In two years, Ternium will have 93% of shares, becoming the steelmaker’s sole controlling shareholder
03/31/2023
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Usiminas makes perfect sense for the Italian-Argentinian group Ternium — Foto: Divulgação
Usiminas, the steelmaker co-founded by Nippon Steel 65 years ago, has become too small for the Japanese group to continue investing both in the company and in the Brazilian steel market, which is constantly hit by economic crises. This market has been stagnant for decades and is growing at a sluggish pace.
Usiminas makes perfect sense for the Italian-Argentinian group Ternium, which is owned by Paolo Roca and took over the Brazilian company in 2012. The group will be able to integrate its operations in Latin America, from Argentina to Mexico, and reach the United States.
It also owns Ternium Brasil, a Rio de Janeiro-based steel plate producer created by Thyssenkrupp and later sold to Ternium, marking another foreign group’s move out of Brazil seven years ago. In the future, the steel plate producer may merge with Usiminas.
Nippon Steel is targeting markets like India, where it is investing in partnership with ArcelorMittal. India’s steel market is growing faster – much faster than Brazil’s. The two groups are already partners in the United States, in a steel rolling mill in Calvert, Alabama.
The deal – closed for less than R$700 million – will increase Ternium’s position in the control block of Usiminas to 61.2%, which means that it nominates most executives, as well as the members of the board of directors. With the deal, it holds 49.5% of the common shares of the Minas Gerais-based steelmaker.
In two years, however, Ternium is expected to be able to buy the remaining 31.7% of the Japanese steelmaker shares, becoming the majority shareholder. Another 7.1% of the block will be in the hands of Usiminas employees’ fund, which does not have a voice in the company.
Today, Usiminas’s controlling shareholders – Ternium/Techint and Nippon, plus the employees’ fund – represent 68.57% of the common stock capital.
The transaction is still under review by the Administrative Council for Economic Defense (CADE) and has a good chance of being approved by the antitrust agency, despite the fact that Usiminas has a significant share of the Brazilian flat steel market and its main competitor is CSN, of Benjamin Steinbruch. New players have emerged to compete in the country.
Minority shareholders of Usiminas, including CSN itself – which attempted a hostile takeover at the beginning of the last decade – may ask capital market regulators whether they are entitled to a takeover bid by Ternium. Such a move could happen.
What will CADE say? It is possible that, in line with previous decisions, it will argue that these are moves within the current control block of Usiminas. But the change leaves the door open for Nippon’s complete exit.
In two years, the Japanese steelmaker, one of the 10 largest in the world, is expected to leave the scene for good, leaving Ternium with 93% and virtually sole control of the company.
Until now, Usiminas has been controlled by joint decisions. A new shareholders’ agreement will be signed after CADE’s approval.
Usiminas has lost momentum in the Brazilian market and has shrunk significantly since 2016, when it closed its steelmaker in Cubatão, São Paulo. The plant became only a steel rolling mill, dependent on the purchase of semi-finished steel (slab) in the domestic market and imports to serve customers in the country.
During this period, ArcelorMittal and Gerdau joined the Brazilian flat steel market, competing in some niches dominated by Usiminas, which is the leading supplier of steel to the local automotive sector.
With this move, Nippon Steel is beginning to say bye to Brazil after a marriage of more than six decades. However, the Japanese company is likely to maintain one foot in Brazil. After all, it is a 30% partner of Usiminas in the Unigal rolling mill for galvanized steel (high value-added material), located on the steelmaker’s site in Ipatinga, Minas Gerais.
*Por Ivo Ribeiro — São Paulo
Source: Valor International
This is the fourth year in a row Brazil has made available more credit for the industry
03/31/2023
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Camila Ramos — Foto: Leonardo Rodrigues/Valor
Despite rising interest rates in Brazil last year, the volume of financing through banks and capital markets for solar power generation – both large plants and small photovoltaic systems for self-generation – exceeded R$35.1 billion in 2022, up 79% year over year. In the previous year, it amounted to R$19.6 billion.
The data comes from a study conducted by consultancy Clean Energy Latin America (Cela) with state-run and private-sector financial institutions, credit unions, and fintechs that promote the generation of electricity with photovoltaic technology.
Credit for large plants (centralized generation) jumped 105% last year to R$13.7 billion, compared with R$6.6 billion in 2021. Contributions for solar power self-generation systems in rooftops (distributed generation, or DG) grew 34% in 2022, with R$11.9 billion injected in the year. Remote solar plants of distributed generation (shared generation and remote self-consumption) had R$9.3 billion available, up 134% from 2021.
This is the fourth consecutive year Brazil has made available more credit for the sector. Camila Ramos, director and founder of Cela, said that financing is a bottleneck, but also enables renewable power projects. According to her, investments have grown, even with the current situation of more expensive capital costs in 2022 compared to 2021 due to the increase in interest rates in the country.
What explains the strong volume of financing is the high growth of new solar power facilities in Brazil, which will reach 23.5 gigawatts of operational power by the end of 2022.
This boost is due to the subsidies that have attracted companies to the sector. The distributed generation regulatory framework has sparked a race to develop new self-generation projects, as investors wanted to ensure zero tariffs for the use of the distribution grid – those who apply for connection to the grid by January 6, 2023 will be exempt from the tariff until 2045.
On the other hand, large-scale solar power projects have been boosted by contracts on the free market and the race to get projects up and running and maintain the benefit of the 50% discount on the Distribution System Use Tariff (Tusd). The executive believes that these projects can keep the pace of new financing thanks to the tariff discount.
“In addition to the incentives for the sector, financing has been driven by increases in electricity tariffs, the opening of the free power market, the competitiveness of renewable sources, even with the increase in capital expenditures and interest rates, and the ESG agenda in companies,” she said.
With small rooftop photovoltaic systems, consumers are paying the financing installments instead of electricity bills. However, there may be a reduction in financing in 2023, since the new ones will no longer have total exemption for the use of the distribution network.
In the case of remote DG, the companies authorized to access the distribution network have one year to complete their projects. As a result, there is a number of plants under construction that can still seek financing. She also notes moves toward mergers and acquisitions, with new investors buying these companies and making direct capital contributions.
*Por Robson Rodrigues — São Paulo
Source: Valor International
“Mirage” of high real rates tends to be undone by fiscal plan or inflation, analysts say
03/31/2023
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Philipe Biolchini — Foto: Claudio Belli/Valor
As the first quarter is almost over, investors are taking stock of financial investments and finding that fixed income was the most profitable – and safest – alternative in Brazil in the period. The stock market precluded, for most of the time, the most opportunistic efforts to take advantage of apparently cheap prices, but the unveiling of the Lula administration’s new fiscal plan is beginning to attract a new flow to stocks. In the year, Brazil’s benchmark stock index Ibovespa is still down 5.5% until the 30th. Stocks linked to consumption fell nearly 10%, due to the dependence on credit. Among traditional assets, gold led the way with gains of nearly 6%, followed by the IMA-B 5, an index made up of inflation-linked government bond with maturities of up to five years (+4.5%). With Brazil’s official inflation index IPCA projected at 2.1%, there are real gains.
The arrival of the new fiscal rule proposal to Congress on Thursday has the potential to improve the sentiment of financial agents and has rekindled forecasts that the Selic, Brazil’s key interest rate, will fall from the current 13.75% per year already this year. The expected convergence of inflation to the target paved the way for longer-term positions in interest-rate-linked strategies and some tactical positions in the stock market, said Ruy Alves, a global macro fund manager at Kinea Investimentos.
“We still think that credit will be more restrictive and economic growth will be difficult. But if the medium and long parts of the yield curve start to ease, driven by a more convergent inflation and a credible fiscal rule, that benefits the stock market,” the manager said. With withdrawals from stock funds and the recent exit of foreigners who had been offsetting sales by local investors, the technical argument also seems to have become stronger, as stock prices reflect a very pessimistic view.
In futures contracts, the projections for the coming months had been reduced, but those for 2024 recovered ground, signaling that the fall does not seem sustainable, Mr. Alves said. Kinea expects inflation to slow down, so it decided to make longer-term bets on falling rates for a period when financial agents see new highs.
“Brazil has gone from real interest rates of -5% to +8% in less than two years, and this is starting to affect the economy. This instrument is like blast fishing. Those who use dynamite don’t know how much to throw in the water. The small fish die first, then mullets and tuna. When a whale dies, they realize they’ve thrown too much [dynamite],” Mr. Alves said.
The developed world is also “blast fishing.” The specialist cites pension fund problems in the United Kingdom, the bankruptcy of the Silicon Valley Bank in the United States, the bailout of First Republic, and the hasty purchase of Credit Suisse by UBS as phenomena resulting from tighter financial conditions. In Brazil, household debt is a factor that will shake consumption in 2023.
The scenario is still one of real interest rates that “seem like a mirage, that cannot exist in practice, and they will disappear, for better or worse,” Mr. Alves said. “Without a primary surplus and without growth, there is no way to stabilize public debt.” This means that if the Lula administration’s fiscal plan does not recover credibility as it hopes, the fat real interest premium will turn into inflation.
For individuals, investing in National Treasury Notes Series B (NTN-B), which pay a correction of the IPCA (Brazil’s official inflation index) plus 6% at current prices, is “a gift to rentiers,” the manager said. “The situation is different for funds because of the mark-to-market rules, but those who can take it and keep it.”
For those who can tolerate high volatility and look beyond the short-term horizon, there are good return prospects in either fixed income or stocks, said Philipe Biolchini, chief investment officer at Bradesco Asset Management. With nominal interest rates above 13% and real interest rates at 6%, the trend is for very attractive returns when a more normal environment returns. “This is also true for variable income, with assets trading at a significant discount, but there is competition from interest rates and the impact of weaker activity on corporate revenues and expenses,” the executive said. “For those with a long-term vision, this is a good time to buy.”
To go beyond investments linked to the interbank deposit rate (CDI), Mr. Biolchini said there are different alternatives depending on the objective and the profile. “If you are entering a risky asset now, you have to understand its valuation and be prepared because it will oscillate. You have to be aware that you are buying cheap.”
Santander’s main orientation in recent months is now driven by the demand for fixed-income alternatives, according to investment strategist Arley Junior. For the stock market, the indication was one degree below the structural exposure. Except for those with a conservative profile, this means keeping a portion of investments in stocks.
“The monetary tightening cycle has brought higher interest rates, but at some point it will be enough to bring inflation to target and the Central Bank will find room to cut rates. The stock market tends to surf well in this scenario. Investors don’t have to wait for that to happen to be positioned because the current price level is already an opportunity.”
Santander’s investment team maintains its forecast of 122,000 points for the Ibovespa by the end of the year. As for the Selic rate, the bank expects a reduction to 11% per year in 2024 and a return to single-digit levels only in 2025, to 8% per year. The data may be revised depending on how the Lula administration’s plan for the new fiscal rules unfolds. “It is the main issue in Brazil, crucial for allocation decisions. In today’s world, with the local and international landscapes, it is best to be cautious. This is reflected in the asset classes in the portfolio.”
Mr. Junior said clients were looking for assets linked to the CDI because of high interest rates, including real estate and agricultural credit bills (LCIs and LCAs) and guaranteed real estate bills (LIGs).
In the recommended portfolio, the bank suggests structured notes with principal protection and corporate debt from first-level companies. Mr. Junior said that there were moments last week when there were tax-exempt securities in the secondary market paying IPCA plus 7% or 8%. “But when we talk about credit, one should look for dispersed risk, be it through funds or a direct investment. Portfolios can have an attractive composition for all profiles [of investors].”
In the global economy, the degree of uncertainty is so great today that there are convincing arguments both for a fall in U.S. interest rates and for new hikes, said Mr. Biolchini, with Bradesco Asset. And this is important because interest rate trading in the U.S. is the world’s most liquid market and is decisive for the valuation and profitability of assets in general.
Some analysts believe that the crisis in the banking system will deepen, leading the U.S. Federal Reserve to reverse the pace of monetary policy. Others consider that the measures taken so far are sufficient to stop the problem and that it is common, in a tightening cycle, to have victims along the way. “This makes earnings expectations adjusted by volatility unattractive,” Mr. Biolchin said. It drives the investor to more conservative portfolios and, for now, “with the privileged condition of having good yields with low risk.”
Por Adriana Cotias — São Paulo
Source: Valor International
Electricity will come from Rio do Vento and Umari wind farms
03/30/2023
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Lucas Araripe — Foto: Leonardo Rodrigues/Valor
Casa dos Ventos and Braskem signed an agreement worth R$2.1 billion to supply wind power from the Rio do Vento and Umari farms, both located in Rio Grande do Norte, through power purchase agreements (PPAs) of up to 22 years.
This second major agreement between the companies turns Casa dos Ventos into Braskem’s main supplier of renewable power. In January 2021, the companies announced the signing of 20-year renewable power supply agreements that helped materialize the first phase of the Rio do Vento wind complex, Latin America’s largest wind power project.
In this new agreement, part of the electricity will come from the expanded power supply of the Rio do Vento wind power complex, which will have a total installed capacity of 1,038 MW, of which 504 MW is already operational through 120 wind turbines. In 2023, 120 more wind turbines will start operating, adding 534 MW of power.
Another part of the electricity will come from the Umari wind complex, which is under construction and will be operational in 2024. The companies do not disclose the exact amount of electricity that each farm will provide, nor the total amount of power supplied. It is only known that the consolidated volume of contracts between the companies exceeds 100 average MW. This is equivalent to the residential consumption of a city of about 1.5 million people.
Casa dos Ventos Executive Director Lucas Araripe said that the transaction is key to make the company viable, as PPAs are the main way to expand renewable power generation in Brazil.
“Braskem was one of the main customers that brought a volume of electricity that allowed us to look for financing and make the expansion of renewable supply possible,” he said.
Mr. Araripe recalled that the first partnership with Braskem was a R$1 billion contract, also in the Rio do Vento project. Now, with this increase in the contracted acquisition of Rio do Vento’s output and part of Umari’s output, the agreements signed since the beginning amount to R$3.1 billion.
The contract is part of a typical strategy among electro-intensive companies like Braskem, which is to bet on renewables to advance in decarbonization as part of the commitment to reduce their emissions. The amount of power required is more thermal than electric, but the path to electrification is key in this process.
According to Gustavo Checcucci, Braskem’s chief energy and industrial decarbonization officer, this is the largest renewable power contract ever signed by Braskem, and the sixth long-term wind or solar contract signed by the petrochemical company in Brazil in four years – the second one with Casa dos Ventos.
Today, Braskem’s monthly consumption totals 550 MWm, a volume that comparatively exceeds the commercial consumption of the state of Bahia. Mr. Checcucci acknowledged the need for partnerships to accelerate the decarbonization process of the operation.
“With this contract, when it comes into operation, and together with the other contracts we have, we will exceed the volume of 220 MWm that Braskem has signed in Brazil,” he said. “The volume of power contracted by Braskem in its operations in Brazil will reach the threshold of 40% supplied by wind and solar.”
This is likely to happen in the first quarter of 2025 and will represent 8% of the decarbonization target. By 2030, the goal is to reduce scope 1 and 2 greenhouse gas emissions by 15%. Braskem estimates a reduction of 3.2 million tonnes of CO2, taking into account this one and the other contracts signed.
The other 60% will come from conventional sources, which include everything from hydropower to fossil fuels. If all goes well, the company hopes to achieve 85% renewable power in its power mix by 2030.
Por Robson Rodrigues — São Paulo
Source: VAlor International
Brazil needs to discuss income, wealth taxation after reviewing consumption tax, Manoel Pires said
03/30/2023
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Manoel Pires — Foto: Wenderson Araujo/Valor
The discussion on the taxation on wealth, profits, dividends, and inheritance is key for the next tax overhaul in the country after the debate on the simplification of consumption taxes is completed. This idea is advocated by Manoel Pires, coordinator of the Economic Policy Center and the Fiscal Policy Observatory of the Brazilian Institute of Economics of Fundação Getulio Vargas (FGV/Ibre).
According to the researcher, who is a former secretary of economic policy at the Ministry of Finance, the problems of the Brazilian tax system will not be solved only with the proposal to amend the Constitution on tax reform, the so-called PEC 46/2022.
PEC 46 merges sales tax ICMS and services tax ISS and was presented to the Senate this year. “This is a more mature reform [the one on consumption taxes], from the technical point of view. Now, the discussion we must have is what the next [tax] overhaul will be.”
Mr. Pires acknowledges that talking about taxing wealth, profits, dividends, and inheritances are complex political issues. “Nobody likes to pay taxes,” he said, adding that Brazil can and should start a technical discussion on these issues if it wants to build a fairer tax system in the country.
In the case of the super-rich, the economist commented that there is currently a process of “revisionism” of tax systems in the world regarding this issue. “There was an understanding that if you taxed the richest people less, they would invest more, create jobs, and benefit the poorest,” he said. “But that didn’t create more growth, it created more inequality.”
In the 2020 pandemic, this became even more evident, Mr. Pires said. With the economic crisis arising from the health problem, the economic vulnerability of the world’s poorest people became more visible. For him, by exempting the richest people from paying taxes, they were simply acting to preserve their economic power.
In Brazil, the Tax on Great Wealth (IGF) is foreseen in the 1988 Constitution but has never been regulated. When asked if proposals such as that of Senator Randolfe Rodrigues – of the Supplementary Bill PLP 101/2021, which tax assets above R$4.67 million – would be a solution, Mr. Pires is cautious. For him, it is necessary to tax the super-rich in a broader context that includes all of the country’s taxation rules.
According to him, it is necessary to discuss the best design for taxing the super-rich. This includes discussing the taxation of profits and dividends at the same time. The economist drew attention to the correlation between the two issues, noting that in the country 58% of the income of the portion of the population that corresponds to the richest 0.1% is in the form of profits and dividends, which are not taxed in Brazil.
In the “next overhaul,” the researcher advocates thinking about concomitant actions and avoiding proposals with single measures – without thinking about how they fit into the Brazilian tax system as a whole.
Mr. Pires gave some examples of how isolated proposals could be inefficient. A lot of people talk about reforming income tax rates, he said, and using income tax returns as the basis for taxing the super-rich. “Apparently, the countries that impose a wealth tax experience capital flight and underreporting of assets,” he said, adding that the possible regulation of a wealth tax must be accompanied by effective control measures.
Another example is the taxation of profits and dividends. Brazil is one of the few countries that does not tax profits and dividends, Mr. Pires said, noting that this change does not need to be the implemented alone. It could be accompanied by an income tax rate on profits and dividends distributed by companies to individuals or corporations, and a reduction in the corporate tax rate, he said. This would prevent taxation from looking like a form of punishment for a company that is efficient and manages to make a profit.
Mr. Pires also defends taxing inheritances. He believes that the measure could stimulate economic growth. According to him, without inheritance taxation, wealth accumulation occurs through family inheritance, not through economic choice. “This stimulates people to produce today and not just be heirs,” he said. This creates more businesses and jobs, with a beneficial impact on the economy, and tax collection.
*Por Alessandra Saraiva — Rio de Janeiro
Source: Valor International
Sequence of events, however, is full of arguments for an interest rate cut
29/03/2023
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Stock of credit in the financial system fell by 0.1% in February compared with January — Foto: Pixabay
February credit statistics published Wednesday by the Central Bank certainly sets off an even louder alarm. After analyzing the data, the scenario may not be as bad as it seems and was already widely expected, given the context of high interest rates and the retail chain Americanas debacle that scared banks in January. Nevertheless, it is still an open door for the government and other productive sectors that have been calling for a reduction in interest rates.
The stock of credit in the financial system fell by 0.1% in February compared with January. In the previous month, it had already reported a decline of 0.8%. Two consecutive falls in this indicator are not normal. The 12-month variation, which peaked at almost 17% in the middle of last year, has been declining month by month and now stands at 12.6%. The market forecast for this year is for credit to grow just over 8%, so a slowdown was already expected.
What has attracted the most attention is perhaps the 9.5% drop in new loans made by banks. This follows a 15.6% drop in January. This indicator is much more volatile and affected by seasonal issues, including the number of working days in the month. Still, the seasonally adjusted decline was 2.2%.
But what explains this decline? For individuals, there was a monthly increase of 0.8% in seasonally adjusted loans, while for companies there was a reduction of 4.4%. In total free credit, the concessions fell by 1.8%. Directed loans also fell by 1.8%.
Fernando Rocha, Central Bank’s head of statistics, said invoice factoring for businesses declined 7.7% in February, but removing the seasonality “it would be expected” stability or a slight increase. “There was a decline of 5.9% in the stock of card receivables, unlike what would be expected in seasonal terms. The last time there was a drop in February compared to January was in 2016,” he said.
According to Mr. Rocha, the Americanas crisis has had a “one-off” effect on credit, and there seems to be no risk of contagion or spread. “The effect is concentrated in the lines where Americanas was most active, which is the supplier finance,” he pointed out. These modalities are related to invoice factoring and factoring of receivables, which dropped above the pattern in February.
If the January data did not yet capture the full impact of Americanas (the accounting scandal was announced on the evening of January 11), by February it can already be said with a high degree of certainty that the case has had an impact. Many companies were already reporting difficulties in accessing supplier finance, although officially the big banks say they still operate such lines — more cautiously, of course.
What is not reflected in the February credit data is the collapse of Silicon Valley Bank (SVB) and the problems at Credit Suisse that hit the market this month. Although the U.S. and European authorities acted quickly to contain the contagion effects, the indicators may reflect at least a temporary impact from the uncertainties. There is also the pause that the banks have taken in the supply of credit to the National Institute of Social Security’s pension contribution (INSS) beneficiaries after the government’s forced reduction of interest rates. With almost R$5.2 billion in lending in this segment per month, the pause of little more than a week can already have some impact.
In this whole context, there was enormous pressure on the Central Bank to at least indicate in the minutes of last week’s Monetary Policy Committee (Copom) meeting that a monetary easing cycle could be on the horizon if there was progress in the new fiscal rules. This indication did not come, frustrating the expectations of many analysts who hoped to see a light at the end of the tunnel — even if it was full of caveats.
A new excerpt in the Copom minutes that came as a surprise was the mention of credit. “Lastly, the Committee reinforced that the harmony between monetary and fiscal policies reduces distortions and uncertainty, facilitates the disinflationary process, and fosters full employment over time. In this regard, the Committee reinforces the importance that public and private credit granting remains at competitive interest rates sensitive to the Selic.” In hindsight, one can speculate whether the monetary authority sees a deterioration in credit that is not yet fully priced in.
In addition to the pressure to lower interest rates, the credit report may also increase the demands for new editions of federal programs to stimulate credit, such as Pronampe, FGI-Peac, or even the Central Bank’s offer of liquidity lines to banks. Again, there is no evidence in the public data of a lack of liquidity in the banking system. But the trend is certainly not positive. The context may also accelerate other announcements that the government has been working on, such as the Desenrola debt renegotiation program and a possible line for small and medium suppliers affected by the Americanas case, which was discussed in the working group created by the Ministry of Finance and the banks.
The government, which a few weeks ago raised fears of a credit crisis, now has the upper hand to reinforce the narrative against the Central Bank. If the monetary authority gives in, the Executive branch can hope that the monetary easing will stimulate the activity somewhat this year. If Central Bank President Roberto Campos Neto does not give in, the Lula administration will have a perfect scapegoat to blame for a weak GDP growth in its first year in office.
*Por Álvaro Campos, Larissa Garcia — São Paulo, Brasília
Source: Valor International
Source says that government will evaluate program results and plan expenditures for up to four years
03/27/2023
When the new fiscal framework comes into effect, the Brazilian budget will be based on a tripod, according to a government source. The trajectory of public accounts outlined by the new rules will be supported by a “backward” look, which will come from the evaluation of public policy results, and a “forward” look, through a budget that will plan expenditures for a period of three or four years.
These changes, which are being formulated by the Ministry of Planning, will bring Brazil’s budget management in line with the best practices adopted around the world. According to the source, the Organization for Economic Co-operation and Development (OECD) experienced a boom of innovations in this area after the 2008 crisis. Since then, advanced economies have adopted these new practices. Brazil was a bit behind in this process, he commented.
The medium-term budget is the great innovation that the current government intends to implement. One of its qualities, according to the government member, is to clarify the “trade-offs” in public spending.
Since there are not enough funds to carry out all the actions the government would like to take, it will be necessary to choose priorities. The consequences of these choices are easier to visualize over a longer period.
The first budget proposal in this format will be presented next year. It will be valid until 2025 and will include projections for the following years.
In turn, the evaluation of public policies will allow spending to be reduced with more discretion. In the absence of this type of information, the most common practice in recent years has been to make across-the-board spending cuts. With evaluation, programs that are not producing the desired results can be eliminated or corrected, thereby improving the quality of public spending.
Behind the scenes, this new structure is being called “Budget by Performance 2.0.” Version 1.0 is the legislation drafted in 1964 and is still in force today. At the time, it was the state of the art.
Another government source said that it will not be enough to look at the new framework to understand the future trajectory of public accounts. The rule, he said, will be complemented by other instruments, such as the annual budget and the draft of the Budget Guidelines Law (LDO), and the multi-year plan (PPA).
The first of these instruments is the LDO project. The deadline for its submission to Congress is April 15.
The main element of this bill is the primary result target. Economy Minister Fernando Haddad has said that the goal is to reduce the public deficit to zero next year.
The proposal for the 2024 LDO will be prepared based on the current legislation. That is, it will take into account the spending cap. And it will include provisions for the transition to the new framework when it comes into force.
The drafts of the 2024 annual budget bill (PLOA) and the PPA are expected to be submitted to the Legislature by August 31.
Por Guilherme Pimenta, Lu Aiko Otta — Brasília
Source: Valor International
In a meeting with Alckmin, global director revealed plans to export to the U.S.
03/27/2023
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François Dossa — Foto: Gabriel Reis/Valor
Land Rover will cease the production of internal combustion vehicles worldwide by 2030. That means the factory in Itatiaia, in the state of Rio de Janeiro, which currently produces only combustion vehicles, will have to be closed if the model line is not changed by then. But the company intends to include Brazil in the production of electric cars and even export them to the United States, according to François Dossa, strategy and sustainability executive director of the Jaguar Land Rover group. He was in Brazil last week in a meeting with the Vice President Geraldo Alckmin to detail these plans.
Mr. Dossa returned from the meeting with Mr. Alckmin enthusiastic. Also minister of development, industry, and trade, Mr. Alckmin showed that he knows and cares about sustainability,” he said. The meeting in Brasília was not the only good memory Mr. Dossa took with him from his week in Brazil. On Saturday, the day before he returned to England, Jaguar won the Formula E (electric cars) race in São Paulo, the first of its kind to be held in Brazil.
Inaugurated in June 2016, Land Rover’s Brazilian factory is a small structure compared to the big car manufacturers. It has just under 500 employees and is dedicated to a niche market, the luxury SUV segment. In 2022, local production will account for 30% of the approximately 700 Land Rover vehicles sold in the country. The idea is to increase local production to 50% of sales by 2023, according to João Oliveira, who took over as head of the company’s operations in Brazil and Latin America eight months ago.
The project in Itatiaia is part of the investments of luxury brands in Brazil, when the Brazilian government, during the automotive program Inovar-Auto, raised the Industrialized Products Tax IPI by 30 percentage points on cars imported by companies without factories in the country. Land Rover was one of the last to join the wave, which also included Mercedes-Benz, BMW, and Audi. Mercedes and Audi ceased production. In 2022, Audi resumed operations in Paraná state.
Part of Mr. Dossa’s conversation with Mr. Alckmin was about the group’s desire to see incentives for the production of 100% electric cars contemplated in the next phase of Rota 2030, the federal program to stimulate the sector. The production of electric cars in Itatiaia would be possible, according to Mr. Dossa, with the expansion of production aimed at supplying the U.S. market, where the group does not have a plant.
Toyota, Stellantis, and Volkswagen defend the policy aimed at developing ethanol-powered hybrid cars in the country. The hybrid has two engines — the one that runs on fuel helps charge the other, which is electric. The two alternate depending on use.
“But who can guarantee that the consumer will fill the tank with ethanol?” asks Mr. Dossa. He considers the sugar cane product to be an important ally for decarbonization for a certain time, but is against the development of new generations of vehicles based on this fuel. According to him, electrification is a way of no return. “Some cities already ban the circulation of combustion cars. “When the car replaced the carriage, many said it wouldn’t work. Now, with electrification, Brazil still has the advantage of generating clean energy.
For Mr. Dossa, the concept of sustainability in transportation goes beyond vehicle emissions. It includes energy sources, design, engineering, materials, factories, and even the way the car is sold. The less disposable the car, the more sustainable it is.
“My dream is to sell a car for life, which requires increasingly durable materials. That is sustainability,” he says. In this case, the car would be updated through software upgrades.
For the executive, a sustainable company must have diversity in mind, including the quota system. “This is the way conservative companies like ours can move forward,” he says. By 2026, the Jaguar Land Rover Group aims to increase the number of women in management positions to 26% from the current 12%. Mr. Dossa also points to companies’ involvement in the community. He has participated in organizations dedicated to the education of disadvantaged youth in Brazil.
Brazil has been a big part of the life of the 59-year-old executive, who was born in Nimes, southern France, and holds a degree in business administration. Mr. Dossa lived in the country before, working in banks and the Renault/Nissan/Mitsubishi group. He knows the region well, since Itatiaia is next to Resende, where the Nissan plant is located. He helped open the factory in 2014, when he was CEO of the Japanese brand in Brazil. Rio de Janeiro has been his destination for Carnival for years as well.
Although they have been part of the Indian group Tata Motors since 2008, Jaguar and Land Rover have retained their British essence and are now accelerating electrification. Jaguar will stop producing internal combustion models in 2025, earlier than Land Rover. “We have little time to make the transition,” says Mr. Dossa.
When he gave this interview to Valor, the Formula E race in São Paulo had not yet taken place. The executive avoided claiming victory. But the result was better than expected. The Jaguar team came in first and third place, and in a way, it also arrived in second, as the driver used a Jaguar I-Type 6.
But what led the organizers to include Brazil in the Formula E season given that electric cars do not reach 1% of car sales? Mr. Dossa recalls that two cities in emerging markets also made their ePrix debuts in the rounds preceding São Paulo — Hyderabad, India, and Cape Town, South Africa. “You have to prepare your mind for the change,” he says.
Sourcer: Valor International
Swiss family wealth management bank reaffirms long-term commitment to Brazil
03/27/2023
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Beatriz Sanchez — Foto: Carol Carquejeiro/Valor.
Swiss bank Julius Baer will not change its market strategy due to the current financial market stress. “We will continue to invest in the market as we have always done, in a conservative way, in quality assets and government bonds,” says Beatriz Sanchez, head of Americas at the institution. She says she believes that the current turmoil in the financial system is very different from the 2008 crisis.
“In 2008, there were a lot of bad assets on banks’ financial statements. Today, the problem is more one of liquidity, and the central banks of Europe and the U.S. have acted quickly to contain it,” she said. In an interview with Valor, the executive pointed out that there will always be vulnerabilities when there are major changes in monetary policy and credit conditions, as there are now. “But what we have seen so far are specific events caused by specific causes. Overall, the banking sector is well capitalized, well regulated, well managed, and safe.”
She notes, however, that it would be unwise to assume that everything is over and we are back to “normal” because we are still in an inflationary scenario where central banks continue to raise interest rates, perhaps just not as fast and as high as previously expected. “So, we can’t rule out that there are other vulnerabilities in the financial system.”
A Cuban who lives in Zurich, where Julius Baer is headquartered, Ms. Sanchez is one of only two women on the group’s executive board, in addition to her role as head of the Americas. Among the quality assets that the bank monitors and invests in are stocks of technology and biotechnology companies, others in the healthcare sector, consumer and luxury goods stocks, companies related to urban mobility and vehicle electrification, and in the innovation sector, such as artificial intelligence companies. “We also diversify with government bonds, which offer good yields due to high interest rates.
After the integration of the GPS and Reliance management companies into the Julius Baer Family Office structure, which was delayed due to the pandemic, the Swiss bank intends to continue growing organically through hiring and infrastructure. “We have a long-term commitment to Brazil. The country is one of the bank’s 10 priority markets,” said Ms. Sanchez, who was in Brazil last week to participate in events related to issues she cares about ESG strategies and financial literacy for women. She also attended the Formula E race — for electric cars — held on Saturday in São Paulo and sponsored by the Swiss bank.
One of the projects Ms. Sanchez is most involved in is financial education for women. “Women today are more entrepreneurial, occupy higher positions in the administration, and are increasingly interested in managing their own funds and wealth,” she explains. According to her, women’s share of the world’s wealth is increasing, and with it their influence and desire to manage their wealth, which was once a male activity. “So, they need advice on how to manage those funds, and that’s something we can provide,” says Ms. Sanchez.
“ESG is an important concern for the bank,” she said, attending the meeting of the Sustainability Circle, a global network organized by Julius Baer that brings together investors, philanthropists, entrepreneurs, and business leaders to discuss strategies to move the world toward a healthier future with less inequality. “We must look after the interests of our clients, but we must not forget to look after the society in which we are.
To this end, Julius Baer has a foundation that invests in projects aimed at reducing inequality and creating opportunities for underprivileged young people. “In Brazil, the bank invests in the Fa.Vela project in Belo Horizonte, which offers professional training in technology tools, digital economy, and business strategies to local young people, and in the Fica project in São Paulo, which focuses on retrofitting abandoned buildings to transform them into low-cost apartments and rent them to low-income tenants,” she said. The volume invested so far in Fa.Vela is $140,000 and in Fica, $151,000.
At the end of 2022, Julius Baer had $460 billion in assets under management. Its CET1 capital ratio was 14%, almost six percentage points above the regulatory requirement. The total capital ratio was 21.7%, more than nine percentage points above the minimum requirement. Both ratios measure the ratio of the bank’s capital to its risk-weighted assets. In addition, the institution has a solid liquidity position, with a coverage ratio of 233.3%, well above the 100% requirement.
“We are asset managers, we manage the wealth of families. We are not exposed to some of the risks that our competitors are. We don’t do investment banking, we don’t do corporate finance. Our focus is on individuals and their families and meeting the needs of our clients throughout their life cycle,” she explains. “We are solid and have a conservative management model with diversified deposits,” she says.
*Por Eduardo Magossi — São Paulo
Source: Valor International