The index can go to lowest annual level since 2020, also because of fear of global recession
08/16/2022
André Braz — Foto: Leo Pinheiro/Valor
The 4.85% drop in gasoline prices at the distributors, announced Monday by Petrobras, may lead the country’s official inflation to a rate below 7% this year, said André Braz, an economist at Fundação Getulio Vargas (FGV). “This is already starting to become more probable [the rate below 7%],” he said, recalling that the market’s previous projection was between 7% and 7.2%. If confirmed, it could be the lowest annual inflation level since 2020 (4.52%). Brazil’s benchmark inflation index IPCA ended 2021 up 10.06%. The impact of cheaper gasoline, he added, will not be restricted to the annual rate: he said that the monthly IPCA for August may end the month with a decrease of around 0.3% — the projections for the rate were around a 0.2% deflation.
In practice, he pondered, the announced decrease reflects a wider phenomenon: the fear of global recession, lowering the price of commodities in the international market, such as petroleum — with an effect on its products, such as gasoline. With this in mind, he did not rule out new price changes in fuel by Petrobras, by the end of the year.
When talking about the decline, the specialist stressed the strong weight of gasoline in the formation of inflation by the indicator. The product has a weight of 6.5% in the IPCA. “But this drop of 4.85% will not be passed on in full [to retail],” he said.
The specialist’s calculations point out that at least half of this decrease may reach the pumps. Therefore, considering the product’s weight in the indicator, as well as the portion of the drop that may be passed on, the total impact on the IPCA will be a decrease of 0.15 percentage points “for 30 days,” he said.
Therefore, as the decrease in fuel prices will come into effect this Tuesday, the specialist projects a drop of around 0.07 percentage points (p.p.) in the August IPCA; and around 0.07 p.p. in the September IPCA.
Mr. Braz added that the decrease in gasoline prices has a greater impact on the IPCA than the 4% drop in diesel prices announced by Petrobras last week. “Diesel weighs only 0.3% in the IPCA, and this drop is likely to have an impact, a decrease of 0.01 percentage point on the indicator in 30 days [from the effective date on August 12],” he said.
However, for the specialist, both gasoline and diesel have the potential for new price decreases in the domestic market. This is because the baseline scenario abroad is increasingly one of a global recession.
The economist recalled the inflation rise in the United States, which led the U.S. to a new round of interest rate increases — which, in turn, hinders consumption and, consequently, the growth pace of the American economy. At the same time, China’s real estate market, strongly linked to China’s GDP, is showing difficulties at the moment, which “may bring new surprises in the field of commodities,” he said, without ruling out new price slowdowns, or even downturns, in this type of product.
Another aspect cited by Mr. Braz is the fact that the signs of deceleration are not only from China and the United States. Other regions, such as Australia and Europe, are also showing signs of the same phenomenon. “The major economies are showing signs of deceleration,” he warned, reiterating that this, in practice, helps to bring down oil prices — and therefore reduce the price of oil products in Brazil.
Economic experts say there is no fiscal space for further cash transfers
08/16/2022
Proposal will compete for the narrow fiscal space of the 2023 budget with other demands — Foto: Marcello Casal Jr./Agência Brasil
The idea of extending the handouts for taxi and truck drivers beyond December, set in motion on Monday by Labor Minister José Carlos Oliveira, has little chance of moving ahead, as far as the government’s economic team is concerned.
If it leaves the field of ideas to be discussed concretely, the proposal will compete for the narrow fiscal space of the 2023 budget with other demands: the maintenance of the cash-transfer program Auxílio Brasil at R$600 (in theory, the value returns to R$400 next year), pay raises for civil servants, the adjustment of the Individual Income Tax (IRPF) by inflation, and the extension of the cut of federal taxes on fuel.
It is an expensive program that will consume up to R$7.4 billion with payments in the second half of this year alone. This is more than the amount earmarked for investments in the Ministry of Infrastructure during the whole year.
The announcement Monday of a new cut in gasoline prices and the recent reductions in diesel prices make it hard to justify, from the economic and social standpoints, the maintenance of this benefit, a source said. Constitutional Amendment 123, which created this aid and allowed its payment on the eve of elections, is based on an emergency framework created by the Russia-Ukraine war.
Despite the decline in fuel prices, the idea of extending the tax exemption is still under analysis. According to officials, however, it would not be just like today, with costs around R$50 billion a year. Instead, there would be a version more focused on poor families. If the tax cut is kept only for diesel, biodiesel, and cooking gas, as advocated by Economy Minister Paulo Guedes, the bill will be about R$18 billion.
When saying that he “takes kindly” to the perpetuation of the benefits to taxi drivers and truckers, the Minister of Labor praised Mr. Guedes’ work in controlling the creation of new programs. He recalled, on the other hand, that the payment of benefits to the most vulnerable has been done by several countries.
When questioned, he also evaluated that the “price context” still requires government support for both work categories.
This is the group’s first investment in Brazil; company now plans to take part in new projects in the country
08/15/2022
The Italian group INC, which won the auction of the public-private partnership (PPP) of the Belo Horizonte beltway on Friday, makes its debut as a highway concessionaire in Brazil. The company now plans to take part in new projects in the country, said Nicola Trovato, the company’s representative.
“We are studying other bids, but I cannot say which ones,” he said after the victory. The company currently operates roads and railways.
INC has been trying to join Brazil’s infrastructure market since 2019. That year, the company even studied the PPP of the Salvador-Itaparica bridge, but ended up not participating in the auction, which was won by a consortium made up of the Chinese groups CRCC and CCCC. “After that, we stopped activities due to the Covid pandemic. Now we put our efforts into trying to win [the Belo Horizonte beltway PPP] and we succeeded,” he said.
The group, which is based in Turin and controlled by the Dogliani family, operates as a construction company, but also runs two important road concessions in Italy.
Among analysts, the entry of a new foreign operator into the Brazilian market was being pointed out as unlikely given the challenging economic scenario and the election year. “A foreigner coming to Brazil at this moment is surprising, but the project is very strong. It has contractual characteristics that provide financial support,” said Massami Uyeda Junior, a partner at Arap, Nishi & Uyeda Advogados, which supported INC in the auction.
In the auction, the company made an offer of a 12.14% discount over the amount that the state will pay. As a result, it defeated the bids of its only competitor, China Railway Construction Corporation (CRCC) group, which offered a discount of 10.2%.
With the discount, the Minas Gerais government will have to disburse R$2.4 billion. This discount applies to the consideration (R$91.1 million) to be paid in the first three years, and the initial contribution for the work (R$2.1 billion). In addition, an additional payment of R$211 million will be made, which will be directed to a contingency account for the project. Part of the money comes from the compensation agreement signed between the state government and mining company Vale linked to the damage caused by the Brumadinho tragedy.
With the victory, INC will have to move forward with the beltway project from scratch. Initially, the project will be 70-kilometer long and require investments of R$4.1 billion considering the construction work and the necessary expropriations.
Fernando Marcato — Foto: Silvia Zamboni/Valor
The construction is expected to start in 2024, according to Fernando Marcato, the state’s infrastructure secretary. The contract with INC is expected to be signed in a month and a half, and the environmental permit and executive plan stage is likely to take at least a year and a half.
In total, the beltway is likely to be 100-kilometer long. The remaining 30 kilometers needed to complete the project may still be added to the contract upon economic rebalancing. For this, an additional contribution from the state will probably be necessary, which could come from the new compensation agreement the Minas Gerais government is negotiating with Vale, related to the Mariana tragedy, Mr. Marcato said. An additional contribution of R$2.1 billion is likely to be required.
Automakers’ failure to make a decision about local production reveals adivided industry and government’s omission in the debate
08/15/2022
Caoa Chery’s plant: carmaker is betting on ethanol hybrid car — Foto:Reprodução
Carmakers have very clear global decarbonization targets. Most of them already have a date when they will stop producing internal combustion engine cars, and the electrification of cars is becoming increasingly common in many parts of the world. In Brazil, however, every time executives refer to the subject, the details and deadlines are unclear.
Of the 13 car manufacturers with plants in Brazil, two – Toyota and CAOA Chery – already produce hybrids locally. CAOA Chery, one of the smallest in the country, made the decision quite recent. Two others, precisely the largest ones in the sector – Volkswagen and Stellantis – have unveiled their intention to produce ethanol hybrid cars in the country, but they have not yet set dates.
General Motors is completely against hybrid cars but does not reveal future plans to decarbonize the local production, which, according to the U.S.-based company’s view, should follow the trend of fully electric cars. Currently, all fully electric cars sold in Brazil are imported.
The issue is even less solved in other automakers. What prevails, for the most part, is the discourse around global targets, which makes it difficult to predict what will happen in Brazil. In other words, the leaders of the automakers avoid the obvious question: how long will they resist, in Brazil, producing only combustion cars?
Both hybrid and electric cars have the capacity to draw consumer interest. But since the prices of these vehicles are still high for the Brazilian standard, the companies that most explore this market are those that only sell imported models.
Luxury brands, such as Porsche and Volvo, have firmly entered the hybrid, plug-in hybrid, and electric segments. And they offer affluent customers the latest launches from Europe. In this range, especially the fully electric ones, prices start at R$300,000. CAOA Chery and Renault have more affordable compact electric cars, starting at R$145,000.
Although hybrid and electric cars coexist in harmony in the Brazilian market, behind the scenes in the sector a kind of fight between one and the other has arisen. Hybrid cars have two engines – a combustion engine helps power the electric one. The country already has production, although still low, of hybrid cars powered by ethanol.
Those who advocate the production of this type of vehicle in Brazil say this is the best way for the country to navigate the intermediate phase without jolts before entering fully electrification. This wing of the automotive sector also argues that this is the only way to save the industrial park that automakers and auto parts makers have built in the country over the past 60 years, and the jobs in the plants. In addition, with these vehicles, they say, Brazil’s ethanol could gain a prominent position on the global decarbonization map.
Engineering and product development teams at Stellantis – the super automaker that since the beginning of 2021 has brought together Fiat, Chrysler, Peugeot, and Citroën – around the world have been working to find solutions to meet the company’s goal of reducing CO2 emissions by 50% by 2030. As recently revealed by Antonio Filosa, the company’s CEO for Latin America, the Brazilian team had the mission of developing the ethanol hybrid car. “We are, in the world, the most capable for that,” he said.
On the opposite end, the CEO of General Motors in South America, Santiago Chamorro, is one of the strongest advocates of fully electric cars. This type of car is made with far fewer parts than a combustion car, and batteries are charged in sockets.
Mr. Chamorro believes that Brazil should follow the path of developed countries. “The other technologies are transient,” he told Valor recently. In his view, Brazil will be able to produce electric cars when the price of the batteries is more accessible. Until then, the industry will continue to make cheaper cars with internal combustion engines. This decision has already been made by GM.
Some brands, especially the luxury ones, have invested in installing charging stations in urban centers and some Brazilian highways. Meanwhile, around the world, the development of hydrogen fuel cell vehicles is moving forward, a technology through which electric power is generated in the vehicle itself, without the need for plug-in charging.
The hybrid-versus-electric debate also involves discussions about which of the two offers the greatest advantage in terms of CO2 emissions. Proponents of the ethanol hybrid car claim that the proper measurement is the so-called well-to-wheel system. That is, the calculation must include the carbon footprint from fuel production (the sugar cane plantation in the case of ethanol), refining, and transportation to the vehicle’s exhaust emissions.
This, however, will be a matter for the next federal administration. Cássio Pagliarini, a consultant with Bright Consulting, recalled that the current Brazilian emissions legislation only takes into account the gases that come out of the vehicle’s exhaust.
But starting next year, the Rota 2030 automotive program will establish the need for a new stage of measurements, both in vehicle safety and emissions. This may favor those who advocate the well-to-wheel model. “It is also necessary to measure what causes the greenhouse effect, global warming,” Mr. Pagliarini said.
The automakers that intend to develop ethanol-powered hybrid cars have taken the discussion to the technical staff of the Industry Development Secretariat, which has already given a positive nod in this direction.
Whatever the decision may be, the next federal administration will have to definitely enter this discussion, since in all the countries that have made their choices, the change in the power generation mix for vehicles has been decided by public authorities. The same should happen in Brazil.
Country’s balance with South America grows amid decline of total balanceoftrade
08/15/2022
José Augusto de Castro — Foto: Leo Pinheiro/Valor
After recovering in 2021 the pre-pandemic level, Brazilian exports to South American countries have advanced this year at a faster pace than the total average and also in relation to imports, in contrast to what happens in the country’s trade balance. As a consequence, the trade surplus in exchanges with neighboring countries reached $7.97 billion from January to July this year, more than double the $3.68 billion seen in the same period in 2021. The country’s total balance of trade fell 10% over the same period.
As a result, the surplus with South American countries from January to July this year equals to 20% of the total, compared with 8.3% in the same months last year, according to data from the Foreign Trade Secretariat (Secex/ME). The sales of Brazilian products to the region totaled $24.85 billion this year and grew by 39.4%. The country’s total shipments increased by 20.1%. The difference was also clear in how fast imports increased – trade with neighbors is up 19.4%, while total foreign purchases climbed 31.6% between January and July.
Brazilian exports to South America fell in 2020 with the outbreak of the Covid-19 pandemic. That year, from January to July, the country exported to neighboring countries $12.02 billion, down 27.2% from $16.5 billion in 2019. In 2021, with the economic recovery in the region, exports totaled $17.82 billion between January and July. The performance of shipments contributed to a surplus slightly above the $7.92 billion of the same period of 2018, which used to be the peak since 1997 (considering the period of the first seven months of the year).
José Augusto de Castro, head of the Brazilian Foreign Trade Association (AEB), said that the recovery of foreign sales to the South American market is key because the region is typically a consumer of Brazilian manufactured goods, although oil exports to countries like Chile have also driven shipments and the trade surplus in regional trade. A third of the $5.18 billion that Chile absorbed from January to July in Brazilian products was oil, followed by automobiles, which had a 7% share. As for Brazilian imports of South American products, says Mr. Castro, commodities or products with little processing predominate.
Secex data show that of the five main items shipped to neighbors from January to July four were manufactured, all linked to automotive or transportation. Oil led the list, with $9.4 billion, practically tied with the $9.03 billion in cars. The two items were followed by car parts and accessories, vehicles for transporting goods, and tractors. The five products accounted for 28% of Brazil’s exports to other South American countries.
Lia Valls, a researcher at the Brazilian Institute of Economics of Fundação Getulio Vargas (FGV/Ibre), says that the increase in the value of Brazilian exports has been accompanied by an increase in the quantities shipped. According to data collected in the Foreign Trade Indicator (Icomex), the volume exported to Argentina rose 14% from January to July this year compared with the same period last year. Imports dropped 0.7% in volume. Exports to other South American countries increased by 14.3% in volume, while the total imported fell 7.5%, Ms. Valls said.
The main explanation for the increase in exports, said Mr. Castro, with AEB, is that most countries in this region are exporters of commodities, items that saw strong price rises, which generates additional foreign exchange. This, he says, provided these countries with new opportunities to import Brazilian manufactured goods.
At a time of logistical hurdles in global trade, he points out, Brazil’s geographical proximity, the logistical cost adapted to the region, the availability of containers, and the viability of land transport are among the main reasons why trade in the region has been favored.
Mr. Castro says that this is not something homogeneous. According to Secex data, considering trade with all the other countries in the region, Brazil had a deficit with three countries from January to July. The negative balance is explained mainly by the supply of energy-related products. There was a deficit with Bolivia, from which Brazil imports gas, with Paraguay, which supplies electricity, and with Guyana, because of oil. The Guyanese practically appeared on the Brazilian import map this year. Brazil imported $313 million from them from January to July, almost all of it in oil.
Argentina also has a different and specific situation, said Welber Barral, a partner at BMJ Consultoria. Exports of $8.89 billion from January to July this year to Argentina represent a recovery, with an increase of 34% against the same period last year. With a still difficult external situation, however, says Mr. Barral, the country does not have enough available hard currency to allow a very unfavorable trade balance, which may again impact Brazil. Recently, Argentina’s central bank issued new measures that have already been felt by some sectors in which the exporters are smaller and more pulverized, says Mr. Barral.
Abicalçados, which gathers Brazilian manufacturers of the footwear sector, has already spoken about difficulties faced by companies in shipments to Argentina, but the effect of this has not yet appeared clearly in the figures of the two-way trade, the organization says.
The restrictions imposed by the Mercosur partner on Brazilian exports are not something new in the two-way trade, Mr. Barral said. They grew with the import licenses put in place while Cristina Kirchner was the president (2007-2015). And even before the pandemic, he says, Brazilian shipments to Argentina also fell due to the economic crisis in the neighboring country, which still faces high inflation this year.
For Mr. Castro, the more positive scenario of trade with neighbors is likely to provide a surplus with South Americans of $41 billion in 2022. Last year, the positive balance was $34.1 billion. The expected expansion with this group of countries compared with what AEB projects for the total Brazilian balance. After the record surplus of $61.22 billion last year, Mr. Castro estimates a surplus of $54.13 billion at the end of this year.
There is uncertainty, however, about the sustainability of trade performance with the neighborhood in the longer term, he points out. The data and scenarios show that Brazil can occupy more space in the markets of different South American countries. “That depends more on whether Brazil wants to increase its exports and less on whether companies in these countries want to expand their imports.” Despite the good results achieved, one cannot consider this neighboring market as captive, he recalled, because China, to mention the main example, is occupying spaces and displacing Brazil as the main supplier in some countries.
Ms. Valls points out that, in 2022, the positive performance of Brazilian exports to South American neighbors is due to the economic recovery in most countries. Future trade depends on this and other factors, such as the role of trade agreements with some partners and political alignment. The result of the elections in Brazil, she said, can also impact regional foreign policy. In the shorter term, says Ms. Valls, the concern is with the possible economic slowdown ahead.
According to the consensus projections of the August report of the FocusEconomics consulting firm, Colombia’s GDP is estimated to grow 5.8% in 2022 after expanding 10.7% last year. In 2023, a 2.6% increase is projected. Chile’s economy is expected to grow 2% this year after expanding 11.7% in 2021. Next year, it is seen as growing 0.2%.
Mr. Barral recalled that the disruption of international trade, under the impact of the pandemic and then the Russia-Ukraine war, brought common challenges to all Latin American countries, such as price pressure. In the medium term, however, the international context may favor trade with Argentina and the other South American countries. The region, he points out, is one of the few in the world where there is no arms race, which makes it a supplier considered reliable from a political point of view. The movement of reallocation of productive resources in the largest economies is an opportunity for the region in attracting industries, Mr. Barral said.
Company’s revenue from medical school grew 32% in the second quarter
08/12/2022
Cogna is in talks with investors to sell a minority stake in its medical school arm in order to boost growth, as Ânima did. The rival received an injection of R$1 billion from the private-equity firm DNA Capital for 25% of the education company’s medical school arm last year.
“We have just spun off the medical school arm. The idea is to find a partner for a capital injection and invest in growth. We are talking to several financial groups,” Cogna CEO Roberto Valério said. In the second quarter of 2022, the company’s revenue from the medical school grew 32%.
The company expects that, by the end of this year, the net revenue from the medical school will total R$482 million, and the EBITDA will total R$224 million. “In the first half of the year, we reached 55.5% of the revenue and 53.8% of the EBITDA projected for the year,” Mr. Valério said.
Cogna reported in the second quarter EBITDA of R$355 million, up 11.4% year-over-year. The margin rose 3.1 percentage points, to 30.7%. “It is the fifth consecutive quarter of growth in EBITDA. There is no silver bullet. Results come little by little and are the fruit of our restructuring in 2020 and 2021,” Mr. Valério said, referring to a restructuring that included closing 25% of in-person units to focus on online programs.
The company calculated an adjusted loss of R$36.6 million, compared with an adjusted net profit of R$20 million in the same period of 2021. The group adjusted the indicator in the bottom line due to the sale of the schools division, approved in October last year. The accounting loss reached R$101 million, up 148.5%.
Cash generation after capex rose 309.5% to R$112.5 million.
The revenue was stable at R$1.15 billion. The company ended the first half with 929,300 undergraduate students, up 12% year-over-year. The increase was driven by those programs with more online classes, which closed the period with 592,000 enrolled students, up 13.9%. The group also managed to reduce the dropout rate by 0.3 percentage points and increase enrollment renewals by 12%.
Mr. Valério points out that this performance in the student base is due to the strategy of granting occasional discounts, but not in a generalized way. It is common for students to enter college attracted by the discounted tuition in the first months, and then become defaulters when the full tuition is charged. By drawing students who are not only attracted by discounts, they are less likely to drop out, and the chances of default fall.
Vasta, the group’s basic education arm, which struggled in the first year of the pandemic, also contributed to the result as EBITDA grew 67% in the first half.
Benefiting from higher metal prices, company reported operational record in 2Q
08/12/2022
Ricardo Carvalho — Foto: Ana Paula Paiva/Valor
Benefiting from higher prices, Companhia Brasileira de Alumínio (CBA) exceeded analysts’ expectations and reported a record operating result in the second quarter, despite the lower sales volume. One of the major producers of primary aluminum in the country, the company continues to expand capacity and is working on the development of a new alloy, to be used in the coating of electric vehicle batteries.
“Aluminum is in every application in the low-carbon world. It is one of the three metals that are most present in the applications of a greener, more sustainable world,” CBA CEO Ricardo Carvalho said. The name of the client for whom the alloy is being developed and the project schedule were not revealed. But the executive indicated that the challenge is to reach an aluminum sheet with mechanical characteristics suitable for use as a casing for lithium-ion batteries, for electric buses in this case.
For analysts, the convergence of the aluminum business with the low carbon economy is one of the company’s trump cards in the long term. BTG Pactual says that the recent hike in the metal prices will continue to pressure CBA in the stock market, but in the long term, the company still benefits from the energy transition, which will stimulate aluminum consumption.
From April to June, the company reported EBITDA of R$641 million, the highest ever and 73% stronger than a year earlier, and a net income of R$ 511 million, the second-highest ever.
The unprecedented result was sustained mainly by the increase in prices and premiums practiced by the company, which offset by far the advance in costs in the period. “Despite the volatility of aluminum, prices were 20% higher in the year-over-year comparison,” said Mr. Carvalho.
In a report, analysts with Itaú BBA pointed out that EBITDA was 12% above the bank’s estimate and the market consensus, in the wake of the better performance in the cost line and the stronger EBITDA in the energy unit.
As prices advanced to an average of $2,875 per tonne on the LME and premiums were higher in face of higher logistics costs and a tighter market, CBA’s net revenue grew 22% in the quarter, to R$2.33 billion.
According to Mr. Carvalho, the primary aluminum import quota in 2023, established by the government after calculations by the Brazilian industry, is expected to undergo a significant reduction with the resumption of production at Alumar and the increase in the company’s capacity.
“The quota reduction will certainly take place. The number is still to be determined in a work coordinated by Abal [which represents the industry], but the prospect is that there will be a relevant cut,” he said.
Brazil imports about 300,000 tonnes per year of primary aluminum and the resumption of production at Alumar alone practically covers this volume, Mr. Carvalho said, indicating that the quota could even be eliminated next year.
In this scenario, supply and demand are expected to balance in the domestic market. “There may be a need for small imports or exports, but the market will be more balanced,” he added.
According to CBA’s chief financial officer, Luciano Alves, the demand for aluminum in the Brazilian market continues to be affected by the reduction in purchases by the self-build and consumer goods industries, which last year benefited the most from the emergency aid paid by the government. “Home construction activity and consumer goods are still below expectations and, in our view, there will be no significant change,” he said.
As CBA’s production resumption was carried out earlier than expected in all the furnaces of line 3, which may reach full capacity at the beginning of 2023, the aluminum production will reach 380,000 tonnes per year, 30,000 tonnes more than the current volume.
More 50,000 tonnes of primary aluminum will be added in 2025, with the recently approved restart of the furnaces of line 1. This way, the company will reach an annual production capacity of 430,000 tonnes of aluminum, in addition to the more than 120,000 tonnes of recycled material used to obtain final products.
*By Stella Fontes — São Paulo
Source: Valor International https://valorinternational.globo.com/
Construction company expects to launch 1,871 units in Rio de Janeiro by end of 2022
08/12/2022
André Campos — Foto: Gladyston Rodrigues/Divulgação
Construction company Emccamp Residencial, based in Minas Gerais, which operates mainly in the economic residential development area, will invest R$4.5 billion in two years, of which R$1.5 billion this year, already in progress. The resources will be used to expand the company’s operation in the Southeast region, where it is present in 16 cities.
By the end of the year, Emccamp will launch 1,871 residential and commercial units in Rio de Janeiro. Currently, the total potential sales value of Emccamp’s land bank in Rio de Janeiro is R$869 million.
“The company is very excited about Rio, where we have already delivered more than 30,000 apartments. The goal is to launch R$1 billion in real estate per year in the city,” said Emccamp’s chief commercial officer André Campos. By the end of July, the company had launched R$750 million in real estate.
Emccamp worked mainly with the now-defunct Minha Casa, Minha Vida housing program with the current program, Casa Verde-Amarela. But the construction company has been launching properties with higher prices, which can be financed by the Brazilian Savings and Loan System (SBPE). The new condos offer more sophisticated services, such as coworking spaces, jogging tracks, beach tennis courts, and open-air cinemas.
“The Casa Verde e Amarela housing program is completely out of scope in Rio de Janeiro. In the other states there is little,” said Mr. Campos. According to Secovi RJ, the employer union of the real estate industry in Rio de Janeiro, residential property sales in the state fell by 11% in the first half, compared to the same period in 2021. The sales of non-residential real estate shrank 6.9%. Real estate companies need to invest in innovations to attract consumers affected by the current scenario of inflation and high-interest rates.
Mr. Campos said that Emccamp will also launch projects this year in the metropolitan region of São Paulo, Belo Horizonte, and Contagem (Minas Gerais).
Founded in 1977 by Régis Pinheiro de Campos, the construction company is controlled by its founder, with a 42% stake. Other partners are Eduardo Campos (22.8%), Eduardo Filho (8.6%), André Campos (8.6%), and other minority shareholders, all from the founder’s family.
In May 2021, Emccamp was registered with the Brazilian Securities and Exchange Commission (CVM) to issue securities in category B. “We went public because we understand that it is part of the process of a mature company. But as the moment was not adequate because of the pandemic, we decided to wait for the best window of opportunity to make the IPO,” said Mr. Campos. According to the executive, there is no deadline for this.
Mr. Campos said that the company has always carried out projects with its own resources. But to support part of the accelerated growth, it issued naked debentures in August 2021, in the total amount of R$150 million, maturing in 2024. The Standard and Poor’s Global rating agency (S&P) attributed the A+ risk rating to Emccamp.
In the first quarter, Emccamp reached the mark of 10,135 units produced simultaneously, with a projected total potential sales value of R$2.2 billion. In the quarter, 700 units were delivered in São Paulo, with a total potential sales value of R$97.3 million. Net revenue increased 37.2%, to R$164.1 million. EBITDA totaled R$16.7 million, up 9.7%. Net income grew 45.1%, to R$8.1 million. The net margin fell 7.4 percentage points, to 5%.
The land bank totaled R$5.45 billion. Mr. Campos said that the land bank is currently at R$6 billion. “We have a land bank for two to three years of developments,” he said.
For the year, Emccamp expects to reach a revenue of R$800 million, rising to R$1.2 billion in 2023. In 2021, revenue was R$724.8 million, and profit, was R$19.6 million.
CEOs also talked about environmental targets at a conference
08/11/2022
Cristiano Teixeira, chief operating officer at Klabin — Foto: Ana Paula Paiva/Valor
Limited wood supply and rising input prices are expected to restrain announcements of new pulp mills in Brazil over the next seven years, which corresponds to the eucalyptus cutting cycle, said industry executives attending the Fastmarkets RISI Latin American conference held Tuesday in São Paulo.
“It is very difficult to foresee new projects happening in Brazil in the short term because of lack of wood,” Suzano CEO Walter Schalka said in a panel with Klabin chief operating officer Cristiano Teixeira, Bracell executive vice-president Per Lindblom, and Eldorado Brasil commercial and logistics head Rodrigo Libaber.
In São Paulo, as Mr. Schalka said, Bracell secured the wood that was still available to feed the expansion of the Lençóis Paulista mill. The company also advanced in Mato Grosso do Sul, where Suzano already operates and is building a new unit, through a total investment of R$19.3 billion, which represents additional demand for inputs.
“From my perspective, there is a shortage of wood in Brazil. We don’t have wood available for competitive short-term projects”, added Mr. Schalka.
At Eldorado, which has a plant in Três Lagoas, in Mato Grosso do Sul state, the perception is the same. Rodrigo Libaber said there will be no wood for new projects in the short term. “More: there will be no wood economically viable in the long term” if planting doesn’t start now, he said. There are areas available in Brazil and the frontiers are “huge,” the executive said. Therefore, there is room for growth in the industry, as long as it is “planned and organized.”
The Eldorado executive also said problems in the global logistics chain are unlikely to be solved in a short period, especially because the logistics cycles in the sector are long and, therefore, it takes time until solutions have some effect. “I don’t believe either that we will have the logistics we had before. There will hardly be a turnaround this year, and things will happen gradually until we reach equilibrium,” he added.
Asked about the commitments assumed by Brazil in the United Nations Conference on Climate Change last year, the COP 26, Klabin’s CEO said it is unclear in which conditions the country will arrive at the next meeting. “I can say that, given today’s figures of emissions and deforestation, we are likely to arrive at COP 27 with low expectations and without delivering what was promised,” said Mr. Teixeira.
According to the executive, the arrival at COP 26 was also marked by low expectations concerning potential efforts of the government, which ended up causing surprise by making unexpected commitments. However, discourse and practice have become disconnected ever since, in his view. “The carbon credit market could be the half-full glass, but the bill that was being discussed with different sectors ended up being run over by a decree,” he said.
Mr. Teixeira also said that it is part of Klabin’s strategic vision to evaluate potential acquisitions or mergers in the corrugated packaging market, and the company will keep this view. “If an opportunity for [paper] integration arises, Klabin will certainly look at it closely. Recently, it has preferred organic growth,” he added.
However, states reliant on industry and services may see moderate advance
08/11/2022
Camila Saito — Foto: Divulgação
States in Brazil’s Central-West region are expected to see the highest economic growth this year driven by agriculture. After a drought last year, agricultural production accelerated with record soybean and corn crops. On the other hand, states reliant on industry and services like São Paulo may face moderate growth, in line with the national average, while those in the South region may witness contraction, projections by Tendências Consultoria show.
According to the study carried out by the consultancy, the GDP of Mato Grosso will probably grow the most among Brazilian states, with an expansion of 5.6% this year, well above last year’s 3.1%. Mato Grosso do Sul comes next, with 4.6% growth, also above the 2021 growth of 3.6%.
“In Mato Grosso, the projection is explained by record soybean and corn crops and better performance for meat slaughtering, resulting from external demand for animal protein. Besides this, the Mato Grosso industry has been showing expressive performances because of the food and biodiesel sectors,” said Camila Saito, an economist with Tendências and a co-author of the study. “In Mato Grosso do Sul, we will also see a good evolution in agriculture. Even though the soybean harvest has suffered with the drought and may drop, the strong performances [of production] of corn and meat are likely to more than offset that.”
She added that both states are expected to benefit from the favorable scenario for food, pulp and biodiesel production.
Mato Grosso and Mato Grosso do Sul have low industrial density and high agribusiness density, which explains those projections, said Fabio Silveira, a partner at MacroSector Consultores. He argues that besides the primary sector activity, farming and cattle raising make industry and services move forward in those states. “It is agribusiness in the broadest sense that drives these states,” he said.
The weight of agribusiness in the industrial and logistics chains of these states exceeds 50%, said Sergio Vale, chief economist of MB Associados. “The growth of agribusiness therefore ends up helping the economy as a whole,” he said.
Mr. Vale argues that the favorable situation of strong price increases and a very favorable exchange rate for exports will lead these states to grow above the country’s average.
The positive effect of agribusiness for growth also benefits nearby states, such as Piauí and Maranhão. “We can’t say that this is a new [agricultural] frontier, because this has been happening for 20 years, but these states where North and Northeast meet have strong grain production that helps GDP growth,” he said.
Piauí is expected to boast the third-largest growth among Brazilian states, with an expansion of 3.7% this year, compared to 4.6% the previous year. Maranhão is likely to expand 3.1%, compared with 4% last year. Tocantins is seen as growing 2.7%.
According to Ms. Saito, Maranhão and Piauí have benefited from international prices since 2020, which stimulated the expansion of the planted area. A crop failure in the South region has also contributed indirectly as it stimulated production in the North and Northeast regions.
“Added to this is the increase in the total income bill after government cash transfers. The implementation of the Auxílio Brasil and the increase in the value of the handout may benefit more the states in those regions,” Mr. Vale said.
The Tendências survey also shows that parts of the South region may see a contraction because of the grain crop due to drought, and the low industrial production of pro-cyclical sectors, such as machinery and equipment, and metallurgy, said Lucas Assis, co-author of the study.
Santa Catarina is expected to contract 0.1%, after advancing 6.6% in 2021. Rio Grande do Sul’s GDP, in turn, is likely to fall 1% this year after expanding 8.6% in the previous one. Last year, the state was one of the positive highlights due to agriculture’s strong recovery after a crop failure in 2020 and good evolution in industry, Mr. Assis said.
Mr. Vale says that, depending on the La Niña weather phenomenon, the following harvests may be affected, while the GDP growth of southern states may disappoint again.
São Paulo is seen as growing 1.6% this year after a 4.4% expansion in 2021. Rio de Janeiro will probably grow more this year, with an acceleration of 2.1%.
“São Paulo’s growth may be slightly below the national average [1.7%], due to a weaker industrial performance, especially in sectors such as automotive and capital goods, which feel the effects of production cost pressures and shortage of inputs, resulting from the imbalance of global chains,” Ms. Saito said.
The higher growth forecasted for Rio is due to the oil sector, with highlight to the Carioca and Guanabara rigs (each one with capacity to process 180,000 barrels per day), and the expectation of the inauguration of the new Peregrino II unit (with capacity for 60,000 barrels per day).
Rising oil prices in the international market indicate a promising near future, says Ms. Saito, since such a scenario tends to stimulate investments in mature fields and the resumption of fields that were inactive.
As for 2023, the scenario is positive for producers of soy, corn, cotton, meat, biofuel, and pulp, which benefits states like Mato Grosso and Mato Grosso do Sul, she said. Pará is seen as recovering iron ore production with the expansion of Vale’s S11D complex, while Rio Grande do Sul is likely to take advantage of the soybean harvest.
States in the Southeast region, however, are expected to face more problems. “Exchange rate and price will still be favorable for agriculture-producing states, to the detriment of others that will suffer with growing interest rates,” Mr. Vale said.
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