Delinquency on revolving credit cards hits all-time high, 44%

Credit card deterioration has driven the worsening of individuals’ defaults

12/20/2022

Delinquency on revolving credit cards – when the client does not make full payment of the invoice – reached the level of 44.4% in October, which is the most recent data released by the Central Bank. This is the highest level in the records, which began in December 2011. Since April 2017, the customer can only use the revolving credit for 30 days. After this period, he is referred to other credit lines.

In February 2020, i.e., before the pandemic arrived in Brazil, the default on the revolving credit line was 35.5%. It fell to a low of 25.4% in April 2021, following a generalized drop in default rates due to measures adopted by the government and the payment breaks offered by banks, and has been rising almost uninterruptedly since then. Total credit card delinquency, which in addition to the revolving credit also includes installment payments, is currently at 8.2%, the highest level since September 2016, when Brazil was going through the worst recession in its history.

Credit card deterioration has driven the worsening of defaults of individuals, segment in which the index of delays in free credit is at 5.9%, the highest since January 2017. Many in the banking industry have been warning in recent quarters about a significant drop in asset quality in cards. One of the most vocal critics is Milton Maluhy Filho, CEO of Itaú Unibanco, who has commented several times that there has been an oversupply in this industry, where “in 30 minutes on the Internet you can get about six different cards.”

Itaú is the market leader in credit cards, in terms of market share in total payment volume (TPV). The bank has 41.2 million active cards, from a total of 190.838 million units in the country. Banco do Brasil (BB) has 51 million cards and Nubank has about 28.5 million. Santander and Bradesco do not disclose this number.

Not every default cycle is the same. In 2015/16, for example, the worsening was more pronounced in business entities, with many large companies affected by the unfolding of anti-corruption task force Car Wash. In 2012, the deterioration in asset quality was greater in individuals but pulled by automotive financing. Now, cards are the biggest problem spot.

“When the Selic went to 2% in 2020, banks had to migrate to riskier lines, and the revolving credit card was one of them,” commented Everton Gonçalves, superintendent of the economic advisory services of the Brazilian Association of Banks (ABBC). In this movement to expand the base, many banks went seeking clients with whom they had no previous relationship, which means a higher risk precisely because of the lack of knowledge about the credit profile of these borrowers. Now, almost all of them have returned to focus more on their own bases, and within them, on higher income clients.

Claudio Gallina, Financial Institutions Senior Director da Fitch Ratings — Foto: Claudio Belli/Valor

Claudio Gallina, Financial Institutions Senior Director da Fitch Ratings — Foto: Claudio Belli/Valor

For Claudio Gallina, senior officer of financial institutions at Fitch Ratings, the card industry is going through a challenging context, with rising interest rates and delinquency, in addition to an increase in competition, which has made the large banks run after new entrants in serving the lower classes. “The data from the Central Bank show that a few years ago people had a relationship with two financial institutions. Now there are five. The clients are more leveraged and salaries don’t rise at the same speed. So, any of those five can go unpaid,” he said.

Citi recently did a study that indicates that defaults have been worse with low-income clients, meaning that different institutions are affected to different degrees. Since the first quarter of 2021, the total payment volume (TPV) of the big four banks have been growing at more or less the same rate, with Santander deviating slightly, in line with what has been indicated by the bank’s management to reduce risk in the portfolio. However, when analyzing the use of the revolving credit card, BB and Bradesco rise much more than Itaú and Santander.

“We observed a lower expansion of the balances of high-income individuals, which can be explained by the greater financing needs of low-income individuals, leading to a greater number of installment purchases. If this is the case, the performances of Banco do Brasil and Bradesco can be partially explained by their greater exposure to the low-income segment,” added analyst Rafael Frade.

In the case of Itaú, Citi points out that portfolio growth comes more from clients using the credit card limits they already had, which would show a greater appetite for risk. “For the first time Itaú reduced its total credit card limits in the third quarter, with new limits being insufficient to offset reductions in existing limits,” he said.

In Nubank’s case, Citi points out that the bank has been gaining market share in terms of TPV, and is already in third place with 13.5%, behind only Itaú (29.3%) and Bradesco (14.9%), and ahead of BB (13.4%) and Santander (10.5%). However, in terms of the interest-bearing portfolio (i.e., revolving credit use), Nubank is still in fifth, with a much smaller share of 8.0%. “Given Nubank’s client profile (lower revenue than its competitors), one would expect a higher usage of revolving credit than other banks, but the data indicates a different profile than expected,” said Mr. Frade.

For him, Nubank has been very successful in exploiting the unbanked public and, despite showing a worsening in defaults recently, it has continued to grow strongly. “Of course, there have been adjustments, but they have been able to continue growing.” According to Citi, in the third quarter, Nubank’s defaults rose 0.6 percentage points, which can be considered positive given the sharp deterioration shown by the other banks in credit cards.

Other institutions that operate with lower classes have also seen a strong deceleration in the issuing of cards. Pan, which released 708,000 new cards in the third quarter of 2021, granted only 173,000 in the same period this year. At Inter, the 12-month growth in total cards used has slowed from 94% last year to 46% now.

If analysts and even some banks say that there was excess in the concession of credit cards, the Brazilian Association of Card Companies (Abecs) defends the sector. For Rogério Panca, Abecs’ president, the revolving credit card has the participation of only 3.1% of the families’ indebtedness. Moreover, only 26.4% of the total credit card portfolio of the financial system earns interest, i.e., it is of people who entered the revolving credit. “Out of ten people, more than seven use the card only as a means of payment, they don’t use credit itself. Does card default hurt? Yes, but if we look at it, it is a very small part of the families’ debt”, he said.

According to Mr. Panca, the outlook for 2023 is for a drop in card delinquency because issuers have done their homework and adjusted their concessions. “Many of our associates report that the new cards issued are already performing very well. Macroeconomic conditions are important, we have many uncertainties in the scenario, but we project an improvement in the [default] curves for 2023,” affirmed Mr. Panca.

He doesn’t believe that there was an exaggerated euphoria in the concession of cards and highlights that the instrument was very important in helping millions of people to become bankable. “This movement is impossible to go back. We can’t imagine that people will stop using cards and go back to going to a bank branch to withdraw cash to make their payments,” added Mr. Panca.

Although banks can reduce the concessions and adjust the limits of the cards, analysts say that this is not so easy to put into practice. First, because you can’t reduce the limit if the client is already using all of it, and second, if the person is already struggling, reducing the available credit can end up making the situation worse instead of better. “Bigger banks, with more products, may even be retracted for longer, but what about the smaller ones, which depend more on the card?”, said Mr. Gallina, with Fitch.

“A card is a different tool; one you can’t adjust much in origination. The bank offers a limit today, but it may take a year for the client to use it. It is something that will be solved gradually”, said Mr. Frade, with Citi.

To Mr. Gonçalves, with ABBC, the moment requires calm. “The default rate is going up, monetary policy affects credit, and we have to wait and see how the expected slowdown of the economy is going to be. I think the banks view the situation with caution, but not panic”, he said.

*By Álvaro Campos — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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Imports put pressure on rubber producers

Import tax of 16% levied on truck tires and latex was zeroed in 2021; industry expects the return of the charge

12/19/2022

The estimate is that Brazil can achieve self-sufficiency in the production of natural rubber with a slight expansion in the production area — Foto: Anna Caro

The estimate is that Brazil can achieve self-sufficiency in the production of natural rubber with a slight expansion in the production area — Foto: Anna Caro

The natural rubber production sector and the Brazilianl tire industry have been pressuring the federal government to reverse the measure that, at the beginning of 2021, zeroed the import tax on truck tires, rubber artifacts, and items such as latex. There is an expectation that the proposal to tax foreign purchases again at 16% will be approved by the Foreign Trade Chamber (Camex) on Monday.

Without the tariff since January 2021, imports have hit record highs in recent months. The purchase of tires jumped to 518,000 in November from 143,000 per month, on average, before the tax exemption. That’s 3.5 million units imported this year. Interlocutors of the transition team say that the tax rate will be re-established in 2023, but rubber tappers and the industry say that the problem gains scale every day and can generate a “dismantling” of the production chain.

Producers who began extracting rubber in September had their production refused by processing plants, which don’t have the demand to process the quantity that was planned before. “Monthly production volumes are being canceled. People are leaving the activity, converting the rubber areas into sugar cane or soy. It’s the opportunity cost”, said Fernando do Val Guerra, executive director of the Brazilian Natural Rubber Producers and Graders Association (Abrabor).

In São Paulo, the council of processing plants informed the cancellation of purchases of 60% of the total volume of the tire industries in November and December, which generates a liquidity shortage in the chain. “This is a reflection of the flood of imported products,” said Mr. Val Guerra. The United States and China, which also zeroed import taxes at the beginning of the pandemic, established tariffs of 17% and up to 50%, respectively, for the import of these items, said Abrabor’s director. “All production came to Brazil,” he said.

The segment says that the import tax exemption for cargo tires was assertive at the peak of the pandemic, but that it should have been temporary, just to combat the inflationary surge at the time when there was a shortage of containers and ships for sea freight. The tire industry, on the other hand, claims that the decision was taken too fast and that its effects have left companies at their limit. If the measure is not reversed, he warns, there is a risk of shrinking production and layoffs.

“If nothing changes, we have scheduled layoffs that are going to happen when employees return from the collective vacation, which is not standard, the drop in production forced the stoppage, and this is complicated,” said Klaus Curt Müller, president of the National Tire Industry Association (Anip). The entity represents giants such as Bridgestone, Continental, Goodyear, Michelin, and Pirelli. The segment has 20 plants in the country and invoices R$36.4 billion a year.

Mr. Müller complains about the government’s lack of sensitivity to the theme and lack of support for the development of the local industry. Production has dropped in recent years and is back to 2012 levels, he said. “We are at the limit. The sector has R$1.5 billion in investments that are in slow motion. This shows that we are going backwards, and in this situation, you have to shrink everything,” he added.

Mr. Val Guerra points out the lack of a specific policy, or a “state plan”, to give security and predictability to the natural rubber segment, with the provision of long-term contracts and income insurance linked to rubber plantations. The country cultivates about 250,0000 hectares with rubber trees, of which 180,000 are in full production, and produces little more than 200,000 tonnes per year, for an installed demand of 417,000 tonnes. Most of the production (66%), processing (80%), and consumption is in São Paulo. Production and processing move about R$30 billion per year

The estimate is that Brazil can achieve self-sufficiency in the production of natural rubber with a slight expansion in the production area. With 1 million hectares of rubber plantations in production, the country could export and supply the entire demand of the U.S. The advance would take place in degraded pasture areas of Cerrado, the second-largest biome in the country. Asia holds 92% the world’s production of natural rubber, which is estimated at 14.5 million tonnes in 2022.

“It is a sector in which the whole industry is already installed and can export processed products, unlike the other agricultural and mineral commodities that come out in natura,” said Mr. Val Guerra. “Depending on rubber imports for tire manufacturing in a road country is critical. It is a macro strategic issue. In the West region, Brazil is the only country that has rubber production and tire factories. This fact alone should have more attention from the government to the sector”, added Mr. Müller, from Anip.

Sought by Valor, the ministries of Agriculture and Economy did not comment.

*By Rafael Walendorff — Brasília

Source: Valor International

https://valorinternational.globo.com/
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Privatization of Corsan faces court challenges

Government is still trying to overthrow the injunction that prevents the bidding process from taking place on Tuesday

12/19/2022

The Rio Grande do Sul government is trying to get the privatization of Corsan (Companhia Riograndense de Saneamento) off the ground this Tuesday, amidst legal offensives that are trying to stop the sale of the state-owned water and sewage company. At least one group — Aegea — has submitted a proposal for the asset. The offers were received last Thursday.

Besides Aegea, four other companies have studied in depth the company’s privatization: Iguá, Águas do Brasil, Equatorial (which already operates the state’s energy distributor), and the investment manager I Squared Capital, according to industry sources. However, the government has not confirmed the total number of proposals that have been submitted.

The state is still working to overthrow an injunction from the Labor Court that ordered last Thursday the suspension of the auction for 90 days, following a request from Sindiágua — the sector’s workers union.

Judge Marcos Fagundes Salomão ordered the government to present studies on “the socioeconomic, labor, social security, and social impact of the privatization process.” According to him, the goal is to prevent the repetition in Corsan of “the situations caused by the privatization of CEEE [energy distributor, sold in 2021 to Equatorial],” in which there were “mass layoffs” and “suppression of benefits,” he said.

For the government, the expectation is to get the injunction lifted in time to hold the public session on Tuesday. Last week, the state had already overturned two other decisions that prevented the acceptance of bids.

If the auction takes place, the competition will be held at the B3 headquarters in São Paulo. The group offering the highest value for the company will win — the minimum was set at R$4.1 billion.

In the private sector, there is no expectation of a fierce dispute for the state-owned company. Sources who have followed the process closely observed that the risks involved in the privatization are quite high.

The main one is the uncertainty about the 198 contracts with municipalities served by Corsan that have not been normalized under the new sanitation law. The fear is that, after the sale, these municipalities will try to break their agreements, generating a wave of legal disputes.

Another point of attention for the interested groups is the company’s huge labor and social security liabilities. Moreover, the transition in governments brings regulatory uncertainties arising from the implementation, still in progress, of the new legal framework for sanitation — a factor that affects the entire market.

Aegea, which already operates a PPP in the metropolitan region of Porto Alegre, together with Corsan, has been pointed out as the main candidate to take the asset. The company confirms that it has submitted a proposal.

The privatization of Corsan may become a paradigmatic case for the sanitation sector and serve as a reference to other state-owned companies, according to market analysts.

Rafael Vanzella, a partner at law firm Machado Meyer, observes that there has already been a previous privatization experience in the country, of Saneatins, in the state of Tocantins, in 2002 — currently controlled by BRK Ambiental (formerly Odebrecht Ambiental). However, this was a process with many peculiarities and regulatory exceptions, due to the recent creation of the state of Tocantins, which prevented the case from becoming a privatization reference to other state-owned companies in the sector.

“Now, Corsan may be a relevant laboratory for the model,” says Mr. Vanzella. “The result of the auction will be very emblematic for governments that may want to follow the same path,” he says.

*By Taís Hirata — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Mergers, acquisitions regain vigor

Number of deals may grow 15% to 20% in 2023, but fiscal risk weighs against them

12/19/2022

The market for mergers and acquisitions regained vigor in the second half of the year, after a weak start in 2022, but the amounts involved dropped by almost half. For next year, there is a chance that the volume of transactions will surpass 2022 by 15% to 20%, depending on the improvement of the investment environment, industry sources say.

This year is expected to close with the number of transactions at the same level as 2021, hitting a record high with 1,627 transactions, according to the U.S. consulting firm Kroll. However, for the pace to accelerate again, clear signs of a commitment from the elected government with a responsible fiscal agenda and an unlocking of stock offerings will be needed. Investment banks also see greater participation of foreign capital in future deals.

A Kroll research revealed to Valor shows that until November there were 1,389 operations, slightly below the same period in 2021 (a decrease of almost 6%). The consultancy firm believes that 2022 is likely to repeat the level of around 1,600 deals because several operations are being announced in December. The survey does not show the value of the deals.

The data from Dealogic point out that in the year to date until last week, mergers and acquisitions totaled $50.5 billion, with 909 operations. In 2021, they were $90.2 billion, with 922 deals. In its survey, Dealogic considers the deals with disclosed values.

This difference in values can be explained, according to sources consulted, by the drop in “valuations” of businesses this year, with the greater instability in the markets and devaluation of assets, and the effect of the strong comparison base of 2021. In that year, transactions in several sectors were closed at high ticket prices before the election period.

This week, important transactions were announced — the national giant Eurofarma disbursed R$725 million to buy assets in the pharmaceutical sector (such as the Valda brand), and the American company Aligned acquired Odata, a data center company from Pátria fund, valued by the market at R$10 billion.

The entry of capital with new issuances on the stock exchange historically helps to accelerate negotiations.

“No one sees an ‘initial romance’ phase, with the acceleration of transaction announcements as early as the first months of 2023. But we see liquidity in the world and a demand from investors for projects in the country, such as in the financial services area, which is already increasing. This can gain pace if stock offerings grow,” said Alexandre Pierantoni, head of corporate finance at Kroll.

“These positive aspects help, at least, to maintain in 2023 the volume of mergers and acquisitions of 2022, especially with more operations in the second half of the year, when there will be greater visibility of the actions in the new government,” said Mr. Pierantoni.

A relevant part of the funds from initial public offerings (IPO) in the country in recent years was destined for growth through acquisitions.

Investment banks have a greater flow of mergers and acquisitions that may be concluded throughout 2023. Infrastructure and energy, retail, and healthcare are likely to remain on the radar of companies, bank executives said.

“We will continue to see sector consolidation happening in 2023 and most of the transactions will happen by exchange of shares [rather than cash payment] until the capital markets can become functional again. When it does, we will see a more balanced mix between cash and shares,” says Alessandro Zema, Brazil’s country head of Morgan Stanley and co-head of investment banking in Latin America.

The banks see a scenario of sector consolidation in which companies with stronger balance sheets seek more scale, private equity funds (which buy stakes in companies) capitalized to take the opportunity to invest more, and even global multinationals are once again looking at Brazil with greater interest, according to Mr. Zema.

According to sources heard by Valor, the Canadian Brookfield, one of the most active investment firms in mergers and acquisitions this year, is evaluating selling assets in solar energy, through the company Elera. The business is estimated between R$9 billion and R$10 billion, including debts, and there are already investors interested.

At the end of July, the Canadian investment firm, through Quantum, sold five transmission concessions to the group Energía Bogotá (GEB), for about R$4.3 billion. In renewable energy, it bought the Seridó wind project, in Rio Grande do Norte, and plans to make investments of R$1.8 billion. The Canadian company, which operates in several sectors, also bought year assets of the car rental company Localiza for R$3.5 billion and disbursed R$5.9 billion in 12 corporate buildings of BR Properties.

Luiz Felipe Thut — Foto: Silvia Zamboni/Valor

Luiz Felipe Thut — Foto: Silvia Zamboni/Valor

Felipe Thut, managing director of Bradesco BBI, recalls that 2022 was atypical because of the war between Russia and Ukraine, the lockdowns in China, and the capital markets having a low performance worldwide, not only in Brazil. “Many companies that thought about doing IPOs but couldn’t do it, resorted to M&A. Here at BBI this year was a record in revenues,” added Mr. Thut.

“We had a relatively good year in M&As and we project that the market will remain heated next year,” says Gustavo Miranda, head of the investment banking area at Santander. For Roderick Greenlees, global head of investment banking at Itaú BBA, there is more interest from foreign groups in Brazilian assets.

In the oil and gas market, for example, expectations for Petrobras are high. The state-owned company, which in recent years has gone through a movement of heavy divestments — this year, for example, it sold Gaspetro to the Cosan group — may buy assets in the area of renewables in the coming months, said a person familiar with the topic.

In 2022, estimates are 60% of transactions of groups with domestic capital and 40% with foreign capital, the same average in recent years. This year, in addition to energy and gas, financial services and technology have also grown — Safra closed weeks ago the purchase of the Alfa bank, and B3 this month acquired Neurotech Tecnologia da Informação.

In Mr. Pierantoni’s view, this profile of strategic acquisitions marked 2022 — about 70% may have this focus, and 30% for financial reasons — but in 2023 deals are expected to remain more selective.

“It is clear that the ‘deals’ end up occurring today considering a more careful analysis of variables due to the increase in the cost of capital, after the key interest rate Selic high, and the risks involved. But in the current scenario, there is still a bias towards M&As in 2023,” said the Kroll executive.

From January to September, private equity groups led investments of R$35.8 billion, compared to R$4.5 billion in the same period in 2021 and R$6.2 billion in 2020, according to research by the Brazilian Private Equity and Venture Capital Association (Abvcap), which represents the sector, and KPMG.

Private equity and venture capital combined invested R$57.8 billion until September — a record sum for the survey, which exists since 2011. For Abvcap, with the loss of vigor in stock offerings in 2022, and with the higher cost of capital, funds were gaining ground and emerged as an option to lead part of those investments in companies in the year.

For 2023, despite the expectation that equity offerings gain ground — which helps “turbocharge” the M&As — Piero Minardi, president of Abvcap, also sees an increase in selectivity by the market.

This reflects the negative signals that the elected government has been sending to the market. If IPOs slow down in this environment, private funds may remain more active in certain specific segments, highlights Mr. Minardi.

“IPOs will come back but it won’t be such a strong wave because we have high-interest rates, and everything indicates that they will remain high longer. And even with active private equity, we will still see these intense price negotiations [of funds] with buyers, each seeking better conditions,” he said.

About the political risk, Mr. Minardi says that despite the increased level of uncertainty in the country due to Mr. Lula’s comments on rapidly accelerating public spending has been causing unbalance in the accounts, “there are many people still waiting, and taking the risk.” And this can affect the acquisition market if the government maintains this line.

For 2023, more optimistic estimates project paper offers of up to R$100 billion, as Valor reported last week — with an average of R$60 billion to R$70 billion. This year, issuances reached R$55 billion until November, but in 2021 they reached R$130 billion.

“If it reaches R$100 billion, we believe it could have a 15% to 20% rise in the number of M&A transactions because IPOs help to move this market as a whole,” said the Kroll executive.

Brookfield was not available for comment on ongoing negotiations. Petrobras informed that its plans in renewables are restricted to what the oil company has already disclosed in relevant facts.

*By Adriana Mattos, Mônica Scaramuzzo — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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COP 15: ‘Historic’ global deal to protect nature agreed at UN biodiversity summit

Mon, 19 December 2022

COP 15: ‘Historic’ global deal to protect nature agreed at UN biodiversity summit

In this article:Countries have pledged to protect 30% of the world’s lands, seas, coasts and inland waters by 2030 as part of a new deal that aims to halt declines in nature.

Measures agreed at the UN Cop15 conference in Montreal also include a pledge to increase the flow of finance to developing nations to care for nature to 20 billion US dollars (£16.5 billion) by 2025 and at least 30 billion dollars (£24.7 billion) by 2030.

There are 2030 targets to halve global food waste, excess nutrients and risks posed by pesticides, reduce to “near zero” the loss of areas of wildlife-rich habitat, and reduce by 500 billion dollars (£411.7 billion) a year government subsidies that harm nature.

Countries also pledged efforts to complete or get under way with the restoration of 30% of degraded land, inland waters, coastal and marine ecosystems by the end of the decade.

They are among a series of 23 targets in the Kunming-Montreal Global Biodiversity Framework that have been negotiated in the Canadian city over the past two weeks, as well as four long-term goals to protect the natural world by 2050.

While the collapse of nature may be the less-well known sister problem to the climate crisis, scientists have warned that up to a million species are at risk of extinction, many within decades.

The natural world is deteriorating faster than ever as a direct result of human activity, including the clearing of forests and other habitats for crops and livestock, pollution, direct exploitation of wildlife, invasive species and increasingly climate change.

Plastic pollution has increased 10-fold in the seas since 1980, fertiliser run-off has caused a “dead zone” in the oceans, land is becoming less productive, and the loss of pollinators puts crops at risk.

That in turn is eroding “the very foundations” of economies, livelihoods, food, health and quality of life worldwide – all of which relies on healthy natural systems, experts warn.

The deal struck at Cop15 to tackle the problems nature faces has been described as a “landmark” agreement which includes the largest land and ocean conservation commitment in history.

A landmark global biodiversity agreement that provides some hope that the crisis facing nature is starting to get the attention it deserves

Brian O’Donnell, Campaign for Nature

Brian O’Donnell, director of the Campaign for Nature, said the deal is “a landmark global biodiversity agreement that provides some hope that the crisis facing nature is starting to get the attention it deserves”.

“At the heart of the agreement is a target to protect and conserve at least 30% of the world’s lands and oceans by 2030,” he said.

The “30×30” target marks the largest land and ocean conservation commitment in history.

“It will have major positive impacts for wildlife, for addressing climate change, and for securing the services that nature provides to people, including clean water and pollination for crops.

“Ocean conservation, which has historically lagged behind land conservation, will now be an equal priority,” Mr O’Donnell added.

Under the targets, 30% of the world’s lands, inland waters, coastal areas and oceans would be effectively conserved and managed, with an emphasis on areas that are particularly important for nature, and recognising the rights and respecting the rights of indigenous peoples and local communities.

Currently, 17% of the world’s land area and 10% of its seas are under protection.

The Wildlife Conservation Society said the 30×30 target is historic, but other areas are weak – including the goals to achieve the agenda to restore nature by 2050, which is too late – and governments need to treat it as a floor, not a ceiling for global action on the biodiversity crisis.

Susan Lieberman, vice president of international policy for the WCS, said the agreement is a compromise, and “although it has several good and hard-fought elements, it could have gone further to truly transform our relationship with nature and stop our destruction of ecosystems, habitats, and species”.

The deal had originally been scheduled to be negotiated in Kunming, China, in 2020, but talks were delayed by the pandemic, with a first stage of meetings taking place largely online last year, and the final part of the Chinese-chaired Cop15 conference was hosted in Montreal.

*By Emily Beament

https://uk.news.yahoo.com/
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Corn drives growth of Brazil’s agricultural exports

Industry shipped more than $10bn in November for the first time

12/16/2022

Brazil’s agricultural exports reached $12.6 billion in November, a record for the month, which had not yet surpassed $10 billion since records began. The amount represents a 51.2% increase over the same period last year, when sales stood at $8.6 billion.

The result was due to the increase in export volume, which grew 29.3% last month, and the rise in the prices of exported products, by almost 17%, informed the Ministry of Agriculture.

One highlight was the growth in corn shipments, which reached 6 million tonnes, or $1.7 billion. The volume was 154% higher than the 2.8 million tonnes exported in November 2021 and the revenue increased 255% in the same comparison – in November last year, sales totaled $486 million.

With this, the grain exports exceeded the quantity sold of the soybean complex (grain, meal, and oil), which was 4.4 million tonnes in November. The complex also led in revenue, with $2.7 billion in the period.

Sugar sales also grew in November and surpassed 4 million tonnes. Exports of the sugar-and-ethanol segment reached $1.83 billion, up 83.5% year-over-year.

Meat exports also reached a record high in November, of $1.92 billion, an increase of 47.2% year-over-year. Beef exports brought in $870 million, poultry meat earned $762.13 million, and pork totaled $228.12 million, also a record high.

Imports of agricultural products totaled $1.48 billion in November, an increase of 2.2% YoY. Thus, the trade balance stood at $11.6 billion. The share of agriculture in the country’s total exports reached 44.9%.

In the year to date, Brazilian agribusiness exports have reached 145.3 million tonnes, with a revenue of $148.26 billion, a record value for the period since official records began, in 1997.

China led the purchases of Brazilian agribusiness products in November ($2.9 billion) and the year ($48.1 billion). The United States, Netherlands, Japan, and Vietnam completed the list of the top five last month.

In 2022, the soybean complex leads in volume exported (98.6 million tonnes) and sales ($58.7 billion). Cereals come next (41.8 million tonnes), with a great performance of corn (37.1 million tonnes). The revenue of this segment reached $12.3 billion.

In 11 months, Brazil exported 7.6 million tonnes of meat, mainly poultry (4.2 million tonnes). The revenue surpassed $23.7 billion in the period. Forest products ($15.3 billion), sugar and alcohol ($11.9 billion), and coffee ($8.4 billion) complete the list of the main items this year.

*By Rafael Walendorff — Brasília

Source: Valor International

https://valorinternational.globo.com/
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Price management becomes weapon after digital boom

In food and beverage, there are 3 billion prices in the market; chains use more technologies

12/16/2022

The tenth-largest consumer market worldwide, and with a middle class of 100 million, Brazil has created in recent years one of the main industries of pricing in the world. The colossal volume of data analyzed in this field helps determine, at the end of the day, how much a pin or a R$30,000 refrigerator, the most expensive one on sale here, costs.

This department within retailers (called “pricing”) grew even more in relevance after online marketplaces consolidated in Brazil, and brick-and-mortar stores of all sizes invaded the digital world, increasing the complexity of managing the information that circulates in the market.

Today, the same store (and it doesn’t matter its size) sells on several websites and with different prices for the same product.

In crucial periods for the year’s sales, such as Christmas, and when retailers try to protect their profitability, as it happens now, when chains have emphasized more rational sales policies, getting the price right is key. “The pricing area has the greatest potential to generate more results in the short term in terms of profitability and market share,” said Fernando Nagano, director of data analysis at Magazine Luiza.

“We have had an evolution in terms of technology in recent years, the sophistication of algorithms, which allows us to be more accurate, and also allows us to constantly provide sellers with more data,” said Marcio Cruz, CEO of Americanas’s digital platform.

There is an impact in this scenario of the rapid advance of foreign platforms in the country (such as Shopee and Shein) from two to three years ago. There was an invasion in the sites and applications of a large amount of micro and small partner stores, and with them, the volume of retail price data increased even more.

The volume of stores hosted in Magazine Luiza, Americanas, and Casas Bahia has tripled since 2020. Combined, they have more than half a million shopkeepers (without discounting duplicates). At Mercado Libre, consultants estimate that there are six million stores.

The same scenario has been repeated on supermarket delivery platforms, which also host shopkeepers, such as iFood, Rappi, and Cornershop. “Pandemic drove many companies into the platforms, so the amount of information about products, prices, and conditions skyrocketed,” said Eduardo Martinelli, CEO of Thima Consultoria, who previously worked for Via and Walmart.

“Defining if the product will cost more in the store than on the website, or if the chain will position itself above or below the market average, are topics on the agenda now. And they gain more weight in periods of high competition and greater search for profitability, as today. Pricing is crucial in this, along with commercial and category management, which operate together,” he said.

“Digital has transformed the way retailers define prices,” said Mr. Nagano, with Magalu. “At the same time, the capture and analysis systems have evolved, data quality has improved, and it is possible to track prices much more easily and much more frequently than years ago. The current phase is to go more in-depth with the analysis.” Robots are involved in this data search process, in addition to in-house work and outsourced consulting.

In this scenario, there is still the effect of the high volatility in prices caused by inflation, which made Brazilians lose reference to values. This requires companies to better manage data to see if it is not too far off the average and align it with the margin policy adopted at the time.

A survey obtained by Valor, conducted by InfoPrice, a leading consulting firm in the area, shows that in November there were 3 billion prices available in the food and beverage market, a number three times higher than in June. In September, there were 2 billion — the rise reflected the addition in the consultancy’s coverage of online marketplace companies.

Paulo Garcia Neto and Vanessa Shigekiyo — Foto: Silvia Costanti/Valor

Paulo Garcia Neto and Vanessa Shigekiyo — Foto: Silvia Costanti/Valor

To calculate the 3 billion prices, Infoprice counts one price for each product in a store. If new items are added or the price changes, the account is updated. Information from the finance departments (which collect invoices) is used, and there is a direct collection in leading retailers’ stores and platform applications. According to Paulo Garcia Neto, CEO of the consulting firm, the analysis variables have grown.

“It is not only about price definitions by the place where you are and by the fact of having a competitor nearby. Today we have the ‘click and take’ and the ‘super apps,’ for example, and the conditions differ. These are cost structures that may or may not affect the price. This can only be solved with a lot of technology and structured analysis processes.”

According to Vanessa Shigekiyo, product manager at InfoPrice, research shows the channel pricing strategies in the country today. “When we compared food and beverage marketplace pricing for example, with invoice and point-of-sale pricing, we got 57% equal pricing,” she said.

“We thought we would get even more equal prices. The data shows how companies still have different policies for the channels, something that may be related to the separate costs of each one [store has a more ‘expensive’ structure than website] or with the pricing and margin strategy adopted in the period.” Integrated operations (store and website) dilute the cost of the store as a whole.

The most expensive items on the online marketplaces than in the stores were 11% more expensive, and the cheapest was 17% cheaper, reinforcing the aggressiveness of digital. Mr. Martinelli recalls that there are tax issues in this account. “If the store has tax advantages in the locations where it is, this affects the value,” he says.

Mr. Cruz, with Americanas, says that the company begins to provide this week access to the platform storeowners to a set of data from the products sold by them, in a kind of “dashboard”, which allows comparisons and better understanding if it is competitive against the market.

The platforms do not interfere with the sellers’ pricing policy, but rather guide them. Since the marketplace accounts for more than half of the large chains’ online sales, this shopkeeper needs more constant attention.

According to Mr. Cruz, the advance in the pricing model brings challenges. “The first is communication to the customer because there are many options of products and prices, and the second is to know the consumer much more and offer something tailored to their profile. We have discount campaigns for those who use the Ame card, for example, which generate benefits.”

He also cites partnerships with universities for the development of better pricing algorithms and states that, in larger retailer clients, Americanas works with alerts for any relevant variation in price conditions in the market.

Mr. Nagano, with Magazine Luiza, reinforces that in the work to guide pricing decisions it is possible to cross data from suppliers and public information from competitors to compare the company with the average and check if it has been gaining “share.”

When there is a price definition in the app or site, and it is identified that it is too far out of a certain level, with the identification of some fault, there are “locks” in the system that can be triggered — a common tool used by the market.

The company says that they supply them with information, with courses on finances, commercial policy strategies, and training, which help to guide them.

Ricardo Ramos, CEO of the consultancy Precifica, recalled that one of the conflicts in pricing in the world, which was the target of recent debates in the U.S. market, is that platforms seek ways to have more aggressive prices through contract clauses. In 2021, Amazon was sued by the attorney general for the accusation of always undercutting its retailer, to sell more than its own partners. In Brazil, sellers heard by Valor say that contracts do not have this clause.

On the consumer side, Mr. Ramos says that customers have started to use many more different sales channels to purchase in recent years. And this scenario has generated higher expectations of getting bargains, especially on strong commercial dates. This, many times, generates communication problems, and customer frustration.

“It is common today for consumers to look at the website, come to the store with the price in mind, and when they see that it is more expensive in the store, they tell the salesperson. But there is no clear answer to that question. The salesperson just says that’s not the price in the physical store,” said Ricardo Ramos, CEO of Precifica, when reinforcing that this is more common in medium-sized networks, without integration of online and brick-and-mortar stores.

*By Adriana Mattos — São Paulo

Source: Valor International

https://www.rkladvocacia.com/
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Number of Cubans fleeing to Brazil spikes amid economic crisis

Tighter migration rules in the United States also explain increasing flow to Brazil

12/15/2022

The combination of a deepening economic crisis in Cuba, increased political repression, and greater difficulties to immigrate to the United States has led more and more Cubans to bet on Brazil as a country to try a new life. Last year the number of refugee claims by Cubans hit a record high. Experts believe that this flow is unlikely to change in the short term since there are no signs of economic improvement on the island.

From January to October, 3,414 Cubans sought refuge in Brazil, up 690% year-over-year, according to data compiled by the Ministry of Justice’s International Migration Observatory (OBMigra). Never before have so many Cubans made such a claim. They have overtaken Angolans and are now the second nationality with the most requests, behind only Venezuelans (29,100). Cubans are mostly men, single, and aged between 18 and 39.

Tadeu Oliveira, OBMigra’s statistics coordinator, says that the increase of Cubans coming to Brazil has occurred through two main mechanisms: refugee claims and family reunification requests, for those who have parents, grandparents, and children here. He recalls that from January 2021 to October 2022, there were 3,912 refugee claims and 2,234 family reunification residence requests.

Those who request refugee status go through the Federal Police, receive their tax ID, and can start working while waiting for the request to be judged, which takes about three months. Those who request residence by family reunification can wait longer to get a residence permit, but they rely on a mechanism guaranteed by Brazilian regulations, argues Mr. Oliveira.

Family reunification requests were made possible by the More Doctors program, he explains. Before it was terminated by the Bolsonaro administration in November 2018, the program had 8,400 Cuban doctors, 46% of the staff, according to the Ministry of Health.

“In 2018, Cubans began to leave Brazil, but part of them ended up staying because they had already settled and started families. In 2020, with the pandemic and the borders closed, the flow decreased. In 2021, when things started to return to normal, there was an increase in refugee requests and residency applications,” he said.

According to Mr. Oliveira, 84% of the current requests are for a family reunification and 16% for refugee requests. He points to what he calls social networks as the main factor of attraction to Brazil. In other words: relatives and friends who are already in Brazil end up serving as an incentive for Cubans to leave the island. In this sense, the More Doctors program would have been the main factor, for having left the legacy of those who came to work here, got married, created families, settled down, and ended up bringing relatives.

The decisive factor, says Mr. Oliveira, would be Cuba’s political and economic problems, as well as higher costs to migrate to other countries, whether financial or logistical. Today, for example, it is much more expensive and riskier for a Cuban to try to go to the United States than to Brazil.

“The migratory projects [of those who want to migrate] always consider cost, benefit, and difficulty of entry. The tightening of migration rules by the Biden administration in the U.S. would be a major obstacle,” he adds.

Michael Bustamante, a professor at the Institute for Cuban and Cuban American Studies at the University of Miami, said that Cuba is experiencing the worst economic crisis in 30 years, has been affected by the economic sanctions announced by the Trump administration in 2019, and the tourism sector — which accounts for about 10% of the country’s economy — has been hit hard by Covid-19. Not withstand the political landscape, marked by increasing tensions between society and the state and intensifying repression of anti-government protests.

“I would point to some variables that intersect and it’s hard to say it’s one thing or another that explains this massive exodus because all is happening at the same time,” said Mr. Bustamante. “There has been an intensification of U.S. sanctions since 2019, which the Biden administration have kept in place and have worsened the scenario. And the pandemic has been devastating to the tourism-dependent economy.”

He adds geopolitical issues, with allies like Venezuela, Russia, and China facing internal problems and increasingly diminishing the funds to help Cuba.

In the political sphere, Mr. Bustamante argues that the past two years have been of rising tensions on the island, which cannot be dissociated from the ongoing economic crisis. “We saw a rising civil society activism, and all of this culminated in July 2021 with the largest protests in Cuba in 60 years. The government repressed these protesters harshly,” he confirmed.

As a result, Cubans are feeling less hopeful, and more people are looking for an alternative to life on the island, he said. The U.S. is the first option, but other countries are also an option for those who want to leave Cuba. Mr. Bustamante recalls that from October 2021 to October 2022, more than 220,000 Cubans tried to enter the U.S. through the border with Mexico. “The number is a record in absolute terms, but also as a percentage of the population,” he says.

In 1980, the peak of the post-Cuban Revolution Cuban exodus, the population was 9,849,000 when 125,000 Cubans left the island through the port of Mariel for the U.S. or 1.26% of the total.

Today there are 11,320,000 on the island and 220,000 who tried to enter through the southern U.S. border between October 2021 and October 2022. This number corresponds to 1.94% of the Cuban population.

“The Cuban’s dream is to go to the U.S., but nobody wants to take the risk,” says M. O. R., a 30-year-old Cuban woman in Brazil for almost four months. “The route to migrate to America has become very dangerous and expensive. The option of coming to Brazil through Guyana came up because it doesn’t require a visa from us.”

M. O. R. worked as a civil engineer in the tourist hub of Holguín, 735 kilometers south of Havana, earning 2,000 Cuban pesos a month — or 11 MLC (“moneda libremente convertible”), which has parity with the U.S. dollar — and says the situation, which was already difficult, got much worse after the pandemic. “The prices of basic items went up a lot, mainly because of the shortage of the products, to the point that it was no longer possible to buy them,” she said, citing that a shampoo costs up to $4 and a carton with 30 eggs costs $5.5.

“On the other hand, the energy situation is precarious. All the thermoelectric plants collapsed, and we had only eight hours of electricity per day. Keeping a refrigerator, for example, was impossible,” she said.

In her view, the current crisis is the worst she has ever experienced in her country, which explains why many young people are leaving the island. “Most of them don’t see a future in Cuba. The possibilities are increasingly scarce, so, those who can leave, leave,” she explained.

The Cuban engineer came to Brazil with her husband, 37, who is also an engineer. They took out a loan with a relative who lives in Miami to pay the travel costs to get here. It took each of them $7,000 to get to Brazil, from a plane from Havana to Georgetown, the capital of Guyana, and coyotes that guide them until they cross the border with Roraima, the main port of entry for Cubans in Brazil today.

She lives in Tremembé, in the northern part of São Paulo, where she pays R$800 in rent for an apartment. She works at a store in the Pátio Paulista shopping center, where she earns R$1,400 plus transportation and meal vouchers. Her husband has not yet found a job.

Dentist Andrés Flores (fictitious name), 24, decided to leave Havana 10 months after graduating. With a salary of $22, it took him two years to save $2,000 so he could migrate here. He says that migrating to the United States would cost him $10,000.

He flew to Guyana and from there came by land to Brazil. He entered through Roraima 40 days ago and came by bus to São Paulo. He looked for a job in Sorocaba, but ended up staying in Jundiaí, where he has a Cuban friend.

He works selling clothes in a neighborhood store, where he earns about R$1,400 per month. He hopes soon to get a formal job that will allow him to earn R$1,800 plus benefits. In the near future, he wants to work as a dentist. “I think so many years of study in Cuba have to serve some purpose,” he said.

He left his father, mother, siblings, and grandparents in his country because he does not see any perspectives and because in Cuba “there is a dictatorship.” “Covid-19 affected the whole world but in Cuba, things pile up, amid so much poverty, misery, and hardship. Cubans are leaving the island in any way they can,” he said, adding that he used to buy clothes from Panama and resell them in Cuba to supplement the $22 earned per month as a dentist.

R.H.R., 29, left Havana three months ago because she reached her limit. “Cuba has had several special periods, but this is the worst,” she says, referring to the years between the collapse of the Soviet Union and Hugo Chávez coming to power in Venezuela when Cuba stopped receiving foreign aid. “There is no food, no medicine, no money, no work. Food is disappearing, and the prices rising. So Cubans are going to any country.”

She decided to come to Brazil because her mother had been here for four years, after having lived in Uruguay. Today she lives in Miami.

Despite the long lines after hours to get government-subsidized food in Cuba, she says that her family did not have enough to eat. “Many times, I would get in line at 3 a.m. to get food, but the government warehouses were empty,” she said.

Without a job or money, she decided to migrate with her 19-year-old brother and oldest son, age 10. She plans to bring her 5-year-old son but depends on having a job to start saving money. “I’m still looking for work, but I found out I was pregnant when I got here. That made everything more complicated and now I have an even harder time getting a job,” she says.

In the short and medium term, the prospect is that the largest Cuban exodus in history will continue, says Mr. Bustamante.

“I don’t see any signs of economic recovery in Cuba. And the internal political equation is still very difficult. Hundreds of people are in jail for having participated in protests against the government a year ago,” he recalls. “And this is just a reflection of a not very hopeful political environment, which is contributing to more and more people wanting to immigrate.”

*By Marsílea Gombata, Álvaro Fagundes — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Major groups expected to compete in power transmission auction

There are six lots of almost 710 kilometers of transmission lines and substations, with investments of R$3.51bn

12/15/2022

The power transmission auction scheduled for Friday at exchange B3’s headquarters in São Paulo is expected to draw traditional groups, ample competition, and strong discount. The six lots offered in the event held by the Brazilian Electricity Regulatory Agency (ANEEL) foresee the construction and maintenance of almost 710 kilometers of transmission lines and substations and investments of R$3.51 billion.

This is because the transmission segment is considered the safest in the electric sector, which is fully regulated, and the winner gets a 30-year contract. Companies such as Isa Cteep, Energisa, Sterlite, Engie, and CPFL have announced their participation.

The infrastructure will serve the states of Espírito Santo, Maranhão, Minas Gerais, Pará, Rio de Janeiro, Rio Grande do Sul, Rondônia, Santa Catarina, and São Paulo. In total, 5,800 jobs are expected to be created during the construction period, which ranges from 42 to 60 months.

For Nivalde de Castro, a professor at the Federal University of Rio de Janeiro (UFRJ) and coordinator of the Electricity Sector Study Group (Gesel), all the lots are expected to be sold in the bidding with discounts typical of the power transmission segment.

“It is the best-structured segment and with a very large future demand. It is an organized sector and ANEEL acts correctly in differentiating the lots. So, we won’t have lots without bids, and we will have a discount. Besides, the winning companies will have a stable and predictable remuneration,” he said.

“The works that will be tendered have the objective of bringing more security and reliability to the ONS,” said Mayra Guimarães, head of renewable energy and regulation at Thymos. She expects that this bid will follow the same trend as the last transmission auctions, that is, high competitiveness for all the lots, which could be sold with average discounts of 40% to 50%. “In addition, we expect robust and financially well-structured companies to participate,” she added.

The overall value of the reference Annual Allowed Revenue (known as maximum RAP) to be paid to the business is R$604 million. The winner will be the one that presents the lowest RAP in the Brazilian currency per year.

Lots 3 and 5 are the ones that draw the most attention for the strength of the investments: almost R$2.3 billion. The largest of them is Lot 3, with 351 kilometers, which cuts through Maranhão and Pará. Lots 5 and 6, on the other hand, have singularities because they are aimed at the restoration and maintenance of existing undertakings to extend their useful life.

What may cause tension is the risk of litigation in Lot 6. The partner of the energy and natural resources department of law firm Demarest Advogados, Rosi Costa Barros, recalled that ANEEL removed the substation of Isa Cteep from the contract and believes that it may be auctioned.

“In ANEEL’s understanding, the asset is expected to be part of the auction to take place this Friday and be excluded from Isa Cteep’s concession. The company has questioned the inclusion of the asset in Lot 6. Therefore, the maintenance of this asset in the Auction 02/2022 may be questioned in court,” said Mr. Barros.

Brazil has 175,000 kilometers of transmission lines, according to data from national grid operator ONS. Despite that, the segment still suffers from bottlenecks to transport the production of wind and solar energy, especially in the Northeast.

The director-general of ONS, Luiz Carlos Ciocchi, said that the auction was designed based on planning studies by the Empresa de Pesquisa Energética (EPE) and on analyses carried out by ONS considering the operating conditions foreseen for the Interconnected System.

“Most of the projects listed for this auction aim to expand the transmission capacity to cope with the load growth and reduce some of the existing restrictions. They are works that aim to solve localized problems and allow the consumer to be served safely … Item 6 stands out because it deals with the bidding for the concession of facilities that integrate the international interconnection between Brazil and Argentina, including a commitment to the necessary revitalization,” said Mr. Ciocchi.

*By Robson Rodrigues — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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