Equal treatment for foreign companies in Brazil attracts interest from Asian businesspeople
01/15/2024
Thiago Vallandro Flores — Foto: Divulgação
Over the past 15 years, Brazilian law firms, particularly those specializing in corporate and tax matters, have witnessed a growing interest from Chinese companies seeking to engage in business within the country. Legal experts in Brazil have cultivated specialized knowledge in this domain. Thiago Vallandro Flores, a partner in the finance department at Dias Carneiro Advogados, with nearly two decades of experience working on contracts involving Chinese companies, notes that the Chinese anticipate a higher level of expertise when engaging with Brazilian lawyers.
Mr. Flores highlights cultural differences, emphasizing that the Chinese place value on closer interactions with senior professionals, and he notes variations in decision-making processes that can sometimes lead to differing expectations about deadlines.
Nick Beckett, a partner at CMS in China, observes the evolution of China’s legal system since the founding of the People’s Republic of China in 1949, stating that it has become more sophisticated and “comparable to Western systems.” Aldo de Andrade, senior lawyer at BYD do Brasil, acknowledges “undeniable differences in legal systems,” emphasizing the challenge of establishing clear communication between the legal and doctrinal systems of two economic powers.
Due to these distinct legal cultures, Mr. Andrade emphasizes the necessity of developing strategies with partner firms to elucidate Brazilian legislation guidelines, particularly concerning labor laws and the recent tax reform. Paulo M. Focaccia, a partner at FAS Advogados collaborating with CMS, underscores opportunities for bilateral business in sectors like power generation, commodities, mobility, and technology, noting the transcendence of legal differences. “We observe with some caution the day-to-day activities of newly established Chinese companies—or those planning to establish their subsidiaries here—with frequent doubts about the complex Brazilian tax system,” said Mr. Focaccia.
Lucas Tavares, a partner in the mergers and acquisitions practice at Demarest Advogados, with over two decades of experience with Chinese clients, highlights labor and tax concerns in Brazil as focal points for foreign investors. He appreciates Brazil’s lack of geographical distinction for investors from a legal perspective, a feature welcomed by the Chinese. Mr. Tavares emphasizes the predictability of Brazil’s regulatory environment as a positive factor but warns against imprudent document signings, urging Chinese companies to seek proper advice.
For Brazilian companies venturing into China, Leonardo Briganti, partner at Briganti Advogados, underscores the importance of China’s Foreign Investment Law, in effect since January 1, 2020. Mr. Briganti provides a didactic description of activities permitted, restrictive, and prohibited for foreign companies in China under this law. He highlights the issuance of Negative Lists by the National Development and Reform Commission and the Ministry of Commerce of China (MOFCOM), clarifying restrictions and rules for operating in Chinese territory.
National Supply Company estimates shipments of 98.45 million tonnes of grain
01/15/2024
The amount of biodiesel in diesel grew to 14% from 12% — Foto: Divulgação
The drop in Brazil’s soybean production estimate, announced on Wednesday by the National Supply Company (Conab), due to climatic problems in the main producing states, is also expected to lead to lower exports of the oilseed this year.
In addition, the National Energy Policy Council (CNPE) approved the increase in the amount of biodiesel in diesel, to 14% from 12%, which indicates that there will be an increase in domestic demand for soybean oil.
As a result, Conab reduced its export estimate by 3.13 million tonnes, to 98.45 million tonnes of grains.
The number of soybeans crushed was adjusted by 119,000 tonnes to 53.4 million tonnes, due to the increase in the proportion of biodiesel added to diesel.
Conab therefore expects ending stocks in 2023/24 to be 3.58 million tonnes, compared to 3.4 million tonnes at the end of 2022/23.
Stocks of soy meal are expected to total 3.27 million tonnes, compared to 1.6 million tonnes in the previous season, and oil stocks are expected to fall to 300,000 tonnes from 310,000 tonnes.
Nearly half of major online stores offer discounts to customers who use the instant-payment system
01/15/2024
Gastão Mattos — Foto: Carol Carquejeiro/Valor
From different discounts to free shipping, the benefits offered in e-commerce for customers who choose to pay with Pix are progressively increasing. In early January, nearly half (47%) of the country’s large online stores offered some kind of advantage for customers using Brazil’s instant-payment system, according to a study carried out by Gmattos Pagamentos consultancy reviewed by Valor. The survey also reveals a decrease in the number of interest-free installments offered on credit cards. Experts see price reductions for cash payments as a healthy market trend.
The trend to promote Pix payment is a result of lower costs for retailers and advantages to their cash flow, as the money is made available immediately. There is also a high level of conversion in the shopping cart. Sales that actually occur after the customer adds the items to shopping cart exceed 90% on Pix, the consultancy notes. With a credit card, the conversion rate is around 70%, compared to 50% for boletos (bank-issued invoices) and 30% for debit card transactions.
The survey included 59 major online stores in the Brazilian market in the January edition and has been carried out bimonthly since 2021. Since September last year, Pix has been offered as a payment method in all stores surveyed, just like credit cards, that was the leading payment method in e-commerce until then.
Until early 2023, research showed some fluctuation in retailers’ incentive to use Pix. Since May, however, the percentage of businesses offering advantages for customers using Pix has been steadily growing. At that time, the offering of benefits involved 30% of stores surveyed. The percentage observed in January even exceeded that seen on Black Friday (46%), although during the promotional date discounts were greater, ranging from 10% to 15%. This month, discounts ranged from 4% to 12% and there was also free shipping offers in some cases.
“I believe the incentive to use Pix will continue to grow. Our view is that retailers were very engaged,” Gastão Mattos, co-founder and CEO of Gmattos, said. “Given the advantages it offers, offering different prices makes sense,” he adds.
Although Pix first became popular in transfers between individuals, transactions from people to businesses have been growing each month. In December, these transactions accounted for 36% of total operations. A year earlier, this share was 24%, according to Central Bank data.
Maurício Salvador, president of the Brazilian E-Commerce Association (ABcomm), points out the discount offer for customers using the instant payment system is not restricted to large online stores; it’s widespread across the Brazilian e-commerce. “On the one hand, Pix became popular among customers. On the other hand, it has a direct positive impact on the retailers’ cash flow. Furthermore, shopping cart abandonment is much lower and there is no risk of chargeback,” he said, on a reference to refunds on credit card purchases after dispute.
When accepting payment via credit card, the retailer has to bear the MDR costs (a discount rate charged by the acquirer firm), in addition to the cost of factoring of receivables in order to receive the money immediately. The greater the number of installments, the higher the costs are. Bank-issued invoices remain resilient in e-commerce—with 62.7% of surveyed stores offering this payment option in January—but has an average confirmation of receipt period of two business days, which affects sales flow.
The survey also revealed that, while the advantages for using Pix grow, the number of interest-free installments offered on credit card payments falls. In January, the average term was 5.4 times, compared to 5.7 times in the previous survey, carried out during Black Friday. A year earlier, the average was around 7.4 interest-free installments.
The discount offered in payment via credit card in one single installment is still low and was observed in only 5% of stores in January. However, Mr. Mattos notes this could be a trend in promotional strategies, given the retailers’ movement to reduce the number of interest-free installments. “Just as the discounts on Pix grew, discounts on a single installment on credit card should also start to increase, even if they’re smaller. It’s a healthy trend,” Mr. Mattos said.
Interest-free installments were in the spotlight last year amid discussions about measures to help reduce revolving credit interest rates, and the topic is expected to remain on the agenda. Carla Beni, an economist and MBA professor at FGV, says the option has become a habit in the Brazilian market, but she notes it is important that consumers understand there is no such thing as interest-free installments. As she explains, if there is no explicit fee, that is because the customer is not getting a discount on cash payments. “There is the normalization of interest rates embedded in the installment.”
In the professor’s opinion, part of consumers is willing to pay in cash if there is a discount, and the practice can help bring up discussions involving financial education. “Offering a discount on cash payments helps the retailer build customer loyalty and become less dependent on factoring of receivables,” she adds.
The evolution of payment transaction initiators (ITPs), a feature that allows the user to operate their account outside the financial institution’s environment, as well as the launch of Automatic Pix, scheduled for 2024, should help increase momentum for instant payment in digital transactions.
The possibility to pay in installments and a more fluid experience are currently the biggest factors for credit card differentiation in the online world, in addition to the chargeback. Pix has a special refund mechanism, aimed at facilitating a chargeback in the event of fraud or operational failure, but the Central Bank points out that cases of commercial disagreement are not part of the rules and must be dealt with directly by the parties.
Although installments via Pix have not yet been officially implemented, several businesses have been offering purchases with alternative installments to credit card, in many cases using instant payment options. According to the Gmattos study, 39% of the stores surveyed offered payment under the “buy now, pay later” option. That was the highest level of acceptance since records started, and the numbers are expected to remain up.
Debit-card payments, the modality that has lost the most space in e-commerce since the launch of Pix, in November 2020, was offered by only 20% of stores in November. Digital wallet payments were accepted in 42.4% of businesses. The highlight was NuPay, digital bank Nubank’s online payment solution, which has established as the second digital wallet in market presence, second only to Paypal.
Agreement ends legal disputes, sets out the amounts of the main past imbalances, but outstanding values remain open; next another round of negotiations will be required
01/12/2024
With the signing of the agreement, Arteris puts an end to multi-billion disputes with the São Paulo government — Foto: Julio Bittencourt
With a delay of more than a year, Arteris and the government of São Paulo reached an agreement to resolve the road concessionaire’s long-standing liabilities in the state. The amendment extends until December 2039 the Intervias contract, which would expire in 2028. The agreement may also include new obligations — another round of negotiations will be required to decide on the final amount owed by the concessionaire to the state, which could result in discounts for users of the automatic payment system, among other compensating measures.
The preliminary agreement had been signed in September 2022 with the previous administration. The parties had expected to reach a final agreement within 120 days, which did not happen. Negotiations dragged on even longer, given the change of administration in 2023. The final agreement was signed on Wednesday (10) and announced on Thursday.
It ends legal disputes, sets out the amounts of the main past imbalances, but outstanding values remain open — which should be decided in a next stage of negotiations.
For the agreement, the parties carried out a set-off of their accounts, considering credits in favor of the government and the concessionaires. In the end, the negotiation led to the extension of the Intervias contract, as a way of offsetting imbalances in favor of the company.
However, there is still an outstanding credit in favor of the state in the amount of R$426.5 million, which has to be offset. The final amount remains to be defined since other imbalances are pending resolutions, which could change the balance.
With the signing of the agreement, Arteris puts an end to multi-billion disputes with the São Paulo government, which had been going on for decades. The disputes also involved three other concessionaires by Arteris, in addition to Intervias: ViaNorte, Autovias, and Centrovias. Those, however, have been resolved, between 2018 and 2020.
The main dispute was created in 2006, when the Claudio Lembo’s administration signed contractual amendments extending the terms of multiple highway concessions. However, years later, the São Paulo government reviewed the agreements and decided to cancel the extensions, which triggered legal disputes with companies in the sector. In addition to this emblematic case, other disputes remained open.
In addition to Arteris, Ecorodovias and CCR had already reached agreements with the São Paulo government, between 2021 and 2022, in which they also ended regulatory disputes and obtained the extension of concessions, in exchange for including construction work.
For Arteris, that is a crucial step towards resolving its regulatory liabilities. The company still has another important standoff pending: Autopista Fluminense. The federal concession, which has been accumulating problems, has even agreed upon a re-tender, but is currently undergoing renegotiations with the federal government and the Federal Court of Accounts (TCU) to be able to continue operations under the contract, with new terms.
According to industry analysts, solving regulatory problems may pave the way for a definition of the future of Arteris, which has already been put up for sale by its owners, Brookfield and Abertis, unsuccessfully. In the market, the general opinion is that liabilities are bringing down the company’s value. Amid the disputes, the company was left out of the road auctions held in recent years. The last concession won by the group was Rodovia dos Calçados, in 2017.
Brazil’s trade deficit with the US shrinks 92% in 2023 amid steep decline in fuel imports
01/12/2024
Abrão Neto — Foto: Divulgação
Trade between Brazil and the United States in 2023 saw a decline in export revenue and overall trade flow compared to 2022. However, exports of industrial goods reached a historic high of $29.9 billion in bilateral trade. The proportion of manufacturing goods in Brazil’s trade with the US increased from 78.8% in 2022 to 81% in 2023.
Last year, exports of industrial goods to the US grew by 1.2%, while Brazil’s total exports of these products declined by 2.3%. The United States remains the primary destination for Brazilian manufacturing goods exports, accounting for a 16.9% share. Such data was compiled by the American Chamber of Commerce in Brazil (Amcham Brasil) based on information from Brazil’s Department of Foreign Trade (Secex).
Abrão Neto, AmCham Brazil’s CEO, highlighted the diversity and high technological intensity of industrial goods exported to the US, including semi-finished iron or steel products, crude oil, aircraft, civil engineering equipment, and pig iron. These items were among the top five Brazilian exports to the US, according to Amcham’s survey.
The survey also revealed that the value of five of the top ten Brazilian products exported to the US increased in 2023. The US is the main market for seven of these top products. “Brazil’s trade portfolio with the US is highly diversified, solidifying its position as the leading market for Brazilian manufacturing goods exports,” stated Mr. Neto. He noted that semi-finished iron and steel products were the top exports to the US, driven by the robust performance of the US construction sector, which also spurred demand for engineering equipment like excavators and loaders.
Fabrizio Panzini, director of government relations at Amcham, mentioned that the top ten products shipped to the US represent approximately 54% of Brazil’s total exports to the country. This diversity contrasts with other destinations, such as China, where the top ten items sold constitute 93.3% of Brazilian exports.
Brazil’s trade balance with the US closed with a deficit of $1.1 billion in 2023, significantly lower than the $13.9 billion deficit in 2022, marking a 92% reduction. This decrease was due to a greater decline in imports than in exports. Brazilian export revenues to the US totaled $36.9 billion, a 1.5% decrease from 2022. Mr. Neto attributed this decline mainly to a 9% reduction in average prices despite a record 8.2% increase in exported volume.
Looking ahead to 2024, Mr. Neto anticipates international prices to stabilize and moderate growth in bilateral trade, both in exports and imports. This outlook considers expected economic growth in Brazil and the US, along with US industrial policies likely to stimulate industrial and construction activities. Additionally, the 200th anniversary of diplomatic relations between Brazil and the US in 2024, along with Brazil’s G20 presidency, may further enhance bilateral relations.
Mr. Neto emphasized the significance of Brazil-US trade, especially in industrial goods, in the context of Brazil’s industrial renewal and efforts to increase manufactured goods in exports and attract more productive investment. He noted the ongoing rivalry between the US and China, which, although recently stabilized, could influence Brazil-US relations. “The US’s search for diversified and reliable suppliers could present opportunities for Brazil,” he said.
Brazilian imports from the US dropped significantly in 2023, with a 26% decrease from the previous year, totaling $38 billion. Consequently, the total trade flow, combining exports and imports, fell by 15.7%. Mr. Neto pointed out that the reduction in imports was concentrated, with $12.3 billion of the $13.3 billion decrease coming from crude oil, fuels, and natural gas. He recalled that Brazilian natural gas imports had risen in 2021 and 2022 due to the water crisis and the activation of thermoelectric power generation. The decline in oil and fuel imports reflects price reductions and ongoing changes in international trade routes for these products due to the Russia-Ukraine war.
Ministry of Agriculture is considering line with the Brazilian Development Bank to help industry renegotiate debts of producers affected by crop failure
01/12/2024
Carlos Augustin — Foto: Guilherme Martimon/MAPA AGRO
The forecast of a drop in grain production in the 2023/24 season and the fall in profitability in the countryside, with the maintenance of high costs and lower prices for agricultural commodities, led the Ministry of Agriculture to bring together entities from the sector in Brasilia on Thursday to discuss possible measures to support farmers and input industries in a projected scenario of indebtedness and lower liquidity in the coming months.
With budget restrictions, the initial idea is to create alternatives to solve possible private debts at no cost to the federal government. The proposal is to structure a line of credit in dollars with the Brazilian Development Bank (BNDES) for costs and working capital, with a three-year payment period.
The measure would help trading companies and input resellers to raise funds and renegotiate producers’ debts in regions such as Mato Grosso state and Matopiba (the confluence of the states of Maranhão, Tocantins, Piauí and Bahia), where the Crop Plan’s controlled credit represents a small portion of the productive sector’s financing.
A similar credit line was made available in 2023 so that cooperatives in Rio Grande do Sul could give their farmer members a boost, but it hasn’t taken off. Only R$20 million have been accessed so far.
At the meeting, representatives of organizations such as the Brazilian Association of Soybean Growers (Aprosoja), the Agricultural Federation of Rio Grande do Sul (Farsul) and the Brazilian Rural Society (SRB) told Neri Geller, the Secretary for Agricultural Policy, and Carlos Augustin, a special advisor to the Ministry of Agriculture, that the scenario was worse than that projected by the National Supply Company (Conab), which predicts a harvest of 155.3 million tonnes of soybeans this year. The reports indicated a drop of up to 20 million tonnes compared to the government’s projection due to delays in planting, replanting, drought, and excessive heat.
The sector has told the ministry that it may need to extend its debts, at a cost to the National Treasury. The measure is on the radar, especially for investment installments due in 2024. The ministry’s representatives, however, stressed the difficulty of obtaining fundas for this type of action.
The consultancy Pátria Agronegócios presented a survey, made at the request of Aprosoja, with a production projection of 143.18 million tonnes, a reduction of 7.4% in relation to the volume of the 2022/23 season.
The area planted with soybeans in the country, according to Pátria, stood at 44.4 million hectares. Average national productivity is expected to fall by 8.1%, to 3,200 tonnes per hectare. In Mato Grosso, the country’s main producer, production is expected to fall by 17% compared to the 2022/23 harvest, to 37.8 million tonnes. In Paraná, the loss could be 11.6%, to 19.8 million tonnes of soybeans.
In relation to Pátria’s initial estimate, which projected a production potential of 164.67 million tonnes in the 2023/24 harvest, 21.5 million tonnes of soybeans will be lost. “It’s the second biggest crop failure in history on this basis of comparison,” said Matheus Pereira, managing partner of the company.
Cleiton Gauer, superintendent of the Mato Grosso Institute of Agricultural Economy (IMEA), showed that the maintenance of high production costs in Mato Grosso and the reduction in soybean prices jeopardize the profitability of the state’s producers, even if the crop failure is not confirmed.
According to IMEA calculations, farmers need to harvest 65 bags per hectare, well above the historical average, just to cover the total costs of the crops, estimated at R$7,200 per hectare. In order to cover the general costs of the harvest, without taking into account investment and leasing costs, for example, productivity above 50 bags is needed.
For corn, the scenario is even worse, with total costs estimated at 161 bags per hectare. Mr. Gauer said that the figures could change over the course of the harvest. “The problem lies in the high costs and the projection of soybean prices below R$100 for future sales. The drought will only worsen a problem that already existed,” said Carlos Ernesto Augustin, special advisor to the Ministry of Agriculture.
“The figures weren’t adding up before. There’s turbulence ahead,” said Sérgio Bortolozzo, resident of the Brazilian Rural Society (SRB).
Lack of resources in 2023 among challenges to solve illegal mining problem
01/11/2024
Illegal mining in Yanomani indigenous territory — Foto: MMA/Divulgação
The rebound in the humanitarian crisis in the Yanomami indigenous territory has as its backdrop an internal crisis in the government. Since the intervention in the first days of 2023, when scenes of malnourished children took the world, the efforts to rescue the sick and expel miners have lost momentum throughout the year, giving rise to an exchange of accusations among ministries about each other’s responsibilities on the matter.
In a ministerial meeting held on Tuesday (9), President Luiz Inácio Lula da Silva said it is not possible to “lose the war” to illegal mining and promised to use the entire state apparatus to expel invaders. Accused by colleagues of failing to centralize the work coordination, Chief of Staff Office Rui Costa announced the creation of a “government office” in the area.
Some ministers, however, argue that the task remains too complex to carry out, also from a political point of view. It is clear that virtually all the main political leaders in the region are related to mining and that broader negotiations will be necessary regarding the scope of the activity, with great weight on the local economy.
Another obstacle is the demand for resources. Providing assistance to the indigenous territory required the intensive use of aircraft throughout last year, which was not always sufficient. Some planes were taken out of operation for maintenance, which compromised the supply of food, medicine, staff, and equipment throughout the year.
Interruptions in service were promptly reported by indigenous leaders and the most of the complaints involved the Ministry of Defense and the Chief of Staff. Trying to overcome the crisis, the government announced investments of R$1.2 billion in public policies. Among the top priorities is getting federal agencies to intensify actions to protect the Yanomami people and fight illegal mining.
Surveillance and action also face setbacks. Brazil’s environmental protection agency, Ibama, is struggling to send the planned number of servers to the indigenous territory. Inspectors have cited security concerns when refusing to go to the Yanomami land.
In charge of the security, the Federal Police has also cited the high complexity of work. Federal Police Director General Andrei Rodrigues told Reuters news agency on Wednesday that the corporation’s staff is not able to guarantee the expulsion of illegal miners.
Located between the Brazilian states of Roraima and Amazonas, the Yanomami territory encompasses eight municipalities with a population of approximately 30,000 indigenous people. According to NGO Instituto Socioambiental (ISA), the occupancy of the land between the headwaters of the Orinoco and Parimpa rivers, near the right bank of the Rio Branco, by the Yanomami people started a millennium ago.
The Federal Prosecution Service (MPF) in Roraima says there have been records of child malnutrition in the territory since 2009. However, according to the MPF, the situation aggravated from 2017 onwards, reaching its peak in 2022, the last year of the Bolsonaro administration. Between 2021 and 2022, some 300 Yanomami children with malnutrition had to be transferred to medical care in the city of Boa Vista.
“The spread of malaria had been growing gradually since the last decade but was considered to be under control until it aggravated five years ago, following the increase of devastation. The number of malaria cases doubled between 2018 and 2021, to more than 20,000 per year from around 10,000, an unprecedented level,” according to ISA.
At the beginning of 2023, with the new administration, the Public Health Emergency Operations Center (COE-6 Yanomami) was created, under the coordination of the Ministry of Health, to carry out emergency actions and fight the crisis. Last year, according to the government, more than 13,000 indigenous people received care after they were found in a situation of severe abandonment.
In addition, the territory’s airspace was controlled in an effort to combat clandestine flights and, thus, block the main mining supply route. The Federal Police launched 13 operations throughout 2023, resulting in 114 search and seizure warrants, 175 arrests in the act and R$589 million in seized assets.
In an interview with news website G1, Alisson Marugal, public prosecutor in Roraima, said he sees some progress in assistance to indigenous people over 2023, but the big picture is of “inertia”. He also highlighted that the lack of action could lead the Lula administration to be investigated for genocide, as a result of the same investigations opened on the Bolsonaro administration.
Expansion plan for the coming years includes two bidding processes in 2024, with investments of R$24.7bn
01/11/2024
Thiago Prado — Foto: Wenderson Araujo/Valor
Investments in new transmission lines could reach R$56.2 billion in the coming years. The estimate is part of the Transmission Expansion Program (PET) and the Long-Term Expansion Plan (PELP) for the second half of 2023, according to studies by the Energy Research Office (EPE), linked to the Ministry of Mines and Energy (MME). Of this total, R$24.7 billion are investments in assets that will be offered in the two transmission line auctions scheduled for this year, in March and September.
The new projects’ goals are to increase the flow margin of renewable generation to consumption centers, improve regional service in states, improve energy supply reliability in some regions, and provide solutions for overload.
Thiago Prado, president of EPE, told Valor that, together with the Brazilian Electricity Regulatory Agency (Aneel) and the MME, the company has been working to secure funding for projects with BNDES, in addition to assessing the industrial sector capacity to meet the demand expected to arise with the new projects.
Last year alone, R$37.5 billion in projects were contracted with the main purpose of expanding the transmission capacity of wind and solar energy generated in the Northeast region to supply consumption centers in the Southeast and South. The 2024 bidding processes will follow a similar logic. In the future, the sector will focus on the North of Brazil.
“Investments are well distributed among the Southeast/Central-West, Northeast, and South, with some R$15 billion to R$18 billion for the regions, which shows the distribution of construction work is leveled in terms of demand and supply. For the North region, we have submitted a proposal to the MME involving a work plan for transmission studies and the idea is to advance the Manaus and Boa Vista interconnections to increase reliability,” he said.
Mr. Prado added that the implementation of a new circuit in the North region will lead to a reduction in local thermal generation, which could substantially reduce tariffs. As a result, in the next planning cycle, the North region should receive more investments, according to him. Due to the environmental sensitivity of the areas, the studies are being discussed in collaboration with the federal environmental agency Ibama.
The study includes a new high voltage direct current (HVDC) line that will connect the Northeast to the South. The report should be completed in October, but the auction is expected to be held in 2025 or 2026, with operations starting in 72 months, according to him.
“Another question is the integration of hydrogen plants. Those are very large units using electrolysis and consuming 2 gigawatts (GW). We have a database of hydrogen projects; in the Northeast region the records total 30 GW,” he said.
Despite the outstanding figures, Mr. Prado is wary, noting that projects will not get off the drawing board without long-term contracts such as PPAs. Mr. Prado expects busy bidding processes with strong discounts in the future.
That is because transmission concessions are considered to be the safest in the electricity sector: it is a fully regulated market, in which the winner signs a 30-year contract adjusted to the benchmark inflation index and with no default risk. Those who manage to bring forward the necessary construction works also receive extra allowed annual revenues (RAP).
Georges Almeida, managing partner for Energy and Infrastructure at German consultancy Roland Berger, said that the sector has increased its capacity by some 80% over the last decade with auctions revealing consistency, competitiveness, strong discounts, and players with strong investment potential. In his opinion, the announcement of further investments to boost and increase capacity is a positive sign, since that is crucial for the sector in the short term.
On the other hand, he said there is still room to increase redundancy and alternative paths in case of failure at critical points. “Therefore, from a structural point of view, it is arguable to think the construction of more transmission lines will be the cure to bring the chances of major blackouts to zero, to say the least,” he said.
Edvaldo Santana, a former director at Aneel, said the transmission sector will have a leading role in the electricity sector. However, he highlighted the importance of Capacity Reserve Auctions, a mechanism used to ensure enough generation capacity to meet consumer demand in times of strong consumption growth in a short time frame.
“Plants that are capable of adding energy quickly, especially between 2 pm and 6 pm, when the load increases and, after 4 pm, when solar energy generation stops. In other words, not to add energy to the system, but to ensure reliability,” he added.
Plans for reindustrialization and need to expand infrastructure are among motives attracting investors from China
01/10/2024
Plans for reindustrialization, the need to expand infrastructure and low investment risks have put Brazil in the sights of Chinese investors. During the Brazil China Meeting forum, which began on Wednesday in Shenzhen, companies that have already won auctions or are preparing to invest in the country reported their experiences and concluded that there is a need to intensify the exchange of information between the two countries in order to strengthen relations.
In an initiative by Valor and Lide, the meeting included Chinese groups such as CRCC, which won the auction to build the Salvador-Ilha de Itaparica bridge, in Bahia. According to Liao Jun, head of the CRCC International group, the start of construction has been delayed due to the pandemic. “But they will start this year,” he said.
“Our company is interested in participating in projects in Brazil,” said Deng Yong , CRCC CEO, a 75-year-old company that has become one of China’s strongest groups, responsible for major railroad projects and construction in ports and airports in several regions.
According to Mr. Jun, the Chinese “lack information” about Brazil’s mobility and transportation needs.
“We are willing to take part in Growth Acceleration Programs (PAC) projects, offer intelligent mobility projects and make partnerships with Brazilian universities,” said Yin Xinglei, vice president with the CREC group, a subsidiary of China Railway Group, a giant in the infrastructure sector.
Brazil is a coveted destination for Chinese investors, according to Portuguese engineer João Andrade, with engineering consultancy Future, which works to support Chinese investors globally.
For Mr. Andrade, it is important for Brazil to be attentive to these partnerships. “Brazil leads agribusiness on the one hand, but on the other, its logistics don’t keep up with this development,” he said during a panel on infrastructure and transportation.
The country can, however, take advantage of the experience that China has acquired in this area over the last 20 years.
Projection is lower than the 161 million tonnes in December’s report
01/10/2024
The scenario could result in a loss of productivity for the country’s crops, currently estimated at 3,507 kilos per hectare — Foto: Wenderson Araujo/CNA
The United States Department of Agriculture (USDA) attaché in Brasilia estimated Brazilian soybean production at 158 million tonnes for the 2023/24 cycle, lower than the 162 million reported in October. This month’s projection is also lower than the 161 million tonnes estimated by the agency in its December world grain supply and demand report.
According to the USDA, the revision was due to the poor weather outlook resulting from El Niño, especially in the Central-West states.
“Hot, dry weather, low soil moisture levels, as well as below-average precipitation during most of October and November had a negative impact on yield prospects,” the USDA said in a report.
Weather conditions are also adverse in Brazil’s South region. The report cites the situation in Rio Grande do Sul, where rains in the last two months have slowed the pace of sowing, risking the seeds planted more recently missing the ideal climatic window for proper plant growth.
This scenario could result in a loss of productivity for the country’s crops, currently estimated at 3,507 kilos per hectare. The cultivation area was revised to 45.2 million hectares, 200,000 hectares less than in the previous report.
Finally, given the expectation of a smaller supply, Brazilian exports are expected to total 100 million tonnes this cycle, a reduction of 2 million tonnes compared to the USDA office’s projection for the 2022/23 season.
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