Center comes at a time when many healthcare groups are opening cancer centers
12/08/2022
Parque Global is a planned district under construction in São Paulo — Foto: Reprodução/Parque Global
The Albert Einstein Hospital is investing in a R$1.2 billion oncology and hematology center. The 32,000-square-meter facility, expected to be inaugurated in 2025, will be built inside Parque Global, a planned district under construction in an affluent neighborhood in the southern part of the city of São Paulo.
Of this amount, R$800 million come from the Bueno Neto and Related Group developers responsible for the project. The new planned district spreads over 218,000 square meters where five residential towers, a hotel, a shopping mall, a college, and the Einstein cancer treatment center will be built.
The other part of R$400 million will come from Einstein, which will furnish the oncology complex that will have 160 beds, 120 surgical clinics, 84 doctors’ offices, 36 chemotherapy rooms, and 15 laboratory stations.
“It will be a complete complex. All this is associated with a lot of research because part of what we understand as a solution is related to precision medicine, genetic sequencing of the patient as well as the tumor that will allow a customized treatment for the patient or a personalized activity so that the disease does not develop,” said physician Sidney Klajner, CEO of Albert Einstein Hospital. Since 2013, Einstein has been working with individualized oncology treatments.
The announcement of a center focused on oncology comes at a time when many healthcare groups are launching cancer centers. However, Mr. Klajner prefers not to classify the new Einstein project as a cancer center, since many initiatives in the market that use this denomination do not include multidisciplinary medical treatments, precision medicine, and research.
The doctor points out that the construction of the new center takes place in a scenario of increasing cancer cases, driven by life habits and an aging population. According to the World Health Organization (WHO), in 2020 Brazil reported about 590,000 new cases of cancer, and this number is expected to double by 2025.
Currently, Einstein serves about 25,000 patients in its units in São Paulo (three of them) and Goiás state. These are private patients, those with health insurance, and others coming from SUS — Brazil’s public healthcare system. The company expects an increase of 10,000 patients with the new unit.
The number of health professionals from different fields focused on cancer treatment, which today is 650, will jump to 2,500 with the center.
According to Adalberto Bueno Netto, CEO at Bueno Netto, the initial project did not include a hospital. “We began to prioritize health and education services more recently. Einstein is the only health provider inside Parque Global,” he said.
The planned neighborhood project was launched in 2013 but was embargoed for five years due to environmental problems. The project is expected to cost R$11.5 billion. The sale of the residential apartments was resumed in 2020, with sales forecast at R$2.5 billion. “Of the 600 apartments, only 80 remain to be sold,” Mr. Bueno Netto said.
First unit abroad opens in 2023 to facilitate exportation logistics to Americas, Europe and Africa; expected production totals 40 tonnes per month
12/06/2022
Ana Oliva — Foto: Divulgação
Japi, a Jundiaí-based manufacturer of sanitary ware and gardening accessories, is preparing its first unit abroad, in the Dominican Republic.
The plant is expected to start operating by March 2023, said Ana Oliva, Japi’s director and chair of Astra, a company of the same group, founded by her grandfather, which makes from toilet seats to bathtubs and housewares.
The initial investment for the Caribbean unit is $5 million, and the goal is to expand the base of countries attended by Japi’s exports, which today totals 35 nations. “It is meant to serve North America, Europe, Africa, and Central America, to facilitate logistics for these regions,” he said.
Currently, 30% to 35% of Japi’s revenues, expected to reach R$150 million this year, come from exports.
As Ms. Oliva explains, one of the best-selling products for other countries is the line of plastic garden vases that imitate ceramics. “They are extremely light. We have intelligent pots for vertical gardens and also pots signed by designers,” he said. The Dominican production will be focused on gardening items. Japi expects to produce 40 tonnes per month in the new unit.
The Dominican plant will also help expand domestic production, freeing up space in the Jundiai plant. The company currently occupies a manufacturing area of 20,000 square meters in the city located 50 kilometers far from São Paulo. Astra also has a manufacturing site in Pernambuco. “Japi has a more restricted area situation, I need to create new strategies to grow,” she said.
Japi was created 30 years ago and started as an importer of the products it manufactures today. As the years went by, said Ms. Oliva, the company began to produce more and more of its own items.
The change came in handy since the beginning of the pandemic when trade with China became more complicated and time-consuming. If before the company executives traveled up to five times a year to the Asian country to monitor orders and maintain product quality control, today this is impossible. “Bringing things from China is complex. There is certainly a business opportunity for Brazil to serve its market and countries that used to buy from China,” she said.
Astra is the first company of the group, which was founded 65 years ago, and has also a construction company and a financial services company. Combined, Astra’s and Japi’s revenues are expected to reach R$1 billion in 2022, the same as last year.
Initially, the executive expected an increase in sales this year, but the performance of the construction material sector was lower than in 2021. The Brazilian Association of the Construction Materials Industry (Abramat) projects a 2.2% drop in sales for the year.
“We expected a better year, but the market settled down, so we can’t complain,” she said.
For 2023, Japi’s and Astra’s sales are expected to increase 10%, said Ms. Oliva. “We are returning to the growth rate we had before the pandemic.”
The company sees more incentives for civil construction next year, especially for low-income clients, which drives its forecast.
Astra’s and Japi’s products are mostly aimed at the low-income segment, although both companies have premium lines as well. “We are working to diversify the product mix, with a line signed by architects, and design items, but it is a smaller part of the products. Our strength is the low-income public,” she said.
Both Astra and Japi faced raw material price increases last year and also in 2022, and it was not possible to pass on the entire cost increase to the final prices, said Ms. Oliva. The company increased prices by about 20% last year and started working with tighter margins.
What reassures the executive is that it is “a very down-to-earth company”, which has not leveraged. “We have zero debt, we do everything with our own funds,” she said.
Quotas and inspection in ports have shrunk supply, especially of phosphates fertilizers
12/06/2022
China reduced shipments of phosphate fertilizers to Brazil by 50% between January and October of this year. Asia’s largest economy put in place a policy of restricting fertilizer exports to protect its domestic market.
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China exported 1.2 million tonnes of this type of input to the Brazilian market in the first 10 months of 2022, while in the same period in 2021 the volume reached 2.5 million tonnes, according to data from the federal government.
China’s share in Brazil’s imports of phosphate fertilizers until October totaled 14%. In the full year 2021, China was Brazil’s leading supplier with 3.3 million tonnes of phosphate fertilizers or 26% of the imports.
The impact reflects the new policy imposed by the Chinese government on its exporters, which came into force in October 2021 and included the sales quotas and increased inspection in ports.
China has increased inspection requirements. As a result, all fertilizer cargoes, except for ammonium sulfate (SAM), are now subject to a quarantine period in ports. This can take up to 70 days.
Since the export restriction policy came into effect in China, the country has lost a large share of the global market, wrote Luigi Bezzon, an analyst at StoneX, in a report.
The shrinkage is evidenced when one looks at the volume exported in the year-to-date. Except for ammonium sulfate, the only nutrient that was excluded from the inspection policy and is not subject to quotas, exports of DAP and MAP phosphate fertilizers fell by 49% and 56%, in that order, in the first 10 months of 2022, compared to the same period in 2021. Urea (nitrogen fertilizer) saw an even stronger drop in the period, of 60%.
There is not much transparency regarding the measure involving quotas, Mr. Bezzon wrote in a report. “It is believed that, in July, export quotas were issued for 3.6 million tonnes of phosphate and compound fertilizers effective for the entire second half of 2022,” he said.
In the first 10 months of 2022, some Chinese companies reached the limit of the volume allowed for export. According to Mr. Bezzon, there were rumors this month that new export quotas would be issued for specific companies, but only for volumes that are already in the ports. The goal is only to clear port stocks, not to encourage new exports.
Pátria sells 55% of Entrevias to French group but keeps interested in sector
12/06/2022
Belen Marcos — Foto: Divulgação
The French group Vinci and the investment management company Pátria plan to continue expanding their operations in the Brazilian infrastructure market, according to Belen Marcos, global CEO of Vinci Highways, and Roberto Cerdeira, partner of the investment management company. The French company has just debuted in the highway sector in the country with the acquisition of 55% of Entrevias, a concession won by Pátria in 2017 that operates roads in the Central-West region of São Paulo.
The sale, whose value was not disclosed, will still go through approvals from authorities. It is expected to be completed within three to four months.
For Vinci, this is only the first step in the sector, which has been in the group’s planning for some time. For Pátria, the divestment does not mean an exit from the highway market.
The French group has been active in infrastructure in Brazil since 2017, when it won the concession for the Salvador airport. Since then, it has also won the auction of a regional block of airports in the North region in 2021.
“We have been looking at the Brazilian highway market for some time. Sometimes it is a matter of finding the right asset. When we started talking with Pátria, we realized that Entrevias could fit our requirements. It is a contract that is entering a moment of greater maturity, is well-operated, and has the appropriate size and remaining term. And São Paulo is a growing state, with a good history of concessions,” says the executive.
The company’s goal is to continue expanding in the country, both in airports and highways. “We will certainly look at new investments in Brazil. There is a big pipeline to come. It is a country that will have a lot of growth. When we go into a region, if we are comfortable working with it and if the project does well, in general, our goal is to have a long relationship with the country. We are long-term investors,” said Ms. Marcos.
She says, however, that for now there are no specific targets, and that everything will depend on the assets that come to the market. “At the moment, our focus will be to finalize the operation. It is too early to talk about future targets. We have to conclude this operation first.”
On Pátria’s side, the sale of Entrevias does not indicate that the company is not interested in the Brazilian highway market, said Mr. Cerdeira. “Divesting is part of our business. Whenever the asset is mature enough, we will evaluate it. In this case, we found a good partner, so we decided to do a partial sale,” he said.
According to him, in the short term, there is no discussion about selling the other road assets in Brazil — Cart (Concessionária Auto Raposo Tavares) and Eixo SP (which operates the Piracicaba-Panorama corridor). As for the other 45% stake in Entrevias, the partner also says that there is no decision made about keeping its share or leaving the business completely.
After winning the Eixo SP auction, in January 2020, with a fixed concession payment of R$1.1 billion — well above the second-largest bid — Pátria did not bid on new infrastructure projects in Brazil for almost two years. The pause was broken with a bid in the tender for Noroeste Paulista, last September, but the company did not win the asset.
“We never stopped studying. We analyzed 90% of the projects that came to the market during this period. We evaluated the regulation, the history of the assets, our capacity to be competitive in the auction,” he said. In addition, the management company won two major road contracts in Colombia in 2021 — one through acquisition and the other through bidding. “We’ve been doing quite a bit.”
Mr. Cerdeira says the plan is to keep competing for infrastructure auctions in Brazil. “We are analyzing most of the projects in the region, but the decision about whether or not to enter is made at the last minute,” he said.
Asked about the expectations with the new federal administration, the partner said that the group’s long-term vision does not change: “The regulation has been stable in the last years and in different administrations. We have already invested R$6.4 billion in highways in the country and we want to do more.”
Ms. Marcos, with Vinci, also downplayed the political risks. “We have seen changes in government in many countries and we always adapt. It’s part of doing business in infrastructure.”
Asked about the challenges of the Brazilian market to draw international investors, the executive mentions, besides the importance of political and regulatory stability, the size of the assets offered. “Sometimes the projects are very large. Entering any new infrastructure market is complicated. If the asset is very large or if there is a lot of construction to be done, it becomes more difficult for foreigners.”
In the case of Entrevias, this is a concession that manages 570 km of roads in São Paulo. The concession, signed in 2017, provided for R$3.9 billion in investments over the 30-year contract period. Today, more than 50% of the works have already been executed, according to Pátria.
In the year to September, the concessionaire reported gross revenues of R$633.6 million, a small increase of 0.77% compared to the same period in 2021. The adjusted EBITDA rose 32%, reaching R$296 million in the year. In the period, there was a loss of R$ 44 million.
Company will soon put into operation three wind farms and two large solar plants
12/05/2022
Paula Dalbello — Foto: Silvia Zamboni/Valor
The EDP group’s plan to grow in renewable energy involves Brazil. The Portuguese company’s ambition to reach 20 GW of installed capacity by 2025 has the country as one of the main vectors of growth outside Europe.
Paula Dalbello, the new country manager of EDP Renováveis do Brasil, took over the command of the company less than two months ago with the challenge of putting large-scale projects to work. For 2023, the renewable energy generation branch of the group plans to put into operation three wind farms in the Northeast region. In addition, there are two more mega plants, which yield 463 MW, in São Paulo and Rio Grande do Norte. Combined, the plants total more than 1 GW.
In parallel, the executive has the personal challenge of taking care of little Gregory, a five-month-old baby, and between meetings she finds time to breastfeed. The civil engineer told Valor that her goal is to get the projects off the paper and put them into practice. This includes prospecting and developing them until they mature for construction, which means finding good areas, connection points, entering auctions, and closing new power purchase and sale agreements (PPA).
The favorable natural conditions for renewable generation make Brazil the company’s second-largest market. The promise is to invest R$24 billion, but they do not detail the share that will be destined for Brazil. The intention is to build between 1,000 MW and 1,200 MW of renewable projects by 2025, in addition to 6.9 GW of projects with concession or authorization for the medium and long term.
“We have 790 megawatts (MW) in operation, a great part of which is in Rio Grande do Norte. For the coming months, we have three wind power projects in the state that add up to 580 MW. One is already in the operational test phase and two others should start early next year. Also in 2023, we will have two more solar projects, which are coming off the paper, of 463 MW in São Paulo and Rio Grande do Norte,” said the executive.
Most of the energy from the plants is likely to be intended for the free energy market, given the context of the opening in which a greater number of consumers served with high voltage will be able to opt to purchase electricity from any supplier as of January 1, 2024.
Specifically in solar, the company will build the projects in partnership with EDP Brasil, also a subsidiary of the Portuguese group operating in Brazil. The disarrangement of the segment’s supply chains raised capex but was not an obstacle for the projects. “We bring the project, and they help us find the PPAs and the investment is made together,” he explains.
Recently EDP Renováveis sold to Copel the wind complexes Aventura and Santa Rosa & Mundo Novo for R$1.8 billion. It is a strategy of the Portuguese company to rotate assets, which facilitates the monetization of the generating parks before they reach the end of their useful life, besides raising funds for the projects under construction.
“It is a strategy that allows us to feedback the process. We are happy to fulfill the company’s global objective by using our own resources to develop those projects,” says Mr. Dalbello, guaranteeing that there are no more assets available to the market for rotation in the short term.
The Northeast region is the flagship of renewable energies in Brazil and where EDP’s main plants are located. However, the bottleneck of transmission lines has made it difficult for the companies to drain the amount of energy, so the alternative has been to make a mix between submarkets with common connection points, a strategy that has made entrepreneurs migrate to other regions of Brazil.
This is perhaps why São Paulo has become an option. In 2021, the company inaugurated the Pereira Barreto solar complex, in the countryside of the state, with an installed capacity of 252.29 MWdc. The investment was R$750 million, the multinational’s largest investment outside Portugal.
Next year, work will start on the Novo Oriente Solar project, in the municipality of Ilha Solteira, also in São Paulo state, which will have an installed capacity of 254 MWac. Besides the advantage of being close to the consumer centers, the company can also reduce transmission costs.
“It is up to us, as developers, to align our development strategy with best practices. We are developing projects in the Southeast, which is where we will mitigate the impact of the transmission costs of our projects,” he said.
Bank still holds around 8% of the shares and is studying a block operation instead of a public offering
15/05/2022
Rio de Janeiro – Edifício sede do BNDES, Banco Nacional de Desenvolvimento Econômico e Social, no Centro do Rio. (Fernando Frazão/Agência Brasil)
The Brazilian Development Bank (BNDES) is evaluating the sale of most of its remaining position in Eletrobras and has already begun talks with investment banks on the subject. The lock-up imposed on the capitalization last June ends on December 7th, when the institution’s shares become free for trading.
BNDES is considering selling R$7 billion, corresponding to the common shares held directly and via BNDESPar, which are the most liquid shares of Eletrobras. The preferred way is a block trade, not a public offering, sources said.
The bank has already succeeded in an operation of this size up and running quickly. At the end of 2020, it sold R$8 billion in Vale shares in a block trade.
This will require a firm guarantee from the banks, which also explains why the initial approach was made with two large foreign banks and two large Brazilian banks. It needs to have a balance to provide support and quick connections to large investors.
It is a unique window of opportunity for the current management of the Brazilian Development Bank to complete its ambitious portfolio divestment plan before the change of government. “The BNDES wants to sell, but has not yet taken the concrete step,” said a source. “So far it has only been sounding,” added another executive.
The offer will also depend on market conditions and investor appetite. Sought, BNDES did not comment.
BNDESPar has 71.96 million common shares and 18.69 million preferred shares. BNDES holds 74.55 million common shares and another 18.26 million preferential shares. The positions add up to about 8% of the electric company’s capital. If it sells all the common shares, the bank will still hold a little more than 1% in preferred shares.
In the privatization public offering, in the middle of the year, the lock-up of 180 days from the start date (June 10) was imposed on selling shareholders and on those with positions greater than 5%. The BNDES fits both restrictions.
By Maria Luíza Filgueiras, Francisco Góes — São Paulo, Rio de Janeiro
Strategic plan reiterates priorities in deep water oil
12/05/2022
Petrobras’ oil target for the next five years, according to the 2023-2027 strategic plan, is aligned to the previous plan — which did not take the market by surprise. It ratifies the state-owned company’s priority to invest in the deep-water oil. However, a lower oil production forecast for the period drew attention, not because of volume, but for the company’s attention to the natural decline of those fields, which will require new contributions to maintain the desired production level.
Petrobras projects for 2023 a production of 2.6 million barrels of oil equivalent per day (boe/day), a measurement unit that includes the extraction of oil and natural gas, which translates into an operated production (in partnership with other companies) of 3.8 million boe/day, according to Fernando Borges, the head exploration and production, when presenting the 2023-2027 strategic plan last week.
The extracted volume would reach 3.1 million boe/day in 2027, the same estimated for 2026, with production operated at around 4.7 million boe/day. “Production is increasing,” the executive also said, “due to the development of assets in terms of pre-salt development mainly in this leverage period.”
In 2023, 74% of production will come from the pre-salt, rising to 78% in 2027. The figures are very close to those indicated in the 2022-2026 plan. However, Petrobras has indicated a reduction in production by 100,000 barrels per day, due to two reasons. The first cause is the co-participation agreement in the fields of Sépia and Atapu, both in the Santos Basin pre-salt.
According to Petrobras, this adjustment was necessary because the strategic plan 2022-2026 was released on November 24, 2021. A month later, on December 17, 2021, Petrobras acquired, in consortium with partner companies, the rights to exploration and production of the volumes exceeding the transfer of rights in the two fields, in the Second Round of Bids for the Surplus of the transfer of rights under the production-sharing regime for pre-salt oil fields.
Since the fields were under two regimes (transfer of rights and sharing), adjustments were needed in the participation of the companies in the fields. The 2023-2027 plan, in practice, reflects those adjustments, which resulted in a lower production projection. Another reason are adjustments in the interconnection schedule between wells, in the years 2024 and 2025, which were offset by the company’s total and commercial production projections.
For Ilan Arbetman, the chief economist of Ativa Investimentos, the loss of production in these years is compensated in the future with more value generation for Petrobras. “It’s something that brings efficiency gains in the future,” said Mr. Arbetman.
Mr. Borges highlighted the 9% increase in investments in exploration in new areas, to $5.5 billion, focused on replacing the production that will be lost with the natural decline of the fields in production. According to him, “we are fighting against a natural decline of about 10% a year. This means adding 300,000 boe/day to production in order to cope with the decline and maintain production at around 3 million barrels. One of the focal points is the Tupi field, one of the biggest producers in the pre-salt. According to Mr. Borges, Tupi is a field that will need to increase water injection, a technique used to extract more oil from reservoirs.
Petrobras raised its investment forecast for the next five years by a little more than $7 billion, to $64 billion, due to the incorporation of the Sepia and Atapu fields to Petrobras’ portfolio, among other reasons. Two-thirds of this amount is still destined for the pre-salt. Post-salt areas in the Campos and Sergipe-Alagoas basins will demand 24% of this amount, two percentage points less than the previous plan, but, according to Mr. Borges, the planned investment of $18 billion in the Campos Basin aims to offset the decline of other fields.
For financial services provider UBS, Petrobras was conservative in the production target, when considering, also, delays in the operation of fields in the Sergipe-Alagoas basin. UBS highlighted, however, the resilience of the projects in a stress scenario, with a barrel price at $35, and the 18 new platforms (FPSO, the acronym in English) starting operations, half of the new units in the world.
Trade defense measures range from steel to lemon juice
12/05/2022
Tatiana Prazeres — Foto: Carol Carquejeiro/Valor
Brazilian exports have increasingly become the target of trade defense measures in destination countries. Of the 87 measures currently in force, 57 were applied from 2020 to the last 30th. The volume is a little more than double the 28 measures put in place from 2017 to 2019. The number includes cases of extensions and includes antidumping duties, safeguards, and compensation for subsidies. The data signal a more intense use of trade defense mechanisms by all countries, with greater diversification of instruments. Thirteen countries or blocs maintain measures in force for Brazilian shipments.
The U.S. is the one that has the most defensive measures, with 17 in force, followed by Argentina, with 12 measures, and Indonesia, with 11 cases. Iron, cast iron, and steel and steel products add up to 34 measures in force. Although the Brazilian steel sector is the most frequent target, the defense mechanisms already affect a large number of segments, ranging from paper, plastics, machinery, clothing, fabrics, and even food, such as chicken, sugar, and lemon juice.
In total, 33 major sectors are affected, considering the chapters of the Harmonized System (HS) used as the standard for coding products in global trade. Of the 99 existing chapters, Brazil is the target of trade defense measures in one-third of them. The data are part of the Trade Defense Panel, a platform assembled by the Federation of Industries of the State of São Paulo (Fiesp/Ciesp).
“Brazil has become a more frequent target of trade defense measures and there is a diverse set of sectors affected. It is not a subject of interest of just a small group of companies,” says Tatiana Prazeres, director of international relations and foreign trade at Fiesp. “It is increasingly common for the businessman to receive a letter warning about an export investigation and be invited to answer a questionnaire.”
The intensification of defense measures is a global trend that can be explained by several factors, she says, such as economic difficulty, changing international circumstances, and concern about preventing illegal or unfair trade practices from harming domestic industry. “This has been affecting different origins, and Brazil does not escape this movement,” she said.
Data from the panel also shows that the number of trade defense measures notified to the World Trade Organization (WTO) jumped to 329 last year from 150 in 2020. In 2019 there were 193 notifications. Topping the rankings of the locations that have notified the most are the U.S., India, and Canada.
In 2022, until November 30th, 20 trade defense measures in force for Brazilian exports were applied or extended. There were 12 antidumping mechanisms, seven safeguards, and one case of compensatory measure for subsidy. The composition, Ms. Prazeres points out, shows a greater diversification of the instruments used. Before the antidumping duty used to be the most applied measure, now the safeguards are being applied more frequently, including by countries with more mature economies, she says.
Of the seven safeguard measures in force this year, two were from Turkey. The others came from Morocco, Philippines, United Kingdom, European Union (EU), and USA. Among the seven processes, there is an exclusion of surcharge for Brazil in six. The safeguards make it possible for developing countries, such as Brazil, to be free from its application, provided that requirements are met regarding the share of exports to the country of destination. The situation may be reviewed.
The EU safeguard extended in 2022 is emblematic. It has been in effect since 2019 and was revised in June of this year. Of the four product categories included in the measure, Brazil was excluded from two but is subject to surcharges in two others. In this safeguard, quotas were established that, if exceeded, subject exports to a 25% surcharge. The measure, recalls Fiesp’s technical team, was a reaction by the EU to the results of the surcharges that former U.S. President Donald Trump applied to imported steel in 2018. The Europeans claimed that the measure caused a shift of exports to other destinations, which led to a high volume of steel exports to the bloc.
Safeguards, Ms. Prazeres explains, are applicable when there is a sudden surge in imports of a certain item combined with damage to the domestic industry. “If this can be proven, the safeguard is the most effective remedy, because with a single measure it is possible to reach all origins, the various countries that caused the sudden import. The antidumping measure needs to be applied to each of the exporting countries.”
Lia Valls, a researcher at the Brazilian Institute of Economics of the Getulio Vargas Foundation (FGV Ibre), recalls that international trade related to iron and steel is a sensitive issue for the USA. According to her, as the Americans lead the defense mechanisms in force involving Brazilian exports, it is expected that the steel sector will be one of the main targets. Of the 17 American measures in force, ten involve the iron, cast iron, and steel sectors.
José Augusto de Castro, president of the Brazilian Foreign Trade Association (AEB), evaluates that the intensification of the measures is connected to the protectionist concern that several countries have been showing at the same time that there is a reorganization of the production chains and an attempt to bring industries to their territory or to regions considered friendly. In the case of Argentina, he says, the large number of defense measures can also be explained by the country’s economic crisis, which has established measures to restrict imports.
Welber Barral, partner at BMJ Consultants, highlights the significant number of defense measures from Indonesia, which is explained by the policy of that Southeast Asian country. Indonesia has safeguards for several products and, as the measure affects all origins, Brazil was affected. “The country historically has a very closed market and is opening up, but there is a lot of internal resistance. That is why Mercosur seeks an agreement with Indonesia and Vietnam,” he said.
Retail and industry are investing R$19bn this year; uncertainties about new administration weigh on 2023
12/05/2022
Retail chain Americanas increased its investments by 30%, to R$1.8 billion this year until September — Foto: Brenno Carvalho/Agência O Globo
Consumer goods companies, the sector that employs the most in Brazil and accounts for more than 60% of the country’s GDP, recovered their ability to invest since 2021, after the worst moment of the crisis generated by the pandemic, and reached in 2022 one of the highest levels in recent years. Yet, the sector’s leaders project that they have to invest wisely in the first months of 2023 until there is clarity about how the new government will run the economic policy and whether the Lula administration will be fiscally responsible.
“We don’t think investments will grind to a halt, but people are adopting a wait-and-see approach in the short run,” said , managing director at consultancy Gouvêa Ecosystem and founding member of IDV, a trade group that gathers 70 large chains.
The volume of funds released until now, considering pre- and post-pandemic data, show a rapid recovery of investments between 2021 and 2022.
According to an analysis by Valor based on the earnings reports of the 10 largest retailers and industrial companies from the durable goods, fashion, food, and drinks segments, R$19.7 billion were invested in fixed assets (equipment and furniture in stores and storage centers) and intangible assets (like brands, patents, and software) between January and September. The combined amount is 47% higher than a year ago, and only 10% lower than that seen in the full year 2021.
The data collected from cash flow reports of the past five years include payments for acquisitions and capital raises in controlled businesses, but exclude securities and asset sales.
The combined investment doubles the amount disbursed by September 2019 (R$9.5 billion), the last year before the health crisis. As far as investments are concerned, retailers grew faster than industrial companies.
In these chains, cash directed for investments by September reached R$11.1 billion, up 56% year-over-year and close to the amount disbursed in the full year 2021 (R$11.2 billion). Industrial companies disbursed R$8.6 billion by September, up 38% year-over-year – the sector still depends on the disbursements of the last quarter to overcome 2021. Last year, investments totaled R$10.6 billion.
“Retailers and industrial companies are accelerating again efforts focused on innovation and efficiency gains after the worst part of the pandemic, which forced them to revise priorities for 2020 and part of 2021,” said Mr. Gouvêa. Despite a still weak demand this year, manufacturers resumed launchings and chains reopened stores. Whirlpool, for example, created new lines in 2022 after pushing them to the back burner in 2020, and the payments for acquisitions already concluded of startups and retail businesses accelerated disbursements.
The analysis covered earnings reports in the two sectors – retail chains GPA, Carrefour, Magazine Luiza, Via, and Americanas, and industrial companies Ambev, Natura, Whirlpool, Alpargatas, and M. Dias Branco, the largest ones in their respective activities.
There are divergences in the pace of growth among groups, and the reports themselves explain the data.
The accelerated disbursements of Carrefour weighed on the combined result of retailers – the French group released R$4 billion until September after acquiring Big (former Walmart). Between January and September, Magazine Luiza paid R$540 million for acquisitions agreed in recent years, three times the amount disbursed in the same period of the previous year.
Americanas comes next, with R$1.8 billion invested by September, up 30% year-over-year, partly driven by the 103% increase in investments on intangible items since last year, including website and system development.
In the view of GPA, the need to speed up investments in its core business in 2022, including new concepts of stores, Pão de Açúcar’s digital model, and the conversion of Extra stores into Pão de Açúcar, has driven disbursements. For 2023, the group projects investments at the same level or slightly above 2022, when discounting the cost of these conversions. Including this value, there will be a decrease.
“Once the dust of political polarization has settled and with a more stable reality, inflation in check, and cle
Marcelo Pimentel — Foto: Carol Carquejeiro/Valor.
ar signs of [the Lula administration’s] commitment to fiscal balance, confidence grows and investors return,” CEO Marcelo Pimentel said last week.
Industrial companies showed mixed performances this year. While Alpargatas and Whirlpool have more cash for investments, Ambev set aside R$4.5 billion, down 5% from a year before. Considering the disbursement of R$7.8 billion in 2021, the brewery would have to invest R$3 billion more by the end of 2022 to be at the same level of last year. The company declined to comment.
Between January and September, Natura reduced investment by 13% year-over-year. The company, which is restructuring operations, have been revising projects with brands this year. The company declined to comment.
At this moment, investment capacity has been discussed by boards of directors because they have to define the budget for the following year in the last quarter of the year. Between October and December, plans may be revised depending on the pace of economic activity.
The still uncertain economic environment impacts the definition of the budget for the year, whose variables include interest rates, inflation, and GDP growth. “The environment is a little confusing, which is natural considering the presidential transition,” said Jorge Gonçalves, IDV’s head.
“In general, our members believe that it is better to understand what the beginning of the year will look like, and whether spending will be well managed as promised, giving them greater clarity. But there is no talk of freezing investments in 2023. Retailers must remain upbeat,” he added.
The first signs show tougher projections for consumption in early 2023. IDV, retail’s largest trade group, projects a 6.4% decrease in sales in January compared to the previous year, adjusted by the Brazil’s official inflation index IPCA.
In the view of Fernando Pimentel, head of the textile sector association Abit, the central issue is the lack of visibility for businesses. “Everyone is adopting a wait-and-see approach,” he said. “For some direction of the path of investments for 2023, it is necessary to know the names of the new administration and the signals they will send to the market. Another thing is the management of the public accounts, whether we will have some fiscal anchor that generates confidence in investors. The market doesn’t fight with anyone, it prices and punishes lack of visibility,” he said.
In the view of Pedro Moreira, head of Abralog, a trade group that represents logistics companies, investments consider the return on invested capital, which can take be longer or shorter depending on variables such as projected revenue. He recalled that interest rates affect the cost of capital, and that “future interest rates rose as we have seen the elected government send mixed signals on the fiscal policy.”
The investments are not at a standstill, nor will they be. But we expect a first half with fewer funds invested and a potential improvement in the second half of the year. The large companies can even maintain higher expenses, but the others have more difficulty in this environment, without knowing what the fleet renewal plan and the investment project in infrastructure will be.”
For Marcos Gouvêa, with IDV, the memory of the Lula administration after 2003 is a positive aspect. “There was a stimulus to consumption, and this remains in the memory. I believe that, as definitions are made, the sector will accelerate its plans in the expectation of income recovery after 2023.”
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