above the target set for the year, of 3.25% — Foto: Brenno Carvalho/Agência O Globo
inflation expected by the market was 4%, well above the target set for the year, of 3.25% — Foto: Brenno Carvalho/Agência O Globo

Central Bank’s Focus survey of market expectations, which was released Tuesday morning, was more or less within the expectations, but the high inflation projected for 2023 poses a challenge for the Monetary Policy Committee (Copom).

The inflation expected by the market was 4%, well above the target set for the year, of 3.25%, on a horizon that is the main target of monetary policy.

The Focus Survey is not surprising because informal surveys carried out by the market during the Central Bank civil servant’s strike, when these statistics ceased to be released, also pointed to inflation around 4% in 2023.

But the distance of the projections from the target, 0.75 percentage points, is very large. The additional dose of interest to bring this projected inflation to the target is significant. Each 0.26 percentage point drop in inflation requires an additional 100 basis points of interest rate tightening.

These inflation projections take into account the policy interest rate Selic rate of 13.25% per year at the end of the monetary tightening cycle. Therefore, to bring inflation to the target in 2023, it would be necessary to raise interest rates to a little more than 16% a year. Nobody thinks that the Central Bank will do this. The highest Selic rate projected by the market is 14.25% per year.

When calibrating monetary policy, the Central Bank does not need to follow market projections exactly. What counts is the Copom’s own projection, made with its own models. In the March meeting, the Copom reached an expected inflation close to the 2023 target, of 3.25%, while the market was already projecting 3.7%.

However, with the new rise in market inflation expectations, it is more difficult for the Central Bank to maintain its inflation projection around the target. Economic analysts are increasingly questioning the Central Bank’s forecasts, which have rarely strayed so far from the expectations contained in the Focus survey.

There are some factors that could make the Central Bank’s projection fall short of Focus expectations, but not that much. One is the exchange rate. The monetary authority works with the prospect that the rate will remain basically stable at current levels (it was over R$4.9 to the dollar on Tuesday), while the market considers a median rate of R$5 for the end of this year.

The good news for the Central Bank is that, despite the worsening of inflation expectations for 2023, market projections for the following year remained stable at 3.2%. The percentage is above the target of 3%, but the fact that it has not worsened (keeping it somewhat immune from the more general deterioration in the inflationary scenario in the short term) is still positive.

The market has also not increased much its projection for the interest rate at the end of the tightening cycle. Tuesday’s Focus survey shows it at 13.25%. What has increased the most is the interest rate forecast for the end of 2023. In March, it was 8.25%, and now it is 9%.

In other words, the overall Focus projections say that the market does not really believe that the Central Bank will pursue the 2023 target. Because of this, the inflation projected for next year is well above the target, and the final breath of this monetary tightening cycle is relatively restricted.

But, on the other hand, analysts think that the Central Bank will manage to have good control of inflation in 2024, if it postpones the monetary easing cycle planned for next year.

Source: Valor International

https://valorinternational.globo.com

Pension funds to receive R$8.8bn in court-ordered debts

Cool Vector Pension Fund Concept Illustration: vetor stock (livre de  direitos) 340407536 | Shutterstock

After more than 30 years of disputes in courts, the Brazilian government has reached an agreement with pension funds to pay in installments R$8.8 billion in court-ordered debts — the so-called “precatórios” — starting in 2023. This debt refers to a judicial battle started in 1991, when pension organizations disputed the way bonds of the extinct National Development Fund (FND) were adjusted by inflation. The pension funds were forced to buy those securities in 1987.

Recently, the Federal Attorney General’s Office (AGU) and Abrapp, an association of pension funds, reached an agreement to put an end to this discussion, which despite being of a substantial amount, still represents a saving of almost R$5 billion for the federal government. Without the agreement, the government could have to pay R$14 billion.

In total, 88 pension funds will benefit. Among the main ones are Previ (R$3.1 billion), Petros (R$941 million), Funcef (R$379 million) and Refer (R$336 million). The pension funds expect to start receiving the “precatórios” starting next year.

David Rabelo Athayde, deputy secretary for Strategic Planning of Fiscal Policy at the National Treasury, said that the deadline to register the “precatórios” for payment in 2023 ended on April 2. “We don’t know yet if they were included [for payment to begin next year],” he said.

The list will only be known on April 30. He pointed out, however, that agreements like this contribute to the reduction of future government spending, which is positive.

With the end of the dispute, the pension funds want to fully record in their financial statements the amounts that will be received in court-ordered debts. Currently, according to representatives of the sector, there is no specific rule for this. According to the head of Abrapp, Luís Ricardo Martins, the organization is pleading with the National Superintendence of Complementary Pension Funds (Previc) to prepare a rule so that pension funds can, with legal certainty, immediately compute the total value of the debts in the earnings reports of the funds, which would help some, for example, to even eliminate deficits.

In a note, Previc said that it has not yet been notified of the agreement. According to it, without knowing the content, it is not possible to give a conclusive answer as it will depend on a technical analysis.

Previ, the pension fund of the Banco do Brasil employees, which has R$3.1 billion in court-ordered debt securities to be received from the government, said that it concluded the registration process in time to start receiving the payments in 2023.

According to the pension fund, the agreement is not about a benefit for the entities, but the mere accounting recognition of a net and certain right, claimed for more than 30 years, and that should have entered the funds’ assets at that time.

Petros, the pension fund of Petrobras employees, said in a note that the agreement was fundamental to receive the funds, generating positive impacts in the management of the plans. “Those funds are key to increase the equity of the plans, allowing management to seek investment strategies that achieve profitability above the actuarial goals of the plans.”

Gilson Costa de Santana, CEO of Funcef, the pension fund of Caixa employees, told Valor that the request of Abrapp to Previc gives more security to pension funds in the registration of the amount receivable in the financial statements. In his view, the measure can help some funds to reduce deficits.

The amount of R$379 million to be received in court-ordered debts does not solve the accumulated deficit of around R$20 billion, but it does provide a little relief.

Source: Valor International

https://valorinternational.globo.com

Even with war, oil sustains trade surplus

Oil market outlook: Expectations and realities - Crystol Energy

In the first quarter of the year, Brazil saw a trade surplus of $3.7 billion in oil and oil products, 31% of the total trade balance of the period, even though, under pressure resulting from the war between Russia and Ukraine, the prices and import volumes of this group of products have grown at a faster pace than exports. The picture, according to specialists, shows that the commodity and its products are still expected to play an influential role for a few more years in the country’s foreign trade, even with the expected transition to other energy sources.

The figures of the Indicator of Foreign Trade (Icomex), organized by Fundação Getulio Vargas’s Brazilian Institute of Economics (Ibre/FGV) from government data, show that Brazil has seen a surplus in the balance of oil and oil products since 2016, and for four years the balance of this group has contributed at least one-fifth of the country’s total trade balance.

In 2018, the trade of these products resulted in 20.8% of the total Brazilian trade surplus, advancing to 27.8% in 2019. Last year, the trade surplus in exports and imports of oil and oil products was the highest since Icomex records began, in 1997, with a balance of $14.31 billion, equivalent to 23.3% of the total surplus, of $61.4 billion.

In the first three months of this year, the weight of oil and oil products in the balance was a little less representative compared to the same period last year. From January to March 2021, net exports totaled $3.24 billion, or 40% of the total trade surplus for the same period. In the first quarter of 2020, oil and oil products totaled $3.62 billion, above the total trade surplus for the period, of $2.8 billion. From January to March 2019, oil and oil products totaled $2.1 billion, equivalent to 46.2% of the trade surplus for the period.

Lia Valls, an economist and researcher at Ibre, points out, however, that there is no marked trend in the first months of the year. The values of oil exports and imports may oscillate throughout the year and several factors influence both volumes and prices, from domestic demand, which impacts the amount of fuel imported, to the policy of foreign purchases by Petrobras and oil prices, which more recently have also been under greater impact from the war between Russia and Ukraine. What can be said, she says, is that the energy transition to less polluting sources is likely to change the impact of the oil and oil products group on the trade balance as a whole, but this is a process likely to take time.

For now, says Ms. Valls, the prices and volumes of imported oil and oil products started the year faster than those of exports. From January to March this year, the quantity imported in this group rose 25% against the same period of 2021, with a 71.1% rise in prices. In exports, the volume increased 10.2%, and prices, 53%. The different composition for shipments and foreign purchases in this group of commodities helps explain the difference in pace at both ends.

Data by the National Petroleum Agency (ANP), which publishes import and export data for oil and oil products under other criteria, show that this group closed 2021 with a surplus of $19.03 billion. Of the $38.43 billion exported, 80% were oil and only 20% were oil products. In imports, the ratio is almost reversed. Of the $19.4 billion in imports, 79% were oil products. Also according to ANP data, the export of oil and oil products totaled $7.34 billion in the first two months of 2022 while imports were $3.31 billion.

Welber Barral, a former foreign trade secretary and a partner at BMJ Consultores, says Brazil could be taking much more advantage of the impact of high oil prices with more intense effects on the balance as a whole, if there were not structurally a still large dependence on imports of oil products.

Besides the difference in the composition of imports and exports, the type of oil sold and bought by Brazil is also different, said José Augusto de Castro, head of the Brazilian Foreign Trade Association (AEB). Oil is still one of the three most important items on Brazil’s export list, along with iron ore and soybeans, he said. But, although we have increased our production of oil and also exports in recent years, the ability of Brazilians to negotiate prices is limited, he said.

The three big world oil producers today are the United States, Saudi Arabia and Russia, said Caio Carvalhal, a partner at Atmosphere Capital, specialized in investments abroad. He explains that the Russia-Ukraine war and, more recently, the new lockdowns in China due to Covid-19 have interrupted oil price adjustments. For him, even if there is a disruption in oil supply from Russia – something that seems to be starting to happen now – there are pockets that can normalize supply. He exemplifies with production from Saudi Arabia and the UAE, already-stocked oil from Iran, and U.S. shale production. This can happen in a period of six to nine months after an eventual rupture, he points out. With this, the expectation, he says, is that prices will remain around $100 even if momentary price spikes occur.

Source: Valor International

https://valorinternational.globo.com