Company aims to expand its program area to 600,000 hectares and engage customers in Brazil
04/15/2024
Rossano de Angelis — Foto: Divulgação
Bunge is set to enhance its regenerative agriculture program in Brazil, introduced a year ago. With a $20 million investment, the Missouri-based conglomerate intends to more than double the current area under the program from 250,000 hectares to 600,000 hectares by 2026.
Although this expansion marks a significant leap within a year, it still represents just a fraction of the total agricultural area Bunge sources from in Brazil, with the soybean area mapped by the company in 2022 alone surpassing 19 million hectares.
The funds will be allocated to award premiums to participating farmers and supply products to Bunge. Additionally, the investment will support the provision of technical assistance, precision agriculture tools, and measurement technologies at no cost, aiming to assist producers in adopting methods that contribute to emission reduction in agriculture. This support will be offered through Orígeo, a joint venture of Bunge and UPL.
At this phase, Bunge is also keen on involving its customers from the food and biofuel sectors, proposing that these industries also offer premiums to the producers. According to Rossano de Angelis Junior, Bunge’s vice president of agribusiness for South America, there’s a growing interest within the agro-industry to establish direct connections with farmers, and some contracts with clients have already been finalized.
The program does not require producers to sell their entire harvest to Bunge unless it involves an industry client of Bunge that is financing the farm. If a producer opts to sell a portion of their harvest to Bunge, the company will compensate them with a premium for that portion, based on a fixed rate per hectare, though the specific amount has not been disclosed.
Moreover, Bunge plans to broaden the geographical reach of the program currently concentrated in the Matopiba area (the region encompassing the Brazilian states of Maranhão, Tocantins, Piauí, and Bahia) and in Mato Grosso to include producers in Pará, Goiás, São Paulo, Paraná, and Rio Grande do Sul.
In its first year, the program has attracted 34 farms from 26 producers. The most embraced regenerative technique among them is no-till farming, followed by the use of cover crops during the off-season to protect the soil, with 46% adoption. Although other regenerative practices are less common, such as bio-inputs, crop rotation, and natural fertilization, Bunge is focusing on promoting these five practices at this stage for their scalability and customer engagement potential. The program may also support additional techniques like crop-forest-pasture integration, pasture rotation, and reduced water and energy use on farms.
A specific initiative Bunge is exploring involves using oilseeds as cover crops, potentially opening new revenue streams for producers and catering to the demand from advanced biofuel industries, such as aviation biofuel (sustainable aviation fuel, SAF) and green diesel (hydrotreated vegetable oil, HVO). In collaboration with Embrapa, Orígeo, and UPL’s Advanta, the company is studying the viability of growing canola as a cover crop in the Cerrado—a vast tropical savanna region of Brazil—for these industries. “With adequate solutions and assistance, we believe there’s potential for canola cultivation in the Cerrado,” stated Mr. de Angelis. The program anticipates its first canola harvest this year, with seed selection tailored to each farm’s specific conditions, he added.
In theory, Brazil could be hit in two ways: if there is an increase in oil prices and a higher risk aversion in international markets
04/15/2024
Central Bank’s building in Brasília: Few believe that Brazil’s monetary authority will rush to revise its baseline scenario for interest rate cuts — Foto: Beto Nociti/BCB
The uncertainties in the economic scenario that prompted the Central Bank to reduce its monetary policy signaling to just one meeting have heightened with Iran’s attacks on Israel.
This risk is already included in the array of uncertainties that the monetary authority cited in the release of the Inflation Report, which recommends greater caution in signaling future interest rate cuts.
It was also one of the points highlighted in a recent debate organized by the Central Bank with economists who received the Top 5 award, given annually to those who most accurately predict their projections.
In theory, Brazil could be hit in two ways. First, if there is an escalation in oil prices and, second, with increased risk aversion in international markets.
Brent oil had already been trading above $90 a barrel, and some economic analysts were already circulating their calculations regarding the lag in domestic prices. If oil prices continue to rise, it could lead to further postponements in interest rate cuts by the United States. The increase in risk aversion due to the escalation of the conflict would exacerbate this situation, prompting investors to redirect capital from emerging economies to the U.S.
Few think that, in an environment of such uncertainty, the Brazilian Central Bank will rush and revise its baseline scenario for interest rate cuts. The Selic policy rate remains high, and a 50-basis-point increase in May is well signaled, with a long way to go until the June meeting. Yet, the Central Bank is likely to exercise increased caution.
Operators reported operating loss of R$18bn between 2021 and September 2023
04/15/2024
Paulo Rebello — Foto: Silvia Zamboni/Valor
Medical insurance plans are deteriorating, with a smaller network, higher co-payment charges, a drop in reimbursement, and record increases. The number of complaints to Brazil’s National Supplementary Health Agency (ANS) has more than doubled in the last three years. This scenario is a reflection of the crisis facing operators, who have accumulated an operating loss of R$18 billion between 2021 and 2023 (until September).
The sharp slowdown in the sector began in 2021 with the resumption of medical procedures not carried out during the first year of the pandemic. In 2020, when there was social isolation and patients canceled medical procedures, operators had a record result, with an operating profit of R$18.7 billion, three times more than that recorded in 2019, of R$5.7 billion.
This year, there is an expectation of financial improvement and a lower readjustment. However, medical insurance plans are unlikely to return to the same reality as before the pandemic. In the “new normal,” medical insurance tends to be even more restrictive, especially in the adhesion and SME (small and medium-sized enterprises) modalities, products usually purchased by individuals.
In corporate medical insurance, which accounts for 60% of the market, there is still room for further downgrading and benefits, such as reimbursement covering a large part of the cost of the medical procedure and an extensive list of accredited hospitals, which should be limited to large corporate contracts or for a high-income public.
“This product model, with an extensive network, high reimbursements, and no co-payment, is not going to be long-term for retail [membership and SMEs]. You will have that in large corporate contracts, where there is a dilution of mutuality [of risk] in the same contract,” said Mauricio Lopes, CEO of Qualicorp, during a conference call with investors.
Operators are already designing and marketing leaner medical insurance plans. Last year, SulAmérica, which caters to the middle and upper classes, launched 23 types of medical insurance with reimbursement limited to the product profile. At Hapvida, aimed at the bottom of the pyramid, one of the priorities is to increase verticalization, especially in places like São Paulo and Rio, where there is a smaller network of hospitals.
“These products are being offered because this is the current demand. Medical insurance with all those benefits has become very expensive, and there’s no way of paying for them; there’s no demand. Today, the health sector has a different level of costs,” said Marcos Novais, executive superintendent of ABRAMGE, the sector’s representative body.
Since 2020, the monthly fee for corporate medical insurance has risen by almost 55%—practically double the IPCA, according to data from the consultancy Arquitetos da Saúde. Even so, medical insurance plans have been downgraded to mitigate the increase, which could be even higher, according to representatives of the sector.
This significant increase is explained by some atypical factors that occurred after the pandemic, in addition to medical inflation itself, which is historically much higher than the IPCA (Broad National Consumer Price Index). These include regulatory changes that have allowed new medical coverage to be included at shorter intervals and an unlimited number of therapy sessions. The cost of ASD (Autism Spectrum Therapy) at medical insurance companies is already higher than oncology sessions due to the high volume of treatments.
Another change was the increase in the sale of SME plans with up to five users, which soared by 75% between 2020 and 2023. This product, known as false individual, is marketed at lower prices than membership (both compete for the same audience), with strong commercial incentives for brokers to sell this modality. However, “people bought the plan to cover certain treatments. There was no dilution of risk,” said ABRAMGE’s superintendent. In an attempt to correct this distortion, operators began to apply high increases, with the average last year being 25%.
“This strategy of encouraging the SME plan at a lower cost was a shot in the foot,” said Luiz Feitoza, a partner at Arquitetos da Saúde, one of the first to criticize the operators’ policy. They were interested in switching from adhesion to SME because they gave up the cost of the loading fee from the benefits administrators.
With the depreciation of medical insurance, the number of complaints has skyrocketed. In 2020, the IGR (general complaints index) with the ANS was 21.8. Last year, it jumped to 55.3 and is now at 58.2. Many of the complaints concern the accredited network and the reimbursement amount—both of which are getting smaller and smaller.
In the last year, the most affected benefit has been the claim for reimbursement of medical care paid for by users due to the increase in the number of doctors, hospitals, and laboratories that have been de-accredited. However, there have been reports of fraud. Between 2019 and 2022, the volume of reimbursements increased by 90% to R$11.4 billion. Considering that, in the same period, medical procedures rose by 19.5% and, therefore, reimbursements should increase by a similar proportion, there is a “gap” of around R$7.4 billion that is reported by operators as fraud.
Given this scenario, Paulo Rebello, president of the ANS, believes that the current trend of medical insurance with restricted benefits is here to stay and is unlikely to return to its pre-pandemic format. “The changes have really taken place in very short timeframes and, therefore, it is understandable that users are complaining. Operators, for their part, are resizing the network in order to reduce costs, but this movement needs to be done while respecting the rules,” he said. “The sector’s model needs to be revised, with monitoring of clinical outcomes and improvement in the relationship between operators and hospitals,” added the president of the regulatory agency.
But this reality is still a long way off. “Operators are adopting an aggressive strategy of de-accreditation. They now authorize surgery but not rehabilitation. It goes against the premise that the best thing, both medically and financially, is to maintain an integrated line of care with the same medical team,” said Lígia Bahia, an associate professor at the Federal University of Rio de Janeiro (UFRJ).
Last year, 60% of medical insurance plans had some kind of co-payment or deductible, which represents an increase of 4.58 percentage points when compared to 2019. There has also been a gradual increase in plans with regional coverage (group of cities), which are cheaper and now account for 43.5% of the market. The product with national coverage, on the other hand, has been falling.
“Medical insurance has already undergone a major downgrade, the Individual Microentrepreneur (MEI) market is practically all exploited, and there is no longer any way to make adjustments justifying the pandemic. We already have a significant number of plans with co-participation, lower and lower reimbursement, and an increase in regional products to the detriment of national ones. How far are we going to go?” asked Mr. Feitoza.
Discussions about the sustainability of the sector are recurring due to the high prices charged. There are questions about how long there will be demand for a product that represents the second largest expense in a company, behind payroll, and has become inaccessible to individuals. “The performance of the medical insurance market is closely linked to the General Register of Employed and Unemployed People (CAGED)—if employment increases, it grows. However, the current model is facing major challenges, with tight margins and high adjustments. It’s not sustainable,” said Leandro Bastos, an analyst at Citi.
Antônio Britto, president of ANAHP, the association of the country’s leading hospitals, also complains that the path has been one of disqualification, pressure to extend payment deadlines, and not an effective change in the current healthcare model.
Brazil is expected to start exporting ethanol to the sustainable aviation fuel (SAF) industry this year. The volumes will still be small because, for now, there is only one SAF plant in the world focused on this technological path. However, according to Brazilian mills’ assessment, this market is expected to pick up steam starting in 2027. In addition, industry executives expect that 20% to 30% of all SAF that will be demanded by the end of this decade will be produced from ethanol.
Bioenergy company Raízen, a joint venture between Shell and Brazilian energy company Cosan, estimates that there is potential for the global ethanol industry to supply between 9 billion and 12 billion liters per year to the SAF industry by 2030, which would meet up to 30% of expected production.
Brazil may not be the sole supplier, but it has the potential to become the primary one, given that it represents half of the global ethanol trade. In addition, the SAF industry prioritizes renewable sources, which favors Brazilian sugarcane ethanol over U.S. corn ethanol, said Raphael Nascimento, trading business development director at Raízen.
Ricardo Carvalho, BP Bunge’s commercial director, projects that Brazil will have the capacity to supply 5 billion liters of ethanol per year to the SAF industry within a decade. For comparison, he said that this projected volume of growth in national fuel consumption aligns with the expected increase in the Brazilian fleet.
The aviation industry’s primary strategy to reduce carbon emissions is the substitution of fossil fuel with sustainable fuel, which features identical molecules and does not necessitate engine modifications.
The agreement led by the International Air Transport Association (IATA) provides that airlines will have to reduce emissions from all their international flights starting in 2027. This means that the SAF industry will already have to secure the necessary supply by then. The sector, which accounts for 2% of the planet’s greenhouse gas emissions, bets that SAF will guarantee 65% of its decarbonization.
Ethanol is not the sole eligible raw material for SAF production and will face competition from seven pathways, including the more established vegetable and waste oils (HEFA) pathway in Europe. IATA studies, however, indicate that ethanol tends to be the most competitive option. A document from 2022 released by the organization indicated that, at that time, ethanol had the lowest minimum price required for sale, alongside fats, one of the HEFA options.
The first alcohol-to-jet (ATJ) SAF plant was inaugurated by LanzaJet in January in Georgia, U.S. Mr. Carvalho of BP Bunge mentioned that it may begin importing Brazilian ethanol to fulfill its demand.
The U.S. wants to produce 11 billion liters of SAF by 2030 and is likely to be the main short-term market for Brazilian ethanol for SAF. Another potential market is Japan, which last year set a goal of mixing 10% SAF with fossil kerosene by 2030. In Brazil, there haven’t been any announced investments in SAF plants using the alcohol-to-jet process yet. However, companies like Raízen and ethanol trader Copersucar are already internally discussing the possibility.
According to Mr. Carvalho, the construction of SAF plans using the ATJ process will begin to increase next year, as the concept of the LanzaJet plant is demonstrated. However, significant scale gains are expected to take place only by 2027.
Brazilian mills, such as Raízen and BP Bunge, are seeking certification to supply ethanol to this industry—all, so far, from sugarcane. São Paulo’s Zilor also wants to advance in this market and has already certified 90% of the sugarcane of two of its three units. As a result, it ensured the capacity to serve the SAF sector with up to 300 million liters of ethanol per year.
Fabiano Zillo, CEO of Zilor, suggests that the new demand from SAF could potentially fill any gap that may arise due to the transition of part of the automotive fleet from combustion vehicles to electric vehicles.
In Mr. Carvalho’s assessment, sugarcane ethanol has more potential to meet the demand of SAF than corn, given its proximity to ports, which facilitates exports to promising markets, and due to the greater ease of tracking biomass, which guarantees a greater volume of ethanol eligible to serve the market.
Mr. Nascimento of Raízen argues that there is room to increase the production of sugarcane ethanol to meet the new market. According to him, if the sugarcane area in Brazil (10 million hectares) doubles, the supply of ethanol would triple since the focus of the mills would not be sugar.
He also believes that sugarcane will not be the only source. Corn ethanol “still has a journey to reach the minimum of carbon capture” and meet IATA requirements, he said.
Company plans to invest more than R$350m in its first biomethane plant from sugarcane waste
04/12/2024
Atvos, owned by the Arab fund Mubadala, is set to invest over R$350 million in establishing its inaugural biomethane production unit from sugarcane waste. An investment memorandum has been signed for the construction of the facility in Nova Alvorada do Sul, in the Brazilian state of Mato Grosso do Sul, the location of Usina Santa Luzia (USL).
This new unit is expected to produce 28 million cubic meters of biomethane each harvest. Currently, the plant at Nova Alvorada do Sul has the capacity to process 5.5 million tonnes of sugarcane and generate 498 million liters of ethanol annually.
Bruno Serapião, CEO of Atvos, highlighted that this initiative would signify the company’s foray into the renewable natural gas market, benefiting from large-scale production to satisfy increasing demand.
The aim is to utilize biomethane production to partially fuel the logistics fleet of Atvos and its agricultural affiliates, potentially reducing diesel usage by up to 40%. Any excess biomethane is intended for distribution to nearby municipalities.
In Brazil, most operational biomethane plants currently utilize their output for internal purposes rather than commercial sales. Out of 20 operational plants, only six are selling their produced gas, according to the Brazilian Biogas Association (ABIOGÁS). The association forecasts that in five years, there will be 90 commercially operating plants, with 42% anticipated to be within the sugar-and-ethanol sector.
The proposed biomethane facility by Atvos is undergoing engineering analysis for final approval, with construction expected to start within the year.
Term deposits jumped again in 2023 as customers migrated from funds to lower-risk products
12/04/2024
Luiz Masagão — Foto: Divulgação
The start of the fall in the Selic rate in August last year was not enough to increase investors’ appetite for risk. While investment funds withdrew R$127.9 billion in 2023, bank funding from CDBs rose again, consolidating its position as the largest source of funding for financial institutions. Meanwhile, savings continued to fall and were overtaken by bond issues, such as real estate credit bills (LCI), agribusiness credit bills (LCA), and financial bills (LF).
A Valor survey based on statements from Itaú, Caixa, Banco do Brasil, Santander, and Bradesco shows that the volume of term deposits—CDBs—rose 15.5% last year to R$2.2 trillion. Meanwhile, bills jumped 30% to R$960.6 billion, and savings fell 2.1% to R$929.1 billion. Bond issues made by the big banks abroad have been practically stable in recent years and have a much smaller share, at R$117.1 billion. Each instrument has its advantages and disadvantages. Savings accounts are cheaper than CDBs, but they must be directed towards the real estate sector. Bills, on the other hand, are more expensive than the former but are not subject to compulsory payments.
Ever since the yield on savings accounts was changed in 2012, CDBs have been gaining strength, a movement that has been reinforced since 2018 with the rise of investment platforms, which began distributing third-party securities, including those from medium-sized banks, which offer more attractive yields. During the pandemic, with the payment of emergency aid and the restriction on the movement of people, who were left without so many places to spend, there was initially a jump in bank deposits. Then, with the Selic rate at historic lows, the instrument remained competitive but had to compete for investors’ attention with multimarket funds and other asset classes with a greater chance of returns.
In 2022 and 2023, with the reversal of the scenario and rising interest rates, CDBs began to shine again. This pendulum is starting to swing again now, given that there are already signs of an influx into investment funds. Even so, deposit-taking remains strong and is fueling competition for customers’ pockets.
In addition to the big banks, medium-sized institutions—such as Inter, PagBank, ABC, and Daycoval—benefited from the demand and took the opportunity to diversify their funding. It’s common to see advertisements offering promotional rates or highlighting the yield of the securities. The coverage of the Credit Guarantee Fund (FGC)—a private entity in Brazil that protects depositors and investors in the event of a bank failure, offering R$250,000 coverage per individual—was a factor that gave investors the confidence to put money into financial institutions with which they have little familiarity.
The success of investment platforms and CDBs from medium-sized banks hasn’t affected the availability of funding for the big ones, but there are indications that it may have contributed to an increase in prices. A few years ago, it was common to see the biggest institutions paying returns well below the CDI rate. Today, the discount in relation to the spread is generally small, while medium-sized competitors often offer rates of 115% and even 130% of the CDI.
“In recent years, there has been this structural migration from savings accounts to other instruments, and now, even with the fall in the Selic rate, I don’t think this will be completely reversed,” said Luiz Masagão, Santander’s treasury director. “Some investors went into funds and then back into CDBs; they didn’t like having a more volatile portfolio. It’s a question of the investor’s profile.”
Santander has a slightly different funding mix from its private rivals, more concentrated on wholesale, but in the last two years, it has been trying to increase its share of retail. To this end, the bank strengthened its investment advisory services and reformulated the high-income segment. According to Mr. Masagão, this led to a very positive result in customer fundraising last year.
Eric Altafim, director of corporate products and sales at Itaú, says that with interest rates still high and problems in the corporate credit market in 2023, there has been a migration of funds to CDBs. “This has fattened the banks’ cash flow, providing a good supply of liquidity. But you have to remember that excess liquidity is different from excess capital. And that was in 2023. In recent months, we’ve started to see signs of a certain reversal of this trend of migration to CDBs, and there’s competition for these funds again.”
The executive also recalls that although liquidity increased during the pandemic, banks’ portfolios grew rapidly during those years, with the expansion only moderating in 2023.
At Bradesco, Roberto Paris, executive director in charge of the treasury, says that the development of the financial bills market has been so strong in recent years that today banks don’t need to issue international bonds as much. At the same time, after the 2008 global financial crisis, bank liquidity requirements became much more conservative. “Before 2008, the only protective barrier in times of volatility was compulsory deposits. Now, there are a series of rules and liquidity requirements. So I think we’re in a position to have lower compulsory deposits.”
An increase in deposits doesn’t necessarily mean that banks will have more money to lend and invest. If they take in more funds on one side and don’t see much chance of investing this money in the business, they adjust their funding mix, reducing the issuance of more expensive instruments, for example. In addition, in the case of deposits, the financial institution is obliged to leave compulsory deposits with the Central Bank.
A recent change that could affect the composition of bank funding is the restriction on incentivized securities, namely those that are exempt from income tax for individuals. These securities include Real Estate Credit Bills (LCI), Agribusiness Credit Bills (LCA), Real Estate Receivables Certificates (CRI), Agribusiness Receivables Certificates (CRA), and Real Estate Investment Funds (LIG). With new limitations on what can be used as collateral announced at the beginning of February, issuance of these securities has declined. Additionally, the increase in the minimum holding period to nine months for LCA and 12 months for LCI is expected to alter the buyer profile.
Alongside these changes are the challenges facing savings accounts. Savings accounts saw their third consecutive year of withdrawals in 2023. This scenario affects real estate financing, as savings accounts are the primary funding instrument for this industry. Last year, for the first time, savings accounts lost to the capital market as the leading source of funds for housing loans, with shares of 36% and 38% of the total, respectively.
In February, the CEO of Caixa, Carlos Vieira, said that the 2024 budget had been resolved but warned that if nothing was done about savings, there would be problems in 2025. The bank is the country’s leading mortgage lender. According to the executive, there are some alternatives to be discussed, such as releasing part of the compulsory deposit.
When asked, Caixa said in a statement that since 2021, it has repositioned its funding strategy with a focus on bills, especially LCI, in order to compensate for savings outflows from the point of view of funding for housing. Asked if it is discussing a possible reduction in the compulsory deposit with the Central Bank, the institution replied only that “it has been debating alternatives for expanding funding for real estate credit with all the actors involved.”
Banco do Brasil, meanwhile, said in a statement that its commercial funding has been growing in recent periods, reaching more than R$1 trillion in December. “Banco do Brasil, like the financial system, has been experiencing a gradual reduction in the volume raised through savings, which is natural in the context of the evolution of the funding products available to clients. The bank is constantly assessing the most suitable funding alternatives.”
With a provisional presidential decree, federal government extends deadline for accessing discounts on use of power grid
04/11/2024
Alexandre Silveira — Foto: Valter Campanato/Agência Brasil
President Lula signed a provisional presidential decree on Tuesday that drew criticism from the power industry. The decree extends the deadline for wind and solar power projects to access subsidies on grid usage by an additional 36 months. It also aims to reduce tariffs using funds from the privatization of Eletrobras. This initiative has put the sector on alert due to concerns about potential increases in tariffs, which are seen as a significant factor contributing to high electricity costs in the country.
At the ceremony at the Planalto Palace, Alexandre Silveira, Brazil’s minister of Mines and Energy, said that the provisional presidential decree will enable over 30 gigawatts of clean and renewable energy in Brazil, with the construction of new wind and solar power generation projects. Overall, the government estimates that the resources will reach R$165 billion in investments and create over 400,000 jobs.
With this measure, the government reopens the deadline for owners of wind and solar plants to access discounts on the use of the power grid. The original deadline had already ended during the Bolsonaro administration but had been extended by him at the time with the signing of the provisional presidential decree 998/20. It triggered an avalanche of requests for new projects with benefits at the Brazilian Electricity Regulatory Agency (ANEEL).
Members of the government itself complained about the weight of the new wave of subsidies on the account that centralizes tariff charges, the Power Development Account (CDE). This is a point that displeases this group of experts and is classified as “absurd” by a source consulted by Valor. The source calculates that the benefit will increase the cost of charges borne by consumers via tariffs by R$4 billion annually. “Those who pay the CDE are the middle class, industry, and commerce, which are not in the free market and necessarily consume power from distribution companies,” they said.
The provisional presidential decree signed Tuesday includes two compensatory mechanisms to alleviate high tariffs in the country. The first provides for the use of funds from the privatization of Eletrobras to prepay loans contracted by distributors during the COVID-19 pandemic and the 2021 hydrological crisis, thus reducing tariffs by 3.5% to 5% nationwide.
“We will pay off loans from the Covid Account and Hydrological Scarcity Account. There will be R$11 billion less in Brazilians’ pockets,” said the minister of Mines and Energy. He added that both financing contracts were signed “irresponsibly” by the previous government and “should never have been passed on to consumers.”
The second mechanism, with a local focus, aims to secure funding for the distribution company of the state of Amapá. This initiative seeks to mitigate the extraordinary tariff revision requested by the local concessionaire last year, which was estimated to be around 44%. Initially planned as a separate measure, it was eventually included in the proposal for benefits to renewable energy generation projects, as previously reported by Valor.
Minister Silveira and Chief of Staff Rui Costa said on Tuesday that the debate with sector members will be deepened to seek a structural solution to the problem of expensive electricity in Brazil. At the Presidential Palace, Mr. Costa said that a meeting will be held this Wednesday to discuss how to “harmonize the world’s cheapest production with the bill that should be one of the cheapest in the world for the poor and the middle class” in the country.
Mr. Silveira also said that a “permanent discussion forum” has already been established with the sector. “Tomorrow [Wednesday], we will have a slightly broader meeting,” he said, referring to the participation of representatives of entities and experts. According to Mr. Silveira, the government has the ongoing challenge of correcting distortions in the electricity sector, which result in higher tariffs. He said that after listening to the sector, a solution will be presented to Mr. Lula.
Following the government event, the National Front of Energy Consumers criticized the proposal, labeling it as “inconsistent and harmful.” They argue that the rules increase the charges within the tariff and anticipate future resources, thereby creating an additional expense that will ultimately burden consumers in the years ahead. The organization highlighted that subsidies currently constitute 16% of the Brazilian electricity bill. “With the new presidential measure, this cost will escalate further and immediately.”
The Brazilian Association of Energy Consumers (Abrace Energia), which represents industrial consumers, calculated that the extension of subsidies for renewable energy will represent a future increase that could reach R$4.5 billion per year in the tariff. “Therefore, it considers it important that these measures be evaluated together with several others that could structurally reduce the price of power,” the statement said.
*Por Rafael Bitencourt, Mariana Assis, Estevão Taiar — Brasília
Tom Vilsack suggested that this was taking place in retaliation against recent restrictions on foreign ownership of farmland in the country
04/11/2024
Tom Vilsack — Foto: Yuri Gripas/Bloomberg
U.S. Agriculture Secretary Tom Vilsack suggested that China could be favoring Brazil’s soybeans and corn partly in retaliation against recent restrictions on foreign ownership of farmland in the country, according to Bloomberg News.
Recently, the Republican-led state of Arkansas forced Syngenta Ag, controlled by Chinese state-owned group ChemChina, to sell 160 acres (64 hectares). The move was made possible with a new law in the state that restricts ownership of local lands by certain foreign groups. The area had been owned by Syngenta since 1988, when it was not controlled by the Chinese.
According to the secretary, the U.S. saw a trade deficit of $6 billion in the first quarter. “Why would that be? Is it just Brazil, or was there a reason why the Chinese ag minister asked me about Syngenta?” Mr. Vilsack told the news agency.
The U.S. secretary said China’s agriculture minister had questioned him about Syngenta in recent conversations, which would have been a “signal.”
With China buying fewer crops from the U.S., Brazil has overtaken America as the world’s top corn shipper after already doing so with soybeans. Mr. Vilsack advocated that the U.S. diversify its exports to countries other than China, but maintain trade relations with the country.
Bloomberg said it reached out to the Chinese embassy in Washington but received no response. China’s commerce and agriculture ministries were also approached by the agency but did not respond.
Chemical industry estimates that illicit market in Brazil amounts to between $2.9bn and $3.7bn
04/11/2024
Agricultural pesticides originating from Paraguay and Argentina seized by the Federal Revenue of Foz do Iguaçu and by the police of Paraná and Santa Catarina — Foto: Divulgação/Receita Federal
Just over a year ago, state and federal law enforcement agents uncovered a smugglers’ warehouse in a raid in Americana, 140 kilometers away from São Paulo. Spacious and well-lit with fans on the walls, the property hid 75 tonnes of pesticides that had illegally entered Brazil.
One product stood out as it contained Paraquat, an active ingredient associated with Parkinson’s disease in people who handle it, and banned in Brazil in 2021. Before the ban, the chemical was widely used to dry soybean crops to accelerate grain ripening, allowing for early harvesting.
The seizure, which took place in February 2023, only confirmed what authorities had already been detecting: the advancement of criminal groups in the sale of pesticides in the black market. This explains the increase in the number of seizures of illegal pesticides in the country. Last year, the Federal Police alone seized 575 tonnes, nearly 180% more than in 2022.
The batch of products seized in Americana—packaged in sacks and blue plastic barrels— was valued at the time at R$43 million. Authorities said the cargo would be sold to rural producers in Mato Grosso and São Paulo states.
Federal and state agencies have been making successive seizures of both Paraquat and other illegal pesticides—many of which come from Paraguay, Uruguay, Paraguay, Bolivia, and Argentina, countries with less stringent regulations than Brazil’s regarding agrochemicals. The active ingredients are generally imported from China and India.
The trade of these products is primarily attractive due to the lower prices compared to agrochemicals produced and sold within the standards of the Agrochemicals Act, passed in 2023.
In addition to price, the illicit market also exploits the possibility of selling products in Brazil with concentrations much higher than those considered safe. An example is Emamectin benzoate, an insecticide for pest control. Authorized on an emergency basis in the country with a concentration of 5%, the insecticide is found in Paraguay with concentrations reaching 90%.
Enforcement agents involved in tackling the illegal market said that many retailers and rural producers who acquire clandestine pesticides are aware of what they are doing, either because of the below-market price or because of the Spanish-language packaging. They warn of the health and environmental risks posed by these clandestine products.
The Ministry of Agriculture said it does not have an estimate of the size of the illegal pesticide market. The agrochemical industry estimates that the share of the market served by illicit products ranges from 20% to 25%.
The estimate was based on 2021 data and amounted to between $2.9 billion and $3.7 billion that year.
The numbers are from CropLife Brasil, the entity that brings together pesticide, seed, biotechnology, and biological product companies, including GDM, BASF, Bayer, Sumitomo Chemical, and Syngenta.
“This is a global problem. In Europe, according to OECD data, illegal inputs represent on average 14% of the local market. Brazil suffers greatly because it is a major agricultural producer,” said Nilto Mendes, CropLife Brasil’s manager for combating illegal products and a former federal police officer.
A study released in 2021 by the Institute of Economic and Social Development of Borders (IDESF) also estimated the share of illegal pesticides in the country at 25%.
Illegal pesticides can be those smuggled, adulterated through dilutions and additions of other inputs, counterfeited using products not intended for plantations, and may also be those resulting from thefts.
In the case of smuggling, Paraquat has become a more prominent problem. In 2022, law enforcement agents had already made a major seizure in Santa Catarina. In 2023, again in Americana. Last month, the Federal Revenue Service in Foz do Iguaçu seized 36 tonnes of illegal pesticides. Of this total, about 70% was Paraquat.
When health regulator ANVISA decided to ban the sale and use of this chemical in the country, it cited the risk (although, according to the agency, still under discussion in other countries) of Parkinson’s disease and the potential for the substance to cause mutations that could be passed on to future generations or even cause cancer. In 2020, the agency issued a note saying that the risk was for those who handled the product. Those who consume food, however, are not susceptible to exposure to the substance.
For the industry, the entry of criminals—smugglers, counterfeiters, money launderers— into the pesticide market represents unfair competition, tax evasion, a threat to the reputation of legal products, and risks to health and the environment.
For regulatory agencies, the clandestine pesticide chain raises several alarms.
“Considering that illegal products have not undergone the official registration procedure of the federal government, it is conceivable that residues in the food of those who use these products may generate residues above what Brazilian legislation predicts,” said the Ministry of Agriculture.
ANVISA stressed, “Irregular pesticides do not offer safety guarantees for the worker and the environment, nor do they have the efficiency and quality required for these products. Without these minimum requirements, irregular products represent a high risk of damage and threat to the health of the worker and people who consume the food in which irregular products were used.”
Brazil’s environmental protection agency IBAMA, which participated in the Americana raid, said that illegal products originating from smuggling do not undergo evaluations of efficacy, agronomic feasibility, environmental impacts, and human health, and that “therefore, their environmental impacts are uncertain and may cause severe adverse effects on non-target organisms of these substances, negatively interfering with environmental balance.”
The Ministry of Agriculture said that it has been acting against the illegal market and that in 2023 it carried out 35 operations with seizures of pesticides, fertilizers, seeds, and other products.
In addition to increased inspections, another significant measure was implemented. Last year, the new Agrochemicals Act strengthened penalties for illegal businesses involving these products, with sentences now ranging from three to nine years in prison.
But there are still two obstacles. One is to raise awareness among producers about the origin of agrochemicals. Another obstacle lies on the other side of the borders, said economist Luciano Barros, president of IDESF, “It is necessary to improve the regulatory environment in neighboring countries and seek an alignment of agrochemicals regulations among Mercosur countries.”
The Brazilian Confederation of Agriculture (CNA) did not respond to a request for comment.
Italian group reports that 75% of revenues are generated by digitalization business; in Brazil, AI has reduced the number of employees
04/11/2024
Marco Tripi — Foto: Rogerio Vieira/Valor
Almaviva, an Italian group that operates with digitalization and relationship management services between companies and their customers, acquired 51% of Magna Sistemas, a Brazilian software and technology services firm, for R$340 million. With the acquisition, Almaviva seeks to expand its digital transformation business with a focus on public services in Brazil.
The acquisition of the remainder of Magna’s capital, which is now called Almaviva Solutions, is in the Rome-based group’s plans over the next five years, which would raise the purchase price to R$800 million, Almaviva CEO Marco Tripi told Valor. “We spent about two years evaluating technology companies in Brazil, and the company’s management team led us to the decision [to close the deal]. We need high-ranking managers,” said Mr. Tripi, who came to São Paulo to formalize the transaction.
The purchase of Magna does not end the Italian group’s acquisition plans in Brazil, said Mr. Tripi without elaborating. The company, which operates in 11 countries, also seeks to increase the share of revenue generated outside Italy to 50% in 2026 from 30% in 2023, the executive said.
In Brazil, Almaviva has been diversifying its contact center and billing businesses, with more attention to the financial and services industries and less to telemarketing.
The focus on digital channels and the use of artificial intelligence, reducing human interactions, has led to a significant reduction in the number of contact center employees in Brazil.
In 2023 alone, the subsidiary reduced the number of employees in Brazil to 33,500 from 40,500. In Colombia, the base for contact center and billing services in Spanish-speaking countries, the headcount decreased to 36,000 last year from 42,000.
“We will eliminate ‘commodity’ jobs. It’s challenging, but the company must evolve, and technological advancement may lead to a reduction in the number of employees,” said Mr. Tripi.
On the side of technological evolution, according to the executive, the company’s 15-year commitment to artificial intelligence has been bearing fruit. Last year, Almawave, a business focused on AI projects, reported net revenue of €57.5 million, up 20% from 2022. In the same period, net income of €9.29 million almost doubled, an increase of 92.7%.
In 2023, 75% of Almaviva’s global revenue came from digitization projects, particularly in sectors like sanitation and public transport. Call centers accounted for 25% of the result. Revenue totaled €1.2 billion in 2023, up 20% year over year. Net income of €86.7 million represented a 15.5% increase during the period.
In Brazil, the proportion is reversed. Most of the revenue comes from customer management services and billing. But the plan is for other technology services, especially for public sector companies, to account for the bulk of revenues in the coming years.
In 2023, Almaviva reported net revenue of R$1.61 billion in Brazil, up 8.8% from 2022. Net income was R$152.5 million, up 18.5% year over year.
The acquisition of Magna was finalized by Brita S.A. The Brazilian company is 90% owned by Almaviva and 10% by the Italian company Simest, which supports overseas businesses. Simest is controlled by the Italian development bank Cassa Depositi e Prestiti (CDP).
The remaining 49% stake in Magna Sistemas, which was renamed Almaviva Solutions, remains with the founding partners. Adriano Dias, founding partner and chief executive of Magna, will continue to be in charge of Almaviva Solutions. Its 1,200 employees are expected to be integrated into AlmaViva’s Brazilian subsidiary by August.
Magna Sistemas’s clients include the Information Technology Division of the Civil Police Intelligence Department (DIPOL) of São Paulo and the São Paulo State Transportation Agency (ARTESP).
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