Rise in ore prices should activate projects that were on stand-by in Brazil — Foto: Marcos de Moura e Souza/Valor
In a new cycle of strong growth, iron ore prices have attracted two major economic groups to the industry. The holding company J&F — owner of the giant meatpacker JBS — unveiled the purchase of mining company Vale’s assets in Corumbá, Mato Grosso, earlier this month. In August, Cosan, owned by businessman Rubens Ometto Silveira Mello, debuted in mining by buy buying the port of São Luís, Maranhão, with plans to bring ore from Pará.
Although these are still modest mining projects, the two giants are willing to make multibillion investments for this new business division to become relevant for the groups’ revenues, sources say.
J&F’s plans are not restricted to keeping the two mines recently acquired from Vale, with a capacity of 2.7 million tonnes that may be expanded to 6 million tonnes. After buying the mines, J&F mulls new opportunities in the industry, aa source familiar with the group said. “This was the first step,” the source, who spoke on condition of anonymity, said.
Just as it did in the animal protein industry, J&F plans to be a relevant player and build the “JBS of mining,” the source added. Acquisitions have been a regular strategy of the Batista family to advance in the markets in which they are interested in.
Vale confirmed the sale of the mines to J&F, as Valor reported two weeks ago. The deal valued the assets at $1.2 billion by the enterprise value. Considering this EV and the EBITDA of $110 million, the transaction boasts an “attractive” multiple of 10.9 times for Vale, according to Bank of America.
For analysts Caio Ribeiro, Leonardo Neratika and Guilherme Rosito, the sale shows the mining company’s commitment to “enhance and simplify its portfolio and focus on high quality assets.” Compared to Vale’s other operations, the Central-West system represents a lower-quality asset, with EBITDA per tonne of iron ore of $41, compared to the company’s average of $102 per tonne, they noted.
In J&F’s view, however, the deal was not expensive, another source said. A good part of the $1.2 billion attributed to the assets refers to take-or-pay contracts signed with Hidrovias do Brasil until 2039. Therefore, the amount the Batistas will have to disburse effectively will be $150 million, and the debts of the operation total R$1 billion, well below the enterprise value. By closing the deal, J&F indicates that it sees room to increase gains in the operation, which could include expanding production, it said.
J&F decided to enter mining because it considers the industry resilient and because there are assets in the market that can be better exploited. “We are shopping. We will look at growth in all acquired businesses, including but not limited to mining,” one source said.
Also with business fields considered resilient, Cosan intends to advance in mining. The group’s plans for the industry are old — Rubens Ometto Silveira Mello tried to buy pension fund Previ’s stake in Vale, but the deal did not go ahead.
In August last year, Cosan bought the port terminal from China Communications Construction Company (CCCC) with the goal of integrating logistics and mining. At the time, it also unveiled that it had joined businessman Paulo Brito, founder of Aura Minerals, to start mining exploration in Pará and export the production through Vale’s railroad to Maranhão.
The partnership is still being defined — the parties are discussing each other’s stake in this joint venture, sources say. Mr. Brito holds mining rights in the Carajás region, where Vale’s mines are located. The idea is to produce from 2025 on about 10 million tonnes of iron ore a year and triple this volume in the following years.
Cosan picked Juarez Saliba to lead the business. He previously worked with Vale and will also be a minority shareholder in the ore project.
Cosan said in a statement that it is entering the mining and logistics market with a robust project for iron ore exploration in Pará, with distribution through a private port in Maranhão. “The project will rely on the group’s consolidated expertise in the logistics sector (rail and port) and as a strategic partner, with the ambition of becoming a relevant player in the sector in the coming years.”
According to the group, the company that will manage the mining and logistics business will have advisors and executives with experience in the sector, in order to guarantee even more traction to its development.
For Patricia Muricy, a partner at Deloitte Brasil in charge of the mining industry, the high price of mineral commodities is likely to draw both new entrants and private equity funds. “This movement also means an opportunity for large mining companies willing and in need to reorganize their portfolio, focusing on assets with higher performance, lower socio-environmental impact, lower carbon footprint, very much in line with the public commitments made regarding ESG.”
For Ms. Muricy, it is important that new entrants evaluate aspects relevant to all stakeholders and not be restricted to a simplistic economic and financial analysis, because there are many other risks that can make the expected profits unfeasible.
For industry sources consulted by Valor, this new moment of high ore prices is expected to activate projects that were on stand-by attracting investors. Among them, the expansion plans of mining company Bamin, in Bahia.
According to people familiar with the matter, Bamin has been trying to find a financial investor for the project. However, the investment demanded by Bamin is considered high for the entrance of a new partner.
In a statement, Bamin said it has a large integrated project of significant relevance to Bahia, including the Pedra de Ferro mine, in Caetité, the construction of the South Port, in Ilhéus, and section 1 of the Fiol railroad. “These are large-scale projects that arouse the interest of several partners, with whom the company will always be open to talk.”
Another project that was put on stand-by but may be reactivated is the Manabi ore exploration project, in Minas Gerais, according to another source familiar with the matter. Getting this mine off the ground depends on logistics (rail or pipeline) and port facilities. It is close to Anglo American’s mine and Vale’s railroad. No spokesman for the company could be reached for comment.
In iron ore, the big challenge for newcomers is to define if they want to be big – projects above 20 million tonnes per year – and have cash flow to set up the project, said José Carlos Martins, a partner at Neelix Consulting & Metals who worked as head of ferrous metals at Vale for a decade. Many investors prefer to be small and sell their production to Vale or CSN.
Depending on the project, the investment is in the range of billions of dollars and usually takes three to five years to be put in place. There are usually delays because of environmental permits and problems in logistics works (railroad and port). “In Brazil, there are at least 20 projects waiting to get off the drawing board. There is space in the market at the moment. The critical factors are the ones I pointed out, besides the demand scenario, and prices, which must be considered,” the consultant said.
Luiz Barsi’s office is not located in São Paulo’s Wall Street, Faria Lima Avenue, where most of Brazil’s investment banks and asset management companies are based. Instead, the investor, worth over R$4 billion, received Valor in the office of Boa Vista Investimentos in downtown São Paulo, a financial hub of decades ago.
In this austere environment, with several pictures and memories of the open outcry auction of the old exchange Bovespa, the first one to arrive is Mr. Barsi’s daughter, the entrepreneur Louise Barsi, who is flying solo in the financial education segment through a platform called Ações Garantem Futuro (AGF), or Stocks Guarantee the Future.
She summarized which are, according to their methodology, the best industries to invest in stocks. “There is this acronym BESST [in Portuguese]: banking, power, basic sanitation, insurance and telecommunications.”
Luiz Barsi, 83, is a historical advocate of investing in stocks of companies that pay good dividends with the goal of long-term gains. And the method pays off. The investor says he received R$300 million in proceeds in 2021 alone.
Today, the super-investor’s new bets are the power company Auren, the sugar-and-ethanol firm Cosan, Vibra Energia, owner of gas station network BR, and Banco Mercantil.
While most of these positions are in line with his classic strategy of seeking discounted stocks of companies that pay good dividends and have predictable revenues, the way of thinking has been partly updated. Auren stands out, for example, for focusing on renewable power. “Tesla sold over 350,000 cars in the United States in 2021, so there is a strong trend of fossil energy sources having less potential in the future.”
Controversially, he criticized the passionate recommendation that influencers on social media make of a dividend portfolio focused on real estate funds. “Real estate funds are a confidence game,” he said. Mr. Barsi also complained about speculators who sell shares short, and says he still believes in the recovery of reinsurer IRB Brasil – shares are down 90% since the peak, in January 2020.
His stock market recommendations and analyses often include criticisms, targeting bankers and something he calls an attempt to turn Brazil into a “nation of loan sharks.”
Read the interview below.
Valor:You began your career identifying the industries that had the best chance of enduring. At the time they were food, basic sanitation, power, mining and finance. Now, in 2023, if you were to redo this analysis, which sectors do you see as having the capacity to endure and grow?
Luiz Barsi: Not much has changed. Within those sectors, there are a lot of vital necessities, like food.
Louise Barsi: There is this acronym BESST [in Portuguese]: banking, power, basic sanitation, insurance and telecommunications. Those are the best industries to start filtering.
Luiz Barsi: I am buying today the shares of three companies: Auren [a result of the merger between the power assets of Votorantim and the parent company of Cesp], Cosan and Vibra Auren carries within itself an interesting component, which is to continue investing in a solar power mix. It already has a hydroelectric power mix and owns a large plant, Porto Primavera, which belonged to Cesp.
Valor: Is it important for you that it is a company that invests in solar power and other renewable sources?
Luiz Barsi: We are looking at what the world is looking at, which is clean power. We were recently in Miami and drove around several times in electric cars. There is a strong trend of fossil energy sources having less potential in the future.
Valor:Can you unveil something about your investment portfolio?
Luiz Barsi: I do not buy stocks to sell tomorrow. I have shares of Banco do Brasil I bought for R$0.60. I have shares of Klabin I bought for R$0.17. I have shares of Suzano I paid around R$2 or R$3 each. Unipar, which I bought for R$0.25 and is worth R$100. I also have some from [gun maker] Taurus. Besides this, I have Transmissão Paulista, Taesa and Cemig. So, these are securities that I am not going to sell, but that continue to distribute good profits.
Besides this, I have been buying a little bit of Banco Mercantil shares, for strategic reasons. I buy them at R$10 and they pay a higher dividend than Itaú, Itaúsa and Bradesco. But it is difficult to buy the shares. There is virtually no liquidity. When a seller shows up, you try to squeeze him down to his price.
Valor:What about you, Louise?
Louise Barsi: It depends, because as the market capitalization changes, your portfolio gains a different weight. Today, from some movements I made in the portfolio, I believe 30% is in insurance: BB Seguridade, Caixa and IRB Brasil. The second largest slice is in banks, and there is a part equally distributed in power and basic sanitation. In power, I have a good position in AES, Cosan and Eletrobras.
Luiz Barsi: I have a good position in Eletrobras as well, but I bought it for R$3.8 each, and today they are worth R$40.
Valor:Barsi, how do you see value investing today? Is there any difference with how it used to be? Because today, when we look at the U.S. stock markets, we see the Tesla phenomenon and more and more growth theses doing better than value theses. Do you think this scenario has really changed?
Luiz Barsi: You see, these are companies that we don’t buy. They have already reached a level that you can only convince an investor from a developed country to buy, not from a country like Brazil.
Of those who operate in the stock exchange in Brazil, there are probably not 1% of investors. Most want to buy and sell all the time. It is very interesting for the stock exchange to have speculators and not investors. The stock exchange wants brokerage fees, remuneration. Of course, it will not give preference to those who buy and hold.
Most people don’t talk about this, but it is important to talk about it. A country, when it chooses to have a stock market, and makes a place available to negotiate, it has to do so in a way that the values meet in a natural way, that there are no pressures for price formation. Here in Brazil, as in other countries, the stock exchange allows citizens to rent shares and sell them in the market. Thus, you create a selling pressure on certain stocks, and the price made is not natural, it is forged. It is a manipulated price.
Some companies have more than 13% of their shareholder base leased. We don’t have an investor structure capable of withstanding pressure of this nature. This causes that stock to assume a condition that is not the reality.
Valor:Is this the case with IRB?
Luiz Barsi: The Instituto Brasileiro de Resseguros [IRB] has a sector of activity similar to electric power. This company, which should be in a different situation than the one it face today, has two major shareholders, Itaú and Bradesco. So, they have the obligation to rebuild the company. You take out insurance with Bradesco or Itaú, and this insurance contract is not good. Why would Bradesco keep this contract and not pass it on to IRB?
IRB today is an institution you can trust. They are people that you believe would never do something like what was done before [the doctoring of results reported by Squadra in 2020]. That’s why we are fighting and discussing. I know IRB won’t be good for two days from now, but it will be good for a while from now.
Valor: A question for both of you. What do you think about cryptocurrencies?
Luiz Barsi: Cryptocurrency is a fantasy.
Louise Barsi: I’m a big believer in the technology behind it. As an investment, just like any other currency, we don’t put money on it.
Luiz Barsi: It is not good either as an investment or to hold on. In my interpretation.
Louise Barsi: Nothing against those who invest.
Luiz Barsi: Nothing against those who invest, but those who invest will lose. It is a matter of time.
Valor:And how do you see the elections this year? Between Luiz Inácio Lula da Silva and Jair Bolsonaro is there anyone who is better for the market?
Luiz Barsi: What is Lula’s level of education? He doesn’t even know. How well educated is Bolsonaro? He was a lawmaker for many years and is an expert in rachadinha [a kickback scheme where aides return part of their earnings, sometimes for no-show jobs]. If [former judge Sergio] Moro is a candidate I will vote for him. If he is not a candidate, I don’t want to repeat tragedies. I prefer not to vote.
Valor:What about a runoff between Lula and Bolsonaro?
Luiz Barsi: I won’t vote for either of them, neither in the first nor the second ballot. The vision that I have of the politician is the worst imaginable.
A citizen who worked a lot and does a lot is [former infrastructure minister] Tarcísio Freitas. I’m going to vote for him for governor [of São Paulo]. I see in him a person who wants to make the country grow.
Brazilians still need to learn how to vote. We have always been allowed to vote not for the best, but for the least-worst option. The problem is that this time there is not even a least-worst option in the presidential election.
Valor: How do you see Brazil in terms of its capacity to draw investment, considering that of the BRICS countries only Brazil and India are viable?
Luiz Barsi: The money that comes in here is speculative. The exchange rate has fallen now because many dollars have come to Brazil, but the guys are investing here to get interest rates at 12% a year.
Our government has an extremely compromised management capacity. Less than a year ago, our benchmark interest rate was less than 3% and today it is 12%, which generates opportunities for others and not for us.
Valor:You have always been a great defender of the thesis of investing in stocks to earn dividends and reinvest these dividends. But these big investment sites now look at this strategy more in terms of real estate funds than in terms of stocks. Do you think stocks are still better for building a dividend portfolio than real estate funds?
Luiz Barsi: Real estate funds are a confidence game. So are funds in general. Private pension is another one. Run away from funds. You make the fund owners rich. They charge you management fees, success fees, performance fees, and I don’t know anyone who has made money with funds besides bankers.
Valor:What tip would you give to investors who are just starting to invest?
Luiz Barsi: If they are going to buy stocks in the market now, the first thing is to define a focus, a guideline, and be aware that they will only make money in the medium and long term.
The other thing is to create criteria. My most important criterion is that of priority. If someone comes to me saying that he wants to sell me a Mercedes, I will say no, because it is not my priority. My priority is to grow my monthly income portfolio.
I go on exorcising everything that is not my priority. I don’t do anything on impulse. You don’t impose this rule to everything, but to superfluous things, yes.
Valor: You, when you started investing, realized that the INSS [National Institute of Social Security] was going to collapse and it was not a valid way to look at your income in the future.
Luiz Barsi: The state doesn’t have the competence to manage Social Security funds in order for it to be always positive. Brazilians prefer to continue to believe that someone like Lula is a great manager and that the INSS works. We have a shameful retirement burden. In the old days, the citizen retired as an executive and after ten years was destitute. Until today the Brazilian people have not looked at this.
Valor:Do you still don’t believe in Social Security despite the 2019 reform?
Luiz Barsi: This reform was a flight of fancy. It will make up for one or two years. Three or four years from now it will have to be done again. Thirty years ago, you went to Volkswagen, took a picture of the company and saw 15,000 employees working there. Today you have a thousand robots. Robots don’t contribute to the INSS.
Valor:How did you saved money for the first time, and how was the process of starting to save money after beginning to work as a shoeshine boy?
Luiz Barsi: That of being a shoeshine boy happened when I was a nobody, a kid with no culture. I couldn’t do anything else. But then I studied, got a job, and found out that this was not what I wanted. I started to invest in a way to take risks. I am not an economist who ran after the paycheck.
Valor:But how was it to invest in stocks for the first time?
Luiz Barsi: I thought: who has a decent and permanent monthly income? The business owner. Then I said: I want to be a business owner. But I didn’t have any money for that. The first thing I thought was that I wanted to be the owner of Banco do Brasil, but I will never own Banco do Brasil. Then I realized that I could become a small owner by buying shares.
If you buy stocks permanently, maybe you can get to a plausible situation of having a monthly income. How long does it take a guy to retire? 30 years? What if I buy 1,000 shares a month for 30 years? It was possible to do this in Cesp, for example, which paid two dividends a year, according to its bylaws, and had a priority minimum dividend for preferred shares, besides paying a bonus of 10% a year when it still had shares with a nominal value of R$1 in its bylaws. I thought, what if I buy 1,000 CESP shares a month for 30 years? I put it on paper and after I did that, I was convinced that anyone doing the same would be successful in terms of a monthly portfolio.
I called this work “Ações Garantem o Futuro” [“Stocks Guarantee the Future”]. If I did the same today, I would call it “Stocks Guarantee a Great Future.” I followed that work religiously.
Valor: What do you think will be your greatest legacy in the financial market?
Luiz Barsi: My greatest legacy will be to get people to invest in wealth generation and not to be loan sharks. Those who lend money are loan sharks. If they put money in a savings account, they are a loan shark.
Valor:What is your main objective or goal in the financial education work?
Louise Barsi: I think that a small seed was planted more recently with the interest rate at 2%, which made Brazilians awake to risk-taking. We have to demystify this concept that stocks are a very risky investment. It is only risky if you don’t know what you are doing. But it is possible to take risks in fixed income as well and lose money.
Luiz Barsi: Did you know that stocks are safer than fixed-income investments? In 1989, when [former President Fernando] Collor changed the currency structure, he took everything that was in fixed income, except stocks. If he had taken stocks, that would mean to nationalize all the companies in the country. So, stocks, in my modest interpretation, are safer than any fixed-income investment. I have been a fighter for an investment culture in this country.
Valor:And what are the main challenges in this goal?
Louise Barsi: You don’t create a culture overnight. I was in Israel for studies and it’s a country that has a very recent history, with an extremely hostile land for agriculture and surrounded by unfriendly neighbors, so necessity became the mother of invention there. The country has invested in military technology to defend itself from its neighbors. If they don’t have an arable land, they sought technology for desalination and irrigation. Thus, they became a startup nation.
In Brazil, it is difficult to make this revolution because you don’t need to develop the capital market. Here, with little effort a rentier can make money. You don’t have a combination of incentives that is pro capital market.
It is a very generational work. A generation previous to mine started to realize that they have to invest in the future, they can’t count on the INSS. We need these fruits to be passed on to the following generations. Many parents come to us asking for tips on how to make a pension portfolio for their children. It is important that parents pass this on to future generations.
It is a long-term job, but since we already invest in the long term, it is not a problem for me that my objectives are also for more distant horizons. And looking at the curve of new individual investors in the market, we can see that this advance of financial influencers has helped.
Luiz Barsi: It was higher than expected, because more and more people are coming up who say they started to trade in the short term and only lost. Maybe this can be an unpleasant experience, but it will teach you that in the market you will only win if you don’t consider yourself a minority shareholder. Consider yourself a small owner, because the minority shareholder can sell the shares, the small owner won’t sell, because the bigger owner won’t sell either.
In 1970-71 I thought I should be the owner of Banco do Brasil. Today I am not the owner, but I am the biggest individual shareholder. It was the criteria. This is the lesson I would like to leave.
The production of steel and cement is the largest emitter of CO2 among industrial companies around the world, with 15% of the total, and both sectors are racing to meet targets for reducing greenhouse gases. In this vein, Companhia Siderúrgica Nacional (CSN) starts a pilot project with technology from the Portuguese company UTIS, which will use green hydrogen in the production process of some areas of the plant, located in Volta Redonda, Rio de Janeiro. This is one of the technological solutions, among several in the world, that are being developed to cut carbon emissions from industrial processes.
The technology from UTIS has already shown results in cement plants, solid waste combustion and biomass, but this is the first time it will be used by a steel mill, said Felipe Spiri, the chief executive of CSN Inova Open and co-founder of CSN Inova, the company’s arm that invests in innovation and technology projects.
CSN’s management team ordered to lower the use of fossil fuels (petroleum coke and metallurgical coal) and natural gas, Mr. Spiri said. This is both to comply with environmental standards and achieve cost savings. Coke and coal are imported and traded in dollars.
According to the executive, who majored in economics at Unicamp, has a master’s degree from Insper, and has worked in several departments within CSN, the project with UTIS has great potential to help CSN, as well as other steel companies, to meet decarbonization goals using less of fossil fuels. He said that the company has acquired and deployed, since 2020, UTIS technology in cement production.
The use began in the integrated plant of Arcos, Minas Gerais, where it obtained a reduction of 12 kilograms of CO2 per tonne of cement produced. The process is coupled, in four containers, to one of the two kilns in Arcos, generating gains, besides the reduced use of coke, in the productivity of the clinker kiln and power consumption. CSN Cimentos is expected to also take the technology to the plant acquired in Paraíba, and in the future to others.
This week, technicians from UTIS are in Volta Redonda to define where to start using the technology. This stage will last three months, Mr. Spiri said, because all the production flows will be mapped to test the technical and economic viability of UC3 (Ultimate Cell Continuous Combustion). The targets are the blast furnace (which uses coal and coke), steelmaking gases and natural gas, sintering (which agglomerates fine ore) and the hot-rolling mill.
The electric furnace of the long steel mill, for example, is a potential production area to receive UC3 technology initially. It is smaller than the large-flat steel mill.
The goal is to start the injection of green hydrogen in a controlled manner in the second half of the year, in one or more defined areas. The system, in containers – where the electrolysis process occurs, which generates hydrogen –, according to CSN, is easy to install, using renewable power and water, including from the sewage system. The size of the equipment, which will be imported from Europe, will also be defined.
The systems, Mr. Spiri said, have a price range that goes from €100,000 to €1 million. It depends on the capacity of green hydrogen to be generated and injected. According to him, CSN obtained financing from Finep (federal agency that supports innovation in industries) for the cement plant project. But it could not repeat it for the steel project. In all, including other efforts, R$45 million were financed.
According to Mr. Spiri, CSN works to reach in 2030 the CO2 reduction target that the rest of the sector has set for 2050. A bold goal for the eight-year timeframe.
UTIS was founded in 2018 as a joint venture between Ultimate Cell and the Secil group (cement). At the end of 2021, the Semapa group joined the company. UC3 targets energy efficiency and continuous combustion processes in industries.
The results of Brazil’s largest banks in the first quarter may help foresee the pace for the rest of the year, which is still a major unknown. On the one hand, the economy has been doing better than expected and credit growth has also surprised positively, which is likely to guarantee a good performance from January to March. On the other hand, high interest rates and inflation will lead to an expected increase in default rates throughout the year.
The projections of six banks collected by Valor indicate that Itaú Unibanco, Bradesco, Santander and Banco do Brasil (BB) are expected to have a combined profit of R$23.697 billion in the first quarter, up 0.5% from the fourth quarter – when there was a record – and an advance of 8.5% in comparison with the same period in 2021. The annual performance is expected to be the weakest since the fourth quarter of 2020, when numbers were still down due to the pandemic. The earnings season will begin next Tuesday, with Santander.
For UBS BB analysts, the default rate will be the most closely watched indicator in the financial statements. Still, they say that despite the expected deterioration in asset quality, banks are expected to show good operating trends, with year-over-year low-double-digit growth and improved margins for loans. There may be a small increase in provisions for bad debt, but some firms are likely to continue using some of the cushions built up in the pandemic, which would hold back that advance.
“We are positive about the dynamics of the results of Brazilian banks… Overall, we forecast earnings expansion for most of the banks we cover,” UBS BB said. Goldman Sachs takes a similar view, predicting resilient operating trends. “We expect Brazilian banks to sustain relatively stable ROEs as financial margins remain resilient and the cost of risk remains under control, with healthy loan growth, even if the default rate shows some deterioration.”
J.P. Morgan goes along the same lines, but with a slightly more cautious view. For the U.S. bank, the expected rise in defaults favors the large incumbent banks, which have a more diversified revenue base. “In Brazil, we see rising spreads, but asset quality worsening at the margin, in a potentially faster trend than initially anticipated.” According to the report, there could be sharper worsening in individual defaults, especially unsecured consumer loans and credit cards, which are under pressure as the year begins with high inflation and household debt also high.
“We believe that the deterioration in asset quality is likely to dominate the discussions and will probably prevail over strong net interest margin developments in the first quarter results. The first signs of how severe the scenario for Brazilian banks may be is expected to start to emerge in the first quarter,” Bradesco BBI analysts said.
Bank of America says that net interest income will probably benefit from a higher rate environment, although lower treasury earnings will limit total interest income growth to around 5%. They also warn about administrative expenses, which remain a point of concern, reflecting recent salary increases.
In a report in February, when the 2022 guidance was released, BofA said the discrepancies in projections made “Itaú came from Mars and Bradesco from Venus.” While Bradesco’s projections suggest 8% profit growth this year, Itaú’s forecasts indicate twice as much: 16%. “The 2022 guidances for Bradesco and Itaú include large disparities related to financial margin; bad debt provisions; revenues from tariffs and insurance; and effective tax rate. On the other hand, both indicated similar growth in loans and operating expenses,” the analysts said. Now, the first quarter results may give clues about who is right.
Itaú will probably have the highest year-over-year growth in profit, up 14.1% to R$7.3 billion. “We project total credit growth of 13.2% year over year. The retail portfolio is likely to remain robust, but with a different profile from previous quarters (growth in home loans may decelerate, while personal loans may expand faster),” UBS BB said. The analysts said that the recent appreciation of the Brazilian currency may have a negative impact on growth, since the bank’s portfolio in the rest of Latin America represents almost 25% of the total.
Bradesco will likely have a 3.7% expansion in profit, to R$6.754 billion. For Goldman Sachs, despite a solid 18% expansion in the portfolio, the financial margin is likely to fall in the transition from the fourth to the first quarter, and the default rate will rise. “Fee income and expenses are likely to be seasonally worse. We estimate expense growth to reach 10%, limiting profit expansion.”
For BB, estimates are for a 14.1% rise in profit, to R$5.604 billion. Analysts see a low level of provisions and the margin benefiting from the growth in lines with higher spreads. At the same time, Banco do Brasil’s pension fund Previ’s results are expected to make a significant positive contribution. “Given the higher risk quarter, we favor less risky operations, such as Banco do Brasil and Itaú, over Nubank and Santander,” J.P. Morgan said.
In the case of Santander, the forecasts indicate profit of R$4.039 billion, an improvement of 0.7% year over year. BTG foresees an increase of 41.3% in provision for doubtful debts. In addition, analysts point out that the result of treasury, which was very strong in an environment of low interest rates, is likely to lose strength with the increase in the Selic. “Santander ended the fourth quarter with a coverage ratio of 220% (the lowest among large Brazilian banks). We believe this will fall even more in the coming quarters,” UBS BB pointed out.
Market consensus has migrated to more appreciated exchange rates at the end of the year — Foto: Scott Eells/Bloomberg
In view of the strong appreciation shown by the real against the dollar in the last few days, the market consensus has increasingly migrated to more appreciated exchange rates at the end of the year. If at the end of March, when the exchange rate was already at R$4.70 to the dollar, economists were still projecting R$5.25, now the number of analysts who see a chance for the rate to end the year below the R$5 threshold has been growing.
The shock that raised the prices of commodities helps to explain about 65% of the real’s appreciation this year, while high interest rates account for the other 35%, said Guilherme Loureiro, the chief economist at Trafalgar Investimentos. “And these are things that are here to stay. The commodities scenario is more stretched than our previous estimates and so is the interest rate scenario, since we are likely to have a very high Selic [Brazil’s benchmark interest rate] at least until the end of the first quarter of next year,” he said.
In Trafalgar’s view, the situation now looks different from the one seen at the beginning of the exchange rate appreciation process. On Wednesday, the rate closed the trading session at R$4.6194 to the dollar, close to the long-term fair value, which, according to the asset manager’s calculations, is between R$4.50 and R$4.60.
In a survey with 74 financial and consulting firms published by Valor last week, the midpoint of the estimates for the exchange rate at the end of the year was R$5 to the dollar. BTG Pactual (R$4.80), Itaú Asset Management (R$4.80) and Western Asset (R$4.90) are some of the firms that already see the exchange rate below the psychological level of R$5.
“The exchange rate keeps surprising,” said Daniel Tatsumi, a currency manager at ACE Capital. He notes that commodity prices continue to rise and the interest-rate differential remains high – factors that support the real right now. “We don’t think that, after appreciating 20% [against the dollar], the real will rise more 20%, but the direction remains the same.”
For Mr. Tatsumi, the exchange rate may start to become a little more “stationary” after the expressive appreciation of the real this year. “That foreign flow that was coming in has diminished a lot and the position of the local investor is at a very favorable level for the real, which we didn’t used to see in the recent past. We think that the exchange rate continues to improve, but the great appreciation is behind us,” he said.
One risk mentioned by ACE’s manager for the scenario projected for the exchange rate is the possibility of the U.S. Federal Reserve put in place a more aggressive monetary tightening. “If the U.S. raises interest rates with growth and without risk-off, it could be a risk for the real, and the dollar could strengthen again. We already see this in relation to currencies of countries with low interest rates,” Mr. Tatsumi said, referring in particular to the yen.
However, he stressed that the appreciation of the real, although surprising, is well justified. “We are far from saying that there was an exaggeration. Everything was moving in the direction of a more appreciated real,” he said. Regarding the short term, however, he notes that seasonal adjustments may somewhat weaken the real, remembering that in May and June the trade flow is expected to begin to decrease and there may be an outflow of dividends. Mr. Tatsumi notes that a relevant part of the flow comes from abroad, which matches with a seasonally negative period in the coming months.
Looking further ahead, Santander expects, in its baseline scenario, the exchange rate at R$5 to the dollar at the end of this year. Before, the bank expected that the exchange rate would end the year at R$5.4 to the dollar.
In a scenario review released last week, Santander’s economists pointed out that they expect some weakening of the real against the dollar below current levels throughout the second half of the year, “in the wake of the faster normalization of monetary policy in advanced economies and of some volatility generated by the debate about the direction of economic policy after 2023.”
Nevertheless, the bank’s economists say they understand that the rise in commodity prices and a likely structural change in the allocation of funds dedicated to emerging markets, caused by the conflict between Russia and Ukraine, in addition to the still significant interest differential, “is likely to result in a more appreciated exchange rate than we had imagined.” Santander believes that interest rates in the U.S. could reach 3% by the end of this year and 3.5% in 2023, while the projections for the Selic point the benchmark rate at 13.25% this year and at 10% in 2023.
In the view of Alfredo Menezes, founding partner of Armor Capital, the behavior of the exchange rate will depend on how the scenario will look until the end of the year, the terms of trade and the dynamics of monetary policy in the U.S. “If the Fed is more austere than the market is expecting, commodities could give way a bit and then the terms of trade will not be so good.”
For him, in general, the scenario is more nebulous in the second half of the year. Mr. Menezes even says he believes that the flow to variable income, which has favored the real appreciation this year, is unlikely to perpetuate until the end of 2022. In addition, he notes that the end of the year “always has a tighter flow due to remittances,” which is expected to lead the exchange rate to something between R$5.1 and R$5.2 at the end of the year. “But nothing prevents it from falling again in January 2023.”
The external scenario is one reason mentioned by Citi economists for foreseeing the exchange rate at R$5.19 to the dollar at the end of the year. “We expect a less benign global environment for emerging markets behind the expected assertive U.S. monetary tightening, which may have negative implications for emerging market currencies, as seen in 2013 during the taper tantrum [when the Fed reduced asset purchases].”
In addition, Citi professionals point out that a potential strengthening of the dollar and lower commodity prices “could exacerbate the negative impacts on the real.” They note that further strengthening of the dollar generally “is often accompanied by falling commodity prices, which can reinforce the headwinds to the real.” Citi, however, points out that this movement has not been seen so far this year.
The use of mediation to solve problems with creditors is gaining momentum among indebted companies, especially those in legally-backed financial restructuring. Renova Energia has chosen to try this alternative a few days ago, as well as Hotel Maksoud Plaza and department store chain Le Postiche.
The measure can be a fast, low-cost solution for debtors and creditors. Agreements reached through mediation are ratified by judges and considered a ruling. The litigation ends at that point, reducing expenses with attorney’s fees, court costs and the several appeals that would come with a lawsuit.
Disputes taken to higher courts can take years – sometimes decades – to end. With mediation, they usually take only a few months. In the case involving Le Postiche, for example, the agreement was ratified in the same month.
Le Postiche, Maksoud and Renova Energia have all filed for bankruptcy protection in São Paulo courts. Mediation was indicated by the judge or the trustee of these cases, and the measure only went ahead because the parties – debtor and creditor – agreed to try and cut an agreement.
Power generation company Renova, for example, agreed to sit at the table with Brazil’s national grid operator ONS to discuss payments owed to 237 transmission firms. The negotiations are just beginning.
In March, Judge Paulo Furtado, of the 2nd Court of Bankruptcy of the city of São Paulo, appointed a specialized chamber, Med Arb RB, for the case. They will try to reach a decision by consensus with the help of a mediator.
The use of mediation in corporate disputes, in general, has been happening for a long time in Brazil and abroad – especially in the United States. But it is slowly being adopted for legally-backed financial restructuring. The first case in Brazil was that of Oi.
The phone carrier was allowed by Judge Fernando Viana, of the 7th Business Court of Rio, to use mediation in 2017. Agreements were reached with more than 50,000 creditors – most of them holding credits of up to R$50,000 – through an online platform developed by the think tank Fundação Getulio Vargas.
“It worked very well. But people were skeptical that it would work for other cases. Oi’s reorganization case is the largest in Latin America,” said Samantha Longo, with the law firm Longo Abelha Advogados, who worked on the case.
There is more talk now about mediation in the financial restructuring market after the National Council of Justice, a public institution that aims to improve the work of the Brazilian judicial system, published recommendations to judges. The first was at the end of 2019 and others came in 2020 – when the pandemic hit.
But experts say the turnaround came with the reform of the Bankruptcy and Judicial Recovery Law (No. 11.101) in early 2021. The rule now provides for the use of mediation, including as a pre-procedural step, with the right to benefits that were previously only allowed within the proceedings – such as the suspension of collection actions against the debtor for 60 days.
Le Postiche, a handbag and luggage retailer, decided to try this path in July 2021. It used mediation with property owners where some of the brand’s stores operated. The company agreed to hand over the rooms and the landlords, in exchange, considered the debts settled.
Without an agreement, the debt would remain within the reorganization process – to be paid according to the plan approved in a creditors’ meeting, with the possibility of discount and payment in installments – and the owners would have difficulty in recovering the properties immediately.
“Mediation has to be analyzed on a case-by-case basis and used in those cases in which it is really necessary and can work,” said Julio Mandel, with law firm Mandel Advocacia, which works in the company’s reorganization.
The agreement with the lessors was ratified in the same month by Judge Andréa Galhardo Palma, from the 2nd Regional Business Court in São Paulo.
In the case of Maksoud, mediation was used in a landmark dispute: the ownership of the iconic building in São Paulo where the five-star hotel operated for 42 years.
There had been litigation since 2011, when businesspeople Jussara and Fernando Simões, siblings and shareholders of Simpar, bought the property for R$72 million – R$137 million in updated values – in an auction by the Labor Court. Hidroservice, the holding company of the Maksoud group, questioned the validity of the auction in court and had been holding on the property.
During the reorganization process, after the recommendation of the trustee, the parties agreed to try an agreement through mediation. It worked.
It was agreed that the loser would not have to pay the attorney’s fees to the prevailing party. And they fixed an incentive clause to vacate the property. The Simões brothers committed to pay an extra R$59 million and Maksoud, in exchange, would deliver the building on time.
With these amounts, Maksoud will be able to settle its reorganization plan and pay tax debts, and it still has money left to continue its activities, which are now more related to real estate services and management.
The agreement cut in five months was ratified by Judge João de Oliveira Rodrigues Filho, from the 1st Bankruptcy Court of São Paulo.
But the case is not yet closed. The brothers Claudio and Roberto Maksoud, sons of the hotel’s founder, Henry Maksoud, filed an appeal in court questioning the sale price of the building, which, according to them, is worth R$300 million.
Because of this situation, the company took a little longer than expected to deliver the building. This, today, is already done. The current phase is the registration of the letter of sale in the real estate registry. According to interlocutors, the registration is expected to be completed later this month.
With this step completed, the amount collected in the auction is made available to the company. The extra R$59 million, foreseen with the incentive clause to vacate the property, will only be released when the São Paulo Court of Justice confirms the agreement ratified by the trial court.
Elias Mubarak — Foto: Divulgação
“They usually say that mediation is an alternative method. But, as said by high court judge Paulo de Tarso Sanseverino, of the Superior Court of Justice, it is, in fact, the appropriate method to reduce litigation. The parties are able to solve the situation in a much less stressful manner,” said Elias Mubarak, head of Med Arb RB.
The chamber is specialized in mediation, arbitration and other conflict resolution methods related to corporate insolvency. Before founding Med Arb RB, Elias Mubarak worked, individually, as a mediator. He conducted the agreement involving Maksoud and the Simões brothers, and also the one between Le Postiche and real-estate landlords.
“The road is long, and we are at the beginning of it,” he said, in relation to the consolidation of this method in judicial reorganization. According to Mr. Mubarak, there is an incentive to the practice, especially from judges of specialized courts.
Paulo Furtado, of the 2nd Court of Bankruptcy of São Paulo, said that mediation has been used to bring the debtor and creditors closer together in the construction of the payment plan, for example, and also in bilateral situations. “It has been a fruitful path,” he said.
The judge is following five cases. Among them, that of Renova Energia. He is even studying another indication of the use of mediation in this process. This time, to deal with the leasing of land where the company’s wind power towers are installed. “Mediation can facilitate the understanding of the creditors, the owners of the land, of how corporate reorganization works.”
Renova Energia did not immediately reply to a request for comment.
The Ministry of Economy has released a study on the topic.
The demand for 5G solutions for the most diverse areas of the economy has the potential to generate BRL 101 billion ($ 21.6 billion dollars) over the next decade for companies and startups in Brazil, a study released on Tuesday (April 19) by the Ministry of Economy reads.
The study also estimates that the potential benefit of 5G deployment for the Brazilian economy could reach BRL 590 billion ($ 126.2 billion dollars) over the next decade. The calculation takes into account productivity increases and cost reductions from the so-called Industry 4.0.
5G is the fifth generation of mobile and internet networks, whose speed is hundreds of times higher than the current fourth generation. With its implementation, countless possibilities are expected to be opened in areas such as artificial intelligence, data processing, augmented reality, and logistics, among others.
“The new technology will serve as a lever for several sectors,” Secretary of Productivity and Competitiveness of the Ministry of Economy Daniella Marques said.
The report on the projection for the software market and applications was produced by Deloitte consulting company, in cooperation with the United Nations Development Program (UNDP).
“We are behind developed countries, but we realize we have good chances to make a fast progress with 5G, especially in software and application development,” managing partner and head of the Technology, Media and Telecommunications Area at Deloitte Brasil Maria Ogawa noted.
Recommendations
The report suggests 96 recommendations for public policies on eight fronts, so that the potential for generating wealth is achieved, and points out the challenges along the way.
The report recommends, for example, the creation of special economic zones focused on 5G technology, tax exemptions for the purchase of equipment for emulating 5G networks and the offer of tax benefits for multinational companies to implement strategic operations in the country, transmitting technology.
The low availability of resources to foster the national ecosystem around 5G, the lack of qualified labor (programmers and developers) and the insufficiency of environments that emulate 5G and allow the testing of solutions are among the main problems pointed out in the report.
“We are talking about a capital-intensive industry, and obviously all this investment is not cheap,” said Alberto Boaventura, senior strategy manager at Deloitte Brasil and one of the report´s co-writers. “It´s necessary to keep breaking down these barriers to financial and tax support,” he added.
Shopping mall operator Aliansce Sonae made its third proposal of the year for a merger with BR Malls — and this once it had a considerable advance. BR Malls agreed to discuss the terms and take the decision to a vote of the shareholders. The previous offers had been rejected by the board.
The real possibility of combining the businesses, in a deal that was becoming a battle, encouraged investors. Aliansce shares rose 1% and BR Malls shares gained 7.9%.
This time, Aliansce offered to pay R$1.25 billion in cash to BR Malls shareholders and, in the exchange ratio, add 326,339,911 shares — in the proportion of 0.39 shares per BR Malls share. This is the lowest amount in cash offered so far, but the highest percentage in shares, one of the main points questioned by BR Malls’s management team about the previous offers.
In the current exchange ratio, BR Malls would get 55.2% of the combined company plus the cash payment, compared to 51% plus R$1.85 billion under the terms presented in March and 50% offered in January with R$1.35 billion in cash.
In financial terms, the second and third proposals are even similar. Combined, Aliansce and BR Malls are worth R$13.48 billion. Therefore, the additional 4.2% in share capital in relation to the second proposal is worth R$566 million.
But it makes a difference the currency in which this amount is paid. The main advantage in the current offer would be the new potential high with the companies added together and in governance, as it guarantees a majority to BR Malls shareholders.
Valid for 10 days, the proposal was presented to BR Malls on Monday and the company had committed to hold a board meeting on Tuesday to evaluate it. BR Malls communicated in a material fact notice that the board unanimously decided to authorize the executive board to negotiate the terms with representatives of Aliansce and prepare documents for an extraordinary meeting.
BR Malls understands that the adjustment in share capital is a “demonstration of willingness and commitment” by Aliansce — but that there are still terms to be discussed.
Joao Roberto Teixeira — Foto: Silvia Zambonii / Valor
“We have taken an important step now to engage the two companies in dialogue and take the new proposal to the meeting. Our approach is constructive, aiming at an understanding,” João Roberto Teixeira, a board member at BR Malls, told Valor’s business website Pipeline. “This does not mean that we agree with this price, and still requires us to evaluate a set of fundamental aspects to set a deal.”
Among these aspects are issues such as company governance (the composition of the board, for example, a point that created friction in the first proposal, has not yet been discussed), dividend policy, management composition and portfolio composition (which assets the company would have to get rid of in a merger, for example, due to overlaps in some regions).
With this discussion and documents in hand, BR Malls’s management team will give its voting recommendation to shareholders, for approval or not of the merger — even if it is the investors’ decision.
“We are still exploring other alternatives, without any kind of exclusivity with Aliansce,” Mr. Teixeira said. The company is still in talks with Ancar, but this is a slower negotiation.
Analysts have a positive view on the new proposal from Aliansce. Bradesco BBI’s Bruno Mendonça and Pedro Lobato pointed out that the new terms imply a premium of 13% over BR Malls shares, considering Tuesday’s price. They estimate that the new company would be negotiated at a multiple of 9.4 times the enterprise value to EBITDA (of 2022), excluding synergies — an attractive price, they say.
Citi also now sees a greater possibility of approval than rejection of the proposal. BR Malls is advised by Itaú BBA, while Aliansce hired BTG Pactual.
In addition to the adjustment of terms, BR Malls’s decision on the new approach of the rival may also be linked to pressure from asset managers such as Truxt, Miles and Oceana. For these firms, the issue should have already been put to a vote by shareholders in the second offer.
The tone between the companies was also raised last month when BR Malls required the antitrust regulator CADE to evaluate the behavior of the competitor — in addition to having requested an injunction to prevent Aliansce from exercising its political rights as an investor. Aliansce owns about 11% of BR Malls and had already requested the list of shareholders of the target company.
Sources say that Aliansce delivered this week its arguments to the CADE, and now the regulator is evaluating the position of each side. If the merger goes ahead, they may not even need the watchdog’s opinion on the issue of political rights.
The original story in Portuguese was first published on Valor’s business website Pipeline.
A few hours after arriving on Monday from a flight from Los Angeles, where she lives, Stella Li, BYD’s senior vice president, headed straight to Cidade Jardim Avenue, a fashionable spot in São Paulo, where the most luxurious automobile stores in the country are lined up. In front of BYD’s first dealership in Brazil, the executive handed the keys to the first three buyers of the Tan EV, the model with which China’s largest electric car manufacturer makes its debut in the Brazilian electric luxury car market.
Ms. Li made a point of personally participating in a ritual that, in general, would not require the travel of a top executive like her, and the choice of location was not mere chance. The corner showroom where this 50 year old executive delivered the keys smiling all the time was acquired by Henry Visconde, owner of the Eurobike group, to install the first BYD dealership in Brazil.
The meeting of the executive born in the province of Yunnan, a mountainous region in the southwest of China, with the businessman from Ribeirão Preto is strategic. To do well in a competitive market, the brand, still little known by the Brazilian consumer, decided to ally itself with a strong group, which already sells luxury vehicles from brands such as BMW, Porsche, and Audi, and operates basically in the markets of São Paulo, São Paulo countryside, Brasília, and Goiás, regions that concentrate a significant part of those who can afford to buy cars for R$500,000, the price of the new Tan EV.
BYD’s move is bold. The Tan EV is not a simple electric car. It is the first all-electric seven-seat SUV to be launched in a country where, as everyone knows, there is still a shortage of battery charging infrastructure on the roads. And vehicles of this size are usually used a lot for traveling.
But Mr. Visconde is preparing to prevent his loyal customers from being let down. In partnership with Enel X, Eurobike is getting ready to offer recharging stations on the routes most used by its clients. In May, the first point will be installed in the São Paulo-Ribeirão Preto direction, at the Empyreo Ranch, a traditional stop for meals. Next, another point will be installed in the opposite direction. After these, will come the loaders between Brasília and Goiania. Mr. Visconde foresees an investment of R$1.5 million in this first phase. The autonomy of BYD’s car — around 437 kilometers — allows for the arrival trip to one of these stretches. But, says Mr. Visconde, it is better to guarantee and offer peace to the driver.
Besides Eurobike, which plans to open two more stores of the Chinese brand, BYD is in the phase of appointing more dealers who know well the routes of their customers and how to convince them to buy 100% electric vehicles. The plan is to reach 45 locations in Brazil this year and reach 100 dealerships by the end of 2023.
“There is nothing to worry about; this car has a good range,” stresses Ms. Li, who seems less concerned about the local charging infrastructure and more enthusiastic about the growth potential of electromobility in the world. From 2020 to 2021 the share of electric cars in China jumped to 13.3% from 5.5%. This includes electric and so-called “plug-in” models, which are hybrid models that can also be plugged in. In Brazil, hybrid and electric models account for 1.7% of sales.
The executive recalls BYD’s announcement earlier this month about its decision to completely discontinue the production of fuel-only vehicles. “Who could have imagined ten years ago that this would happen,” said Ms. Li, who started working at BYD (Build Your Dreams) when the listed company was founded 27 years ago.
With a background in statistics, Ms. Li has received several awards, including “Most Powerful Woman” from China’s “Fortune” last year. What makes a woman powerful? Work, she answers. And how does a woman succeed in a mostly male environment, such as automotive? “The one who makes the decision to buy a car in a family is almost always the woman,” she says, jokingly. Also in 2021, Ms. Li was named by “Forbes China” among the 60 most outstanding Chinese in North America, where she moved 11 years ago to take the helm of BYD in the Americas.
With 33 factories in the world, operations outside China still represent little — about 10% of the total sales of the company that does not stop growing. In just one month, in March, BYD sold 104,300 vehicles — including cars and light commercial vehicles (LCV). This volume, which is equivalent to the total of cars of all brands sold in Brazil in March, represented 160.9% growth compared to the same month in 2021. In one year the company’s revenue grew more than 50%, totaling $33 billion.
For the executive, Brazilians tend to be interested in Chinese cars because they like technology. “And electromobility is also a way to reduce dependence on oil,” she says.
Until now, BYD was best known by Brazilians for selling bus chassis and vans. These vehicles are assembled in a factory in Campinas, built in 2015.
The operation is still small. There 150 employees work in one shift. Also in Campinas, the Chinese group has a photovoltaic module factory, which opened in 2017. To supply its fleet of electric buses, the company started operating its third factory in Brazil in Manaus in 2020, where iron-lithium phosphate batteries are produced. The company is also responsible for two monorail projects in the country – in Salvador (VLT do Subúrbio) and in São Paulo (Line 17 of the subway).
On the eve of the session that will analyze the privatization of power giant Eletrobras, members of the public spending watchdog TCU are trying to reach an agreement on the final date for the trial.
Although it is on the agenda for this Wednesday’s session, a request for examination by TCU member Vital do Rêgo will postpone the final decision. The question mark is how much time Mr. do Rêgo will have to return the case to the floor.
Mr. do Rêgo is likely to say that the minimum price set for Eletrobras shares in the capital increase process is lower than it should be, according to sources. In his view, there are values not included in the calculation.
The standing rules of the TCU provide for a 20-day period for the requests for examination, with the possibility of two extensions for the same amount of time. Usually, the court authorizes the entire 60-day period, but this time it will be different.
Appointed by President Jair Bolsonaro, with whom he has a friendship, TCU member Jorge Oliveira is leading a movement to restrict the examination vote period to only seven days. He used the same resort in the process that authorized the auction of 5G technology.
Then, as well as now, the argument will be the urgency to carry out the operation. The Ministry of Economy and the Brazilian Development Bank (BNDES) have spent the last weeks telling the TCU ministers of the importance of approving the matter by April 27 at the latest.
The argument is that after this date, it will no longer be possible to carry out the operation on May 13, the deadline for the use of Eletrobras earnings reports for the fourth quarter of 2021. From then on, the statement of the first quarter of this year should be used.
In this case, the capital increase would have to be postponed to July or August, when the operation would run much more risk of not being successful due to the elections and the schedules of the investment funds interested in the business.
Mr. do Rêgo, however, considers that seven days is not enough for any serious analysis and is not willing to accept it. An alternative proposal, headed by TCU member Bruno Dantas, would be to grant the minimum period of 20 days, provided for in the regulations.
Others, such as Walton Alencar, TCU’s longest-serving member, suggest alternative deadlines. If there is no prior agreement, the decision must go to a vote. In the 5G trial, in August last year, Mr. Oliveira managed to convince the majority about the seven days deadline.
At the time, the author of the request for examination was TCU member Aroldo Cedraz, current rapporteur of the Eletrobras case. Forced to return the case within a week, he said he was disrespected, and that the decision was unprecedent in the court.
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