Exporters to be centerpiece in Q2 earnings season

Weakening Brazilian real, commodities to boost results in the period, analysts say

07/23/2024

Iron ore was one of the commodities helped by the real’s depreciation over the dollar — Foto: Leo Pinheiro/Valor

Iron ore was one of the commodities helped by the real’s depreciation over the dollar — Foto: Leo Pinheiro/Valor

The weakening of the Brazilian real against the dollar and the increase in the price of some of the world’s main commodities likely boosted the results of large Brazilian exporting companies in the second quarter and should turn them into the highlights of the earnings season, which accelerates this week.

After a few quarters moving sideways, companies trading oil, iron ore, and pulp, among other commodities, had their revenues helped by the real’s depreciation over the dollar. The exchange rate returned to a level above R$5 between April and June, at an average of R$5.21, an increase of 5.5% in the year and 5.2% over the first quarter.

The prices of some of the main commodities traded by Brazilian companies also rose during the period. The Brent reference barrel closed the second quarter at an average of $84.64, 8% up in the year and 2% up over the first quarter. Pulp traded in China increased by 27% in the year and 9% over the first three months of 2024, close to $700 per tonne.

“Brazilian pulp and paper manufacturers are expected to post more robust results in the second quarter, reflecting the combination of increasingly higher prices and the depreciation of the real,” said Bank of America’s team of analysts led by Caio Ribeiro. Suzano, with greater exposure to the commodity, should especially benefit from the trend.

In the case of Petrobras, Alejandro Demichelis and Pedro Baptista, analysts at Jefferies, say the company’s numbers will benefit from fewer maintenance stops and a higher refinery utilization rate. The company has not yet released its operational preview for the quarter. That, combined with higher oil prices and the depreciation of the real against the dollar, should generate an EBITDA of $13.7 billion.

Iron ore went in the opposite direction and ended the period at an average of $112 per tonne, practically stable in the annual comparison and 9.7% down compared to the first quarter, amid doubts about the sustainability of China’s iron ore demand.

“We expect mining companies to have increasingly better results over the first quarter, driven by higher seasonal volumes and lower costs more than offsetting lower realized prices,” Santander analysts Yuri Pereira and Arthur Biscuola wrote in a report. Vale and CSN are expected to benefit from this move.

Vale released its operational results for the second quarter, posting production of approximately 81 million tonnes of iron ore and sales of 80 million tonnes. Analysts welcomed the result but warned that lower realized prices could hurt the company’s financial numbers.

On the other direction, steel companies are expected to post weak results. Itaú BBA team of analysts led by Daniel Sasson said that still pressured steel prices due to the entry of Chinese products into the Brazilian market, in addition to a weaker U.S. market, could harm the results of Gerdau, Usiminas, and CSN.

Companhia Brasileira de Alumínio (CBA) could be an outlier, with banks projecting its EBITDA could double in a year, helped by better aluminum prices and reduced production costs.

Companies operating primarily in the domestic market should follow the same trends seen in the first quarter, according to bank analysts. They say it will be key to pay attention to the signal these companies’ executives will give amidst the scenario of high interest rates for longer and household consumption not recovering as expected.

BTG Pactual analysts Luiz Guanais, Gabriel Diselli, and Pedro Lima wrote that the fundamentals of retail companies showed signs of improvement earlier in 2024 and the trend is expected to continue over the next few quarters. However, the bank noted that share moves are driven by political and macroeconomic news.

With the prospect of higher interest rates for longer and its possible effects on consumption, estimates are impacted. “We see little room for a positive review in the estimates this year,” they say. The companies carried out a strong cost rationalization process and benefited from greater revenue generation in the annual comparison.

Companies in the electricity sector could be a positive highlight among domestic companies. In the second quarter, extremely high temperatures in Brazil and the lack of rain boosted power prices—helping energy-generating companies—and consumption—benefiting distributing companies—, said Bradesco BBI analysts Francisco Navarrete, João Fagundes, and André Silveira.

Fuel distributing companies are also expected to post positive results in the quarter, with normalization of inventories boosting their margins, although diesel and gasoline prices are still lagging behind international parity.

Healthcare and education providers tend to post weaker results due to the unfavorable seasonality of the second quarter and the margin recovery process they have been implementing. For health insurance operators and service providers, margin trends will be important to monitor, Bradesco BBI analyst Marcio Osako noted.

Itaú BBA analysts Vinícius Figueiredo, Lucca Generali Marquezini, and Felipe Amancio expect no surprises for education providers and say investor attention should remain focused on the evolution of margins and cash conversion.

*Por Felipe Laurence — São Paulo

Source: Valor International

https://valorinternational.globo.com/
/by

Brazil to rank among bottom 20 nations in investment levels

Investment rates are expected to stabilize at 15-16% of GDP, positioning Brazil near the end of IMF’s global rankings

07/23/2024

Ernesto Revilla — Foto: Divulgação

Ernesto Revilla — Foto: Divulgação

After recent upticks in 2021 and 2022, Brazil’s investment rate is projected to stabilize at 15% to 16% of GDP from 2024 through 2029, positioning it among the bottom 20 of approximately 170 nations in the International Monetary Fund (IMF) rankings.

The IMF anticipates that Brazil’s investment rate will reach 15.9% of GDP in 2024, ranking it as the 20th lowest globally. This rate is expected to slightly decrease to 15.4% by 2029, pushing Brazil to the 19th worst position, up from the projected 18th in 2028. These figures fall below the projected rates for Latin America (19.7%) and emerging economies overall (32.4%) in 2029.

In contrast, Brazil ranked 24th worst last year with an investment rate of 16.1%. Following the economic rebound from the pandemic, the rates peaked at 19.5% in 2021 and 18.1% in 2022, placing Brazil at the 46th and 34th worst positions, respectively. The country’s lowest ranking since 2010 was 72nd place in 2011, when the investment rate nearly reached 22% of GDP.

Francisco Pessoa Faria, senior economist at LCA Consultores, said that, according to the IMF’s analysis, only 9% of countries are expected to have a lower Gross Fixed Capital Formation (GFCF, a measure of investment in GDP) than Brazil in the medium to long term.

Economists argue that an investment rate of around 15% of GDP, as projected by the IMF for Brazil, is insufficient and hovers near historic lows of about 14.5%, as seen in 2016 and 2017 following the recession that started in 2014. They believe that a healthier range would be between 17% and 19%.

Mr. Faria also notes that global figures are skewed by China’s performance. According to the IMF’s projections, the world’s average investment rate from this year to 2029 is 26.8%, but excluding China, it falls to 23.5%.

For emerging markets, the average drops from 32% to 26% when China is not considered. “Our comparison with the world is unfavorable, but it’s not as dire as it appears because China is skewing the data,” Mr. Faria explains.

Nonetheless, even with an IMF-projected rate of 18%, Brazil would still rank among the 20% of countries with the lowest investment rates. “This places us in the last quintile, with no immediate prospect for improvement,” Mr. Faria adds.

Felipe Camargo, senior economist for emerging markets at Oxford Economics, describes Brazil as having “a cascade of issues that contribute to reduced investment and subdued long-term growth.”

He projects Brazil’s investment rate to hover between 18% and 19% of GDP in the medium to long term, emphasizing that historical averages are insightful for projections as rates typically trend towards these averages over time.

According to Oxford Economics, Brazil’s investment rate average stands at 18.9% of GDP. Among the 20 emerging countries analyzed by the consultancy, this rate is only higher than that of Colombia (17.9%), Argentina (17.9%), Egypt (17.2%), and South Africa (15.1%). However, it trails behind countries like India (30%), Turkey (23.6%), Mexico (22.2%), Peru (21.9%), and Chile (21.7%). Notably, although Brazil currently leads Colombia, Oxford Economics forecasts Colombia’s investment rate to rise to 21.2% by 2030, while Brazil’s is projected at 18.7%.

Mr. Camargo explains that the investment rate mirrors the country’s savings rate and its current account, which encompasses trade, services, and income transactions between residents and non-residents. “When the current account is in deficit—as it is in Brazil and many emerging markets—it essentially means leveraging external resources to supplement the country’s internal savings for investment purposes.”

Brazil, according to Felipe Camargo, borrows relatively little from the international market. “When domestic savings are insufficient, a country needs to draw on foreign resources. Like Brazil, Colombia, Chile, and Peru also save relatively little and consequently import more capital,” he explains.

Mr. Camargo suggests that Brazil could afford a slightly larger current account deficit, which would utilize more of its substantial international reserves yet remain within healthy limits. “Brazil’s reserves are quite robust,” he remarks.

Despite these ample reserves, which surpass those of some previously mentioned nations, the Brazilian exchange rate remains more depreciated than it arguably should be. Mr. Camargo attributes this to Brazil’s poorer fiscal health and lower credit ratings. “This contributes to Brazil importing fewer capital goods. Lacking domestic production capabilities for these technologies, Brazil inevitably lags behind,” he observes.

He also points to taxation as another crucial factor influencing investment rates across countries. “Much of a country’s investment is driven by its corporate sector. Heavier taxation and higher operational costs reduce corporate profit margins, which in turn dampens investment activity,” Mr. Camargo says.

In Brazil, the linkage between imports and investment is notably weak, observes Mr. Camargo. He suspects that the importation rates are lower partly because of how the ICMS (similar to Value-Added Tax) is applied to imports. “For those importing heavy equipment like ships, machinery, and the like into Brazil, the ICMS calculation basis exacerbates costs significantly. Not only do they face steep import taxes, but also a high ICMS rate on those taxes,” he explains.

While Mr. Camargo acknowledges that the proposed tax reforms won’t reduce Brazil’s overall tax burden, he believes they could make a significant impact by simplifying the tax structure. “Removing compounded taxation should indeed facilitate more investment,” he suggests. Companies could improve profit margins and enhance productivity. “This would allow companies to focus more on their core operations rather than spending resources on navigating complex tax regulations, potentially leading to more investments in essential machinery and equipment,” he adds.

However, Mr. Camargo cautions that without fiscal adjustments to control spending, it remains challenging to implement tax cuts. “This is the balance we are currently managing. It’s essential to align public policies to address this efficiently,” he remarks.

Echoing a broader perspective, Ernesto Revilla, chief economist for Latin America at Citi, attributes Brazil’s low investment rates to the lingering effects of the severe economic downturn the country underwent in 2015 and 2016.

“Then came the pandemic, and Brazil faced weak demand. So, for about the last eight years, Brazil has been trapped in a vicious cycle where strong growth is absent because there’s insufficient investment, and there’s insufficient investment due to the lack of strong growth,” observes Mr. Revilla.

He argues that breaking this cycle hinges on Brazil’s continued efforts on two fronts: reinforcing macroeconomic fundamentals, particularly fiscal policies, to instill confidence in long-term investors, and crafting a growth-centric narrative to assure sectors of the potential returns on their investments.

“This is a pervasive issue in the Latin American economy. With each change in government comes policy shifts, creating a level of uncertainty that long-term investors typically shy away from,” he notes.

Mr. Revilla emphasizes that fiscal sustainability is crucial for robust and enduring economic development, though it alone is not sufficient. “There’s a concern that an escalating debt trajectory could drive interest rates higher, and high interest rates are a significant barrier to investment,” he explains. He also highlights the importance of stable “rules of the game” and a favorable regulatory environment to encourage investment.

In Mr. Revilla’s view, Brazil stands as the most promising of the region’s emerging markets for attracting investment in the medium to long term.

“Brazil’s diverse economy is a significant advantage in today’s complex global environment, where supply chains are being restructured,” he notes. “While Mexico also has a favorable geographic position, the recent elections there have unfortunately heightened uncertainty.”

However, Mr. Faria of LCA, who authored a study for Valor comparing Brazil’s investment rate with that of Organization for Economic Cooperation and Development (OECD) countries, is less optimistic. He highlights that Brazil’s major disparities lie in construction and research and development investments. “And there seems to be nothing substantially new on the horizon that could drive significant progress in these sectors in the coming years,” he remarks.

Mr. Faria also points out that the government’s room to maneuver is limited, especially with interest rates expected to remain high.

“Examining OECD nations and distinguishing between government and private investment—including companies that are not state-dependent, like Petrobras, and households—it’s evident that the government’s contribution to GDP has significantly deteriorated in recent years. Achieving an investment rate comparable to that of other countries is challenging without revitalizing public sector investment capabilities,” explains Mr. Faria.

Mr. Faria said that, unfortunately, there are no indications that this will change soon. He highlights that all projections suggest an ongoing increase in the country’s debt-to-GDP ratio. “Society has prioritized substantial social assistance—which is commendable in itself—but the critical question remains: How will the government fund increased investments? It seems unlikely, particularly in a country where the appetite for spending is high but the willingness to fund that spending is low. The numbers just don’t add up,” he states.

He also notes a lack of incentives for efficient expenditure, significant imbalances such as in the salaries of the judiciary and military pensions, bleak prospects for labor productivity enhancements—including the impacts of Covid-19 on the training of future workers—and limited opportunities to engage in more Public-Private Partnerships (PPPs).

“In my view, if Brazil continues on its current path, that might be the best we can expect; growth will remain sluggish, with no significant prospects for improvement,” he concludes.

*Por Anaïs Fernandes — São Paulo

Source: Valor International

https://valorinternational.globo.com/
/by

Tight job market hides high informality

Formal employment drives up employment rate; informal jobs continue to expand, with 40% of the total

07/22/2024

Lucas Assis — Foto: Claudio Belli/Valor

Lucas Assis — Foto: Claudio Belli/Valor

The Brazilian job market has shown a clear trajectory of expansion in the last two years, after the pandemic crisis hit the market, which had not yet recovered from the 2015-2016 recession. Month after month, new records are seen in the number of formally employed workers and the mass of income, among other indicators. Other components are returning to levels not seen for a decade, such as the number of unemployed workers, that were not seen for a decade, such as the number of unemployed workers, which is below 8 million for the first time since 2015. However, the country’s positive employment figures still include a high level of informality.

Nearly 40% of employed Brazilian workers are in the informal sector. This share has reduced recently but, as the total number of unregistered jobs grows along with formal work, the volume of people in informal work positions continues to expand.

Over the more than eight years of the Continuous National Household Sample Survey (PNAD Contínua) informality rate series—an indicator measured since the fourth quarter of 2015—, only in four moving quarters the share of informal workers remained below 38%. The highest number ever was 41%, indicating a 4.5 percentage point range between the minimum (36.5%) and the maximum.

All quarters measured below 38% were in 2020, the first year of the pandemic, when informal workers were expelled from the job market due to social distancing measures. The share of formal workers among employed people increased but that happened through the composition effect.

“The informality of a relevant part of jobs is a characteristic of the Brazilian job market and represents an important source of inequality,” said Lucas Assis, the economist at Tendências Consultoria in charge of monitoring the job market. “As a result, there is a large number of workers with no access to social benefits, such as social security and paid leave, including maternity leave or sick pay,” he said.

The informal segment has a less stable employment relationship and does not include labor rights—such as sick pay and retirement—and historically offers lower compensation. Reducing informality and increasing the level of formalization of the job market is part of the United Nations Sustainable Development Goals (SDGs), under the eighth topic, “Economic Growth and Decent Workdecent work.” The informality rate is used as a reference for monitoring this SDG.

While Brazil is below the world average (58%) and at the average of the least developed countries (89.1%), it is well above the level seen in European and North American countries, of 11.4%, according to 2023 data from the UN Statistics Division. More than 2 billion people are currently working in informal jobs worldwide.

In Brazil, the PNAD Contínua indicated 39.13 million informal workers in the quarter ended in May, which is the most recent data. When measuring the informal segment, the Brazilian Institute of Geography and Statistics (IBGE) includes private sector employees without an employment registration book, domestic workers with no registration, employers and self-employed workers with no corporate taxpayer ID number, and contributing family workers receiving no compensation.

Adriana Beringuy, IBGE’s coordinator of household sample surveys, emphasizes the high share of informality in the Brazilian job market, despite the role of the formal sector in recent growth.

“The increase in the number of employed workers driven by formal workers doesn’t mean the number of informal workers has been falling. It has only been losing share but remains a very important line of the employed population,” Mr. Assis said, about the new PNAD Contínua. “The increase of the employed population is happening through the formal employment but also the informal employment.”

Liana Carleial, economics professor at the Federal University of Paraná (UFPR), says the informality rate is now just a reference, as the poor conditions of the market as a whole are bringing workers in the formal sector closer to those holding informal jobs.

“The informal category is now just a reference; it means nothing else than that. Formal workers work 12 hours and in poor conditions. It makes more sense to talk about having or not social rights,” the professor argues when considering what makes the two categories of workers different from each other.

Among informal workers, one group deserves attention: the 25.5 million self-employed people, or 25.1% of the 101.3 million employed people. Ms. Carleial criticizes the increase in entrepreneurship, which she says acts to hide the low share of salaried workers in Brazil. “Less than 50% of workers are salaried. There is a large number of self-employed workers, representing 25% of all employed workers,” she said.

Ms. Carleial cites France as a successful story of job market conditions. She notes that 87.3% of workers there are salaried, of whom more than 70% have indefinite-term contracts.

“We can see Brazil’s situation is poor in different ways. In France, nearly 90% of workers are salaried, which is a successful story. It is a solid, salaried society. That’s not our case,” she noted.

One of the differences between formal and informal workers is income. It tends to be the highest among formal workers. Lucas Assis says the transition from informal to formal employment increases the probability of improving income from work, both in absolute and relative terms.

However, the economist points out that income gains with formalization do not benefit all workers equally. “The shift to formal employment has greater potential for improving income from work for the richest,” he noted.

Like other indicators in the country, the informality rate presents inequalities, with worse rates for the poorest. Lucas Assis highlights differences by region, level of education, color, or race. Informality predominates in the North and Northeast regions, decreases according to the level of education, and varies according to color or race, whether men or women.

In the first quarter of 2024, when the informality rate in Brazil was 38.9%, this share was 70.9% among workers with no education and 63.2% among those with incomplete primary education. At the other end, the rate was 19.1% for those with a higher education degree and 29.8% for those with incomplete higher education.

In the analysis by color or race, the share of informal workers was 33.6% for white employed workers, below 41% for Black people, and 43.5% for mixed-race people. Regional data also show inequalities and range between 30.5% in the South and 52% in the North region. The other rates are 51.3% in the Northeast; 34.1% in the Southeast; and 34.6% in the Central-West.

“The Brazilian productive structure still has elements and labor relations typical of underdeveloped economies, such as the large number of workers in domestic services, mostly women,” Mr. Assis said. “The construction segment, also characterized by low income and high informality, predominantly employs men.”

*Por Lucianne Carneiro — Rio de Janeiro

Source: Valor International

https://valorinternational.globo.com/
/by

Americanas’s reorganization plan enters final stage

Americanas’s reorganization plan enters final stageCreditors will be paid after approval of capital increase is ratified, expected this week

07/22/2024

Americanas: fraud is now estimated at R$25bn — Foto: Domingos Peixoto/Agência O Globo

Americanas: fraud is now estimated at R$25bn — Foto: Domingos Peixoto/Agência O Globo

Americanas’s court-supervised reorganization plan reaches its final stage this week, a year and a half after negotiations between shareholders and creditors began. The outcome includes a series of almost simultaneous steps for paying off debts, in a design drawn up so that the parties’ commitment not to litigate becomes definitively valid.

Retail chain Americanas went into court-supervised reorganization on January 19, 2023, eight days after the revelation of an accounting fraud now estimated at R$25 billion.

The first event in this step-by-step process is the approval of the company’s capital increase, scheduled to take place on Thursday. The primary shareholders—Jorge Paulo Lemann, Carlos Alberto Sicupira and Marcel Telles—will make a contribution of R$12 billion, which includes new money and the conversion of loans made to the retailer under the debtor-in-possession (DIP) modality, used for companies in recovery. On the other hand, R$12 billion will be converted into debts to creditor banks, which will make them shareholders.

The bill for the trio of businessmen will not be distributed equally between them. Mr. Sicupira will foot most of the bill—more than R$7 billion— since Americanas has always been a business closely monitored by him, who even sits on the board of directors.

Although it is very likely that the approval will take place on the 25th, this is an estimate. With the plan approved and the adjustments made to it last week, it is possible that the document will be presented by the court to the Prosecution Service before this step, which could push the date further forward.

Once approval has been granted, the settlement begins. First, the new shares are issued and the debts converted. Next, R$2.04 billion will be paid to creditors who sold their debts at discounts of up to 73% in a reverse auction held in April.

After that, Americanas will issue debentures worth R$1.875 billion, with series in reais and dollars. The bonds will mature in five years, have a grace period of 24 months, and will be used to exchange old debts.

The last stage is the so-called downpayment, i.e. the payment in cash of the remaining debt at a discount. At this stage, the disbursement is expected to be R$6.7 billion. This money will come directly from the capital increase and will not even pass through the company’s cash flow. Labor debts and debts to suppliers have already been paid in the first half of the year, with the company’s own money.

All the remaining payment stages will be made concurrently. According to sources with knowledge of the matter consulted by Valor, it is unlikely that everything will be paid in a single day, but the idea is to reduce time lags to almost zero. This is important because it eliminates the risks in the agreement between creditors and shareholders not to litigate.

In order to close the company’s court-ordered recovery agreement at the end of last year, both sides agreed they would not take legal action against each other. Until then, some banks had gone to court to sue shareholders and directors if there was any sign that they had participated in or knew about the fraud. The agreement does not eliminate, but drastically reduces the chances of eventual liability.

So far, both the retailer and investigations by the Prosecution Service and the Federal Police maintain that the scheme to cook the books carried out by the former management, without the board’s knowledge. The investigations are still ongoing.

Last week, Americanas informed it had received the report of the independent committee it hired to investigate the problems. The document has not yet been released, but the retailer has signaled that the work corroborates the thesis of fraud committed by former directors.

Americanas’ recovery process involves the restructuring of R$50 billion in debts, including commitments between companies in the group itself.

The bases of the agreement were initially agreed with the main creditor banks—Bradesco, Itaú Unibanco, Santander, BTG Pactual, and Safra—and then extended to the others.

A team of lawyers from all sides worked on the operation. Senior executives from the banks and, at times, the CEOs of these institutions were involved in the negotiations. The Rothschild investment bank advised Americanas. CFO Camille Loyo, was the company’s main interface with the creditors. Roberto Thompson, a partner at Lemann, Telles and Sicupira, was the negotiator on behalf of the primary shareholders. Pinheiro Neto law firm was the central point for talks between the banks and the company.

*Por Talita Moreira — São Paulo

Source: Valor International

https://valorinternational.globo.com/
/by

Agribusiness revenue drops with smaller harvests, weaker exports

Indicator expected to fall by 13.8% and reach R$953bn in 2024, the lowest figure since 2019; analysts see a normal adjustment

07/22/2024

Sérgio Vale — Foto: Claudio Belli/Valor

Sérgio Vale — Foto: Claudio Belli/Valor

Agricultural revenue is expected to total R$953 billion in 2024, 13.8% less than last year, already discounting inflation, reflecting a smaller harvest and weaker exports, with some effect from the severe floods in Rio Grande do Sul. This will be the lowest figure since 2019, according to projections by consultancy MB Agro, a sign of adjustment after an exceptional period for the segment—and in a year when weather conditions are less favorable.

The sector’s weaker performance is one of the reasons for lower growth in the Brazilian economy this year. In terms of GDP, agriculture is expected to fall in 2024, after growing by 15.1% in 2023. The market consensus points to a 1.6% drop in the segment in the national accounts, one of the factors that will lead GDP to expand closer to 2% this year—last year it was 2.9%.

These figures, however, do not show a crisis in agriculture, according to analysts. For Sergio Vale, chief economist at MB Associados, 2024 “is a year of adjustment” after three very favorable years. Between 2021 and 2023, agricultural income was above R$1.1 trillion, in updated values at 2024 prices. The indicator takes into account prices and quantities produced.

According to Mr. Vale, the three key variables for the sector—price, volume and exchange rate—have cooled this year or in part of it, contributing to a weaker result. With the prospect of higher interest rates in the U.S., commodity prices have settled, and the harvest in Brazil is suffering the effects of El Niño, which is contributing to a drop in volumes, even more so after the exceptional performance of 2023, he said. In addition, only recently has the exchange rate come under pressure again, added Mr. Vale.

The exchange rate got stronger in the second quarter and rose further from June onwards, but spent practically the entire first quarter below R$5 to the dollar. It wasn’t a bad level for exporters, but a stronger real against the dollar is less favorable for those who sell abroad.

In 2024, agricultural income is expected to be R$642 billion, a drop of 12.9%, already discounting inflation, compared to last year, estimates MB Agro. Livestock income is expected to fall more sharply, by 15.4%, to R$306 billion.

According to the most recent figures from statistics agency IBGE, this year’s grain harvest is expected to be 295.9 million tonnes, 6.2% lower than last year. Mr. Vale noted the impact of soybeans, a product that is expected to see a sharp drop in exports in 2024.

According to MB Agro estimates, foreign sales of the soy complex (grain, meal, and oil) are expected to reach $51.8 billion this year, a 23% drop compared to 2023, with a 6% drop in volumes and 18% in prices.

“It’s the product that ended up showing the greatest loss in exports this year,” said Mr. Vale, noting that “there was a little more difficulty in the soybean crop, but nothing too dramatic. It’s not a significant drop, but because of the importance of the crop, it has a significant effect.”

Total agribusiness exports, including industrially processed products, will also fall this year. According to MB Agro’s forecasts, they should stand at $146.5 billion in 2024, 12% less than last year, with a 10% drop in volumes and a 2% drop in prices. Corn exports will also fall sharply, according to the consultancy. The decline is expected to be 42%, to $7.861 billion, with a 37% drop in quantities and 8% in prices.

The 2024 result, however, is not a trend for agriculture, said Mr. Vale. “This should be seen as a temporary factor,” he said. “The expectation for 2025 is a better harvest, with a higher exchange rate and slightly better prices in general, with the prospect of falling interest rates in the United States.”

Fernando Honorato, Bradesco’s chief economist, also sees the drop in agriculture in 2024 as a normal phenomenon. According to him, the decline was expected, given the exceptional advance last year, in a scenario in which soybeans in Argentina are recovering this year, after a 2023 in which the harvest of the product in the neighboring country was shaken by a severe drought. “The year 2023 was atypical; our production was very strong,” said Mr. Honorato.

For 2024, the weaker performance of agriculture this year will, of course, affect GDP performance. “Agriculture was essential for the almost 3% expansion last year, but this year it tends to take away from growth,” said Mr. Vale, projecting that the pace of GDP expansion will be slightly lower, between 2% and 2.5%. MB’s June estimate for agriculture in the GDP was a 0.5% drop, but Mr. Vale noted that the fall could be a little more intense.

Bradesco, on the other hand, sees a much stronger drop in GDP for agriculture in 2024. Two weeks ago, the bank revised its projection for the sector in this year’s national accounts to a fall of 5.2% from a drop of 3.5%. This revision incorporates the effects of the floods in Rio Grande do Sul on the sector, but also the expectation of a weaker result for the entire agricultural segment.

Mr. Honorato reiterated that he doesn’t see a crisis in the segment, but rather one-off problems. “There will always be some ‘uncovered’ farmers, who may have leveraged themselves and are now suffering the financial consequences of the drop in production,” he said. As a result, some have fallen into debt and have to deal with the problems caused by the fall in production. The bank expects the sector to recover in 2025, with a 3.9% rise in agricultural GDP. In June, the forecast was for growth of 1.9% next year.

For economists at the Fundação Getulio Vargas’s Brazilian Institute of Economics (Ibre-FGV), agricultural production is still negative “simply because of the less favorable weather conditions this year and the record harvest in 2023”. For the second quarter, they estimate a 2.2% drop in agricultural GDP compared to the previous quarter, seasonally adjusted.

“There will undoubtedly be a negative impact on the sector due to the disaster in Rio Grande do Sul, but this effect is more moderate due to the advance of harvests in the region until April 2024,” wrote researchers Silvia Matos, Caio Dianin and Bruno Issler in FGV Ibre’s most recent Macro Bulletin. For this year, they predict that GDP will grow by 2%, with agriculture and livestock falling by 2%.

The dominant bet is that next year will see a recovery in farming, but there are still unknowns in the scenario. “For 2025, the picture is still not very clear, as the climate has been much more volatile than in recent years,” said Mr. Vale.

“At first, I estimate a 3% expansion. But that will depend on the harvest, the combination of price and exchange rate,” he said. “With a drop in the U.S. interest rates, commodity prices could have a positive reaction. The exchange rate, in turn, depends on the fiscal situation,” said Mr. Vale. “As it doesn’t look like there will be a definitive solution, the exchange rate may be seeking a new equilibrium point above the R$5 to the dollar it was at previously. This tends to give the sector a sense of recovery next year.”

In GDP, the direct weight of agriculture and livestock is 7.1%, according to figures from the 2023 national accounts. The share of agribusiness is much higher, reflecting the sector’s effect on other segments of the economy. Last year, the share stood at 23.8% of GDP, according to estimates by the Center for Advanced Studies in Applied Economics at the School of Agriculture of the University of São Paulo (Esalq-USP), in partnership with the Brazilian Agriculture and Livestock Confederation (CNA).

The calculation takes into account agriculture, the input sector, agricultural industry, and agricultural services. Thus, an upturn in agriculture in 2025 will have a positive impact on various sectors, amplifying its effects on the Brazilian economy.

*Por Sergio Lamucci — São Paulo

Source: Valor Inaternational

https://valorinternational.globo.com/
/by

Newcastle disease causes Brazil to suspend chicken exports

Federal government placed a preventive embargo on sales to certain countries following confirmation of case in Rio Grande do Sul

07/19/2024

Carlos Fávaro — Foto: Leo Pinheiro/Valor

Carlos Fávaro — Foto: Leo Pinheiro/Valor

The Brazilian government has preventively suspended sales of chicken meat, eggs, and other poultry products to some importing countries following confirmation of an outbreak of Newcastle disease on a commercial farm in Anta Gorda (Rio Grande do Sul).

Sales of poultry and poultry products from all over Brazil to Argentina and European Union countries have been temporarily suspended. The self-embargo of sales to 32 other markets, including China, is for specific poultry products from Rio Grande do Sul only.

There are also countries to which exports of chicken meat and other products originating in regions 50 km from the outbreak site are suspended. The restrictions follow the pre-established requirements in the International Health Certificates (ISC), agreed with each importing country. Valor learned that there may be changes.

Anticipating this scenario of export restrictions, investors drove down the shares of the meatpackers on exchange B3 on Thursday and led BRF, JBS, Marfrig, and Minerva to lose a combined R$6 billion in market capitalization

The outbreak of the disease was confirmed on Wednesday on a commercial farm. According to a market source, the poultry farmer is part of the integrated chain of BRF, which has slaughterhouses in Marau and Lajeado (Rio Grande do Sul)

After a meeting with farmers in Porto Alegre, Agriculture Minister Carlos Fávaro said on Thursday that the focus seemed to be an “isolated case”, but admitted that there could be restrictions from importers.

“As the disease needs to be notified to the World Organization for Animal Health (WOAH), it could lead to trade restrictions and embargoes,” said the minister. According to Mr. Fávaro, the government has already contacted all the buying markets to report the situation.

The last time Brazil had an outbreak of the disease, which is caused by a virus, was in 2006.

JBS, which owns Seara, did not immediately respond to a request for comment. BRF said that the position would be taken by the sector, by the Brazilian Animal Protein Association (ABPA). The two companies are the country’s largest chicken exporters.

ABPA and the Rio Grande do Sul Poultry Association (Asgav) said in a statement that the federal and state authorities acted quickly to identify the case and halt the farm, ensuring that no birds left the place. “The official protocols established to mitigate the specific situation have been activated and the surroundings are being monitored,” they said.

On the stock exchange, BRF was the most affected company in the sector, losing R$3 billion in one session. As a result, the company’s market capitalization fell to R$35 billion. JBS then lost R$1.8 billion and its market capitalization reached R$69.8 billion.

Considering a scenario of export restrictions, Gustavo Troyano and Bruno Tomazetto, with Itaú BBA, said in a report that “the operations of BRF and Seara will probably be affected by a scenario of oversupply in the domestic markets”.

The two companies would have to redirect shipments, increasing the product mix of the Rio Grande do Sul units for the domestic market, said Citi analysts Renata Cabral and Tiago Harduim.

XP Investimentos noted that neither BRF nor Seara have plants in Anta Gorda. BRF has three poultry plants in Rio Grande do Sul, while Seara has only one. The nearest BRF plant is located approximately 55 km from the municipality with the focus, while the Seara plant is around 80 km away. Thus, the impacts would be indirect and market-related.

BRF’s parent company, Marfrig, also lost R$1 billion on B3, and its market capitalization fell to R$10.5 billion.

Despite having no exposure to the poultry segment, Minerva felt the pressure on a bad mood day in the market. The company lost R$190 million in market capitalization, to R$4 billion.

Minister Fávaro said that the outbreak of Newcastle disease was identified in just one bird from a commercial farm with 14,000 animals in Anta Gorda.

After a meeting with farmers in Porto Alegre to discuss the situation of those affected by the floods in May, he said that the other birds on the property had no symptoms and were being monitored. “We think it’s an isolated case. There was a hailstorm on the property, the roof of the farm collapsed, and 7,000 animals died. The remaining animals show no symptoms of the disease,” he said.

According to Mr. Fávaro, the area of occurrence is isolated, and no spread of the virus has been identified on the property or in its surroundings. “It’s important to emphasize that we haven’t yet assessed it as an epidemic because it’s one animal that was found, from an accident that occurred on this farm, in a total of 14,000 animals,” he said.

The biosafety protocols provide for the sacrifice of other birds in the event of contamination. Still, when he made the statements, the minister noted that there would only be a cull if the virus spread, which would not have happened.

Valor has learned, however, that the cull of the animals at the farm in Anta Gorda will begin soon. The measure is indemnifiable by the state’s Sanitary Defense and Development Fund (Fundesa), but there is a possibility that BRF will assume the costs to speed up the process. The measure could speed up the extinction of any possible trace of the outbreak in the remaining animals.

*Por Rafael Walendorff, Nayara Figueiredo — Brasília, São Paulo

Source: Valor International

https://valorinternational.globo.com/
/by

Sabesp reaches record demand; offer below market price

Sale of 17% of shares attracted R$187bn in orders; price closed at R$67

07/19/2024

Sabesp: the final step of the process is expected to take place on Monday, with the settlement of the offer — Foto: Divulgação/Sabesp

Sabesp: the final step of the process is expected to take place on Monday, with the settlement of the offer — Foto: Divulgação/Sabesp

The second stage of water utility Sabesp’s privatization, in which the São Paulo government offered 17% of the company’s shares, attracted R$186.8 billion in orders, according to people familiar with the matter.

The shares will be sold at R$67 per share—18.3% below the value at the end of Thursday trading session. The stake offered will involve the payment of R$7.9 billion. The offer totaled R$14.8 billion, considering the other 15% of shares acquired by Equatorial in the first stage of the process.

The demand reached an all-time high in Brazil, according to a source. Analysts said that one of the key aspects behind the high demand was the share price, which was set well below the value traded on the stock exchange, indicating gains for investors who sell the shares.

Sources also note that the orders are artificial, as investors inflate orders, given the expected pooling at the offer closing. Equatorial, the company taking the position of Sabesp’s primary shareholder, has a good reputation in the market, which helped boost demand.

The market considers the book-building was positive, which attracted major investment funds. Foreign investors were responsible for 53% of total orders, while 65% came from long-only funds, those who buy assets betting on appreciation.

The deal closing had a high distribution among investors. According to sources, more than 80% was allocated to long-only funds, divided by 50-to-50 between local and foreign investors. Another 10% was allocated to individual investors.

Valor’s business website Pipeline informed that Equatorial has relevant investors among its primary shareholders, which boosted the market confidence in the company’s participation in Sabesp. These investors had indirect exposure to the company and decided to seek direct exposure. The price discount also encouraged participation. Atmos, Squadra, Opportunity, and Canada Pension Plan (CPP) are among the primary shareholders. Among the foreign investors in Sabesp are also well-known players, such as the Singapore fund GIC.

The model of the deal is seen as a reason for a price far below the value traded on the stock exchange. According to Sabesp’s model, the price of the first stage should serve as a cap for the second stage, as the value of the shares would have to be the same.

In the first phase, Equatorial was the only group submitting a proposal to become Sabesp’s primary shareholder. The price offered was R$67, which was considered low compared to the trading price at that time—7% below the closing price on June 20th (the day before the release of the initial prospectus) and 10.6% below the price on June 28th (when Equatorial’s proposal was revealed).

In the second stage, investors could make an offer below that amount. However, as demand was high, the price reached the cap, of R$67 per share.

Equatorial must hold the shares for five years, but the other investors can sell at any time, which means expected gains for investors.

As a result, demand reached a record high in the country. According to a person familiar with the matter, the demand was three times higher than the previous record offer—Petrobras’s follow-on offer, in 2010, which reached R$61 billion.

The next step is the settlement date, scheduled for Monday.

After the process is concluded at the stock exchange, the acquisition of the shares by Equatorial should be analyzed by the antitrust watchdog CADE. Sources expect the analysis by the antitrust regulator to take a maximum of 60 days. After that, the new primary shareholder could take over the management of Sabesp. The company will be able to appoint one-third of the board of directors and the chairman.

Faced with criticism regarding the price, the São Paulo government argued that privatization has the main purpose of ensuring universalization of services and attracting a strategic partner to carry out the necessary improvements in the company. Sabesp’s model sought to fix problems identified in the privatization of Eletrobras, in which equity became dispersed.

In the Sabesp privatization, the state government will still hold an 18% stake. Of the total funds raised with the deal, 30% will be allocated to a fund aimed at universalizing sanitation in the São Paulo state. This fund will also ensure subsidies for a tariff reduction, as promised by the São Paulo government. For social and vulnerable customers, the reduction will reach 10%. Tariffs for residential customers are expected to fall by 1%.

The new contract provides for R$68 billion in investments until 2029, for the universalization of water and sewage services—which was previously scheduled for 2033 in Sabesp’s investment plans.

*Por Taís Hirata, Maria Luíza Filgueiras, Fernanda Guimarães — São Paulo

Source: Valor International

https://valorinternational.globo.com/
/by

Finance Ministry announces R$15bn freeze in this year’s budget

A cost-cutting of R$11.2 billion was due to increased spending, and the spending freeze of R$3.8 billion was related to revenue frustration

07/19/2024

Fernando Haddad — Foto: Rovena Rosa/Agência Brasil

Fernando Haddad — Foto: Rovena Rosa/Agência Brasil

Finance Minister Fernando Haddad announced on Thursday the freezing of R$15 billion from this year’s budget as a way of complying with the rules of the fiscal framework.

“It’s a cost-cutting of R$11.2 billion and a spending freeze of R$3.8 billion, due to revenue,” said Mr. Haddad. The decision aims to keep the primary deficit between zero and 0.25% of GDP in 2024, in a context of lower-than-expected extra revenue and higher than expected increases in compulsory spending.

On Monday, the figures will be detailed in the Revenue and Expenditure Assessment Report for the third quarter. “[The deficit] is within the range between zero and 0.25%. It will be close to the ceiling of the range in this report,” said Mr. Haddad.

According to him, the spending freeze of R$3.8 billion could be re-evaluated if the discussion on tax compensations progresses in the Senate. “Spending freeze can be reviewed. Cost-cutting is more difficult,” added Planning Minister Simone Tebet.

The meeting aimed to seek mediation from President Lula for two currents within the government: the one that defends the expansion of spending—and wanted a freeze of between R$10 billion and R$16 billion at most—and the economic team, which was studying a greater restriction. Asked if President Lula had been convinced of the need for the cut, Minister Haddad said that “if he was making the announcement, it’s because Lula had been convinced”.

The containment of R$15 billion in discretionary (non-compulsory) spending was generally well assessed by experts, as it came in above the R$10 billion floor suggested by financial market participants. The amount, however, is still considered insufficient to bring the fiscal deficit to zero.

“The announcement is very positive and comes very close to our forecast, R$16 billion,” said Felipe Salto, chief economist at Warren Investimentos and former Secretary of Finance of the State of São Paulo.

Cost-cutting and spending freeze are two types of temporary spending restrictions, which comply with different rules in the new fiscal framework. Cost-cutting occurs when government spending increases by more than 70% of the growth in revenue above inflation. The spending freeze occurs when there is a lack of revenue that jeopardizes compliance with the primary result target.

According to Mr. Haddad, the report to be released on Monday will detail these figures and will indicate a fiscal deficit between zero and 0.25% of GDP, the tolerance range of the framework.

“It’s within the range, between zero and 0.25% [of GDP]. Remembering that in this exercise that the Federal Revenue Service did, it is not considering at this time the effects of the compensation provided for by the Federal Supreme Court decision. It’s going to be close to the ceiling of the range in this report,” said Mr. Haddad, referring to the Court’s decision to postpone the deadline for the agreement between the government and Congress on compensation for the payroll tax exemption for labor-intensive sectors, defended by companies and trade unionists.

For next year, the government continues to foresee cuts of R$25.9 billion in the budget proposal, said Mr. Haddad.

The announcement was generally well received by economists, as it came in above the R$10 billion suggested by market agents. The amount, however, is still considered insufficient to guarantee compliance with the zero primary result target this year.

The cost-cutting of R$11.2 billion in non-mandatory spending “was a positive move, which is expected to reduce the fiscal risk of non-compliance with the spending limit,” said Tiago Sbardelotto, an economist with XP. “In our assessment, a cost-cutting of R$16 billion [for the year] would be necessary, and an important part of this amount will be made now, which makes smaller additional adjustments less costly,” he said.

On the other hand, the spending freeze of R$3.8 billion still seems insufficient to Mr. Sbardelotto. “To reach the target, taking a damming up into account, we see the need for a bigger cut, of R$25.5 billion,” he said.

When revenue performance is weaker than expected, the government can compensate by freezing discretionary spending. If the total expenditure estimate exceeds the amount allowed by the fiscal rule because of excessive growth in compulsory spending, the government blocks discretionary spending.

“The cost-cutting is a change in the composition of spending, a zero-sum game between mandatory and discretionary items. Spending freeze, on the other hand, all else being equal, results in a decrease in total spending,” said Roberto Secemski, chief economist for Brazil at Barclays. In the end, both measures imply cuts in non-compulsory spending, but a spending freeze is what really affects the primary result.

The government’s announcement shows an adjustment of R$15 billion. Gabriel Leal de Barros, chief economist at ARX Investimentos, was expecting a higher figure, of R$19.5 billion. For him, the composition of what was released indicates that little was changed in the revenue line.

“The market is expected to be positive [in its reaction] on the margin, but it is far from solving the problem, because there is considerable uncertainty as to whether the government will achieve this volume of revenue,” he said.

With the cutting of R$11.2 billion, the adjustment seems to have been made more on the spending side, says Mr. Leal. His suspicion is that the main vector was the upward reassessment of mandatory spending on social security and social assistance, two items that were growing a lot, according to him.

The government’s announcement came closer to Warren Investimentos’ forecast of a R$16 billion freeze and was considered “quite positive” by chief economist Felipe Salto. In his assessment, it was a sign that the government wants to fulfill its promise to meet the targets set out in the new fiscal framework.

Warren estimates that this will require a cut of R$26.8 billion in discretionary spending this year. With the containment of R$15 billion, that leaves R$11.8 billion to be frozen, which could still happen in the next editions of the bimonthly evaluation report, in September and November.

Ana Paula Vescovi, Santander’s chief economist and former Secretary of the Treasury, also said in a comment that “explicitly, the government did not aim for the center of the primary result target”. Santander projected an adjustment of R$15 billion in its July assessment.

Economists say they need to wait until the July report is released on July 22 to understand which mandatory expenses have been revised upwards and which revenues have been revised downwards.

Doubts regarding the government’s commitment to the fiscal targets set for 2024 once again caused a sharp deterioration in local financial assets on Thursday.

While the amount of resources that will be frozen this year to achieve the zero deficit was not known, the exchange rate rose sharply, and once again the real depreciated to R$5.58 for one dollar, while future interest rates rose sharply.

At the end of the day, however, Mr. Haddad announced that the government would freeze R$15 billion in spending, which brought some relief to the markets—a move that players believe could extend into Friday’s session.

The Brazilian real ended the day down sharply against the dollar. The exchange rate rose 1.89% in the spot segment, trading at R$5.5872 for one dollar and at R$6.0889 for one euro.

After the announcement, however, the futures for August moved away from the day’s high and closed up 1.13% at R$5.56.

A similar dynamic was observed in interest rate futures, which shot up along the entire curve during the trading session, but moved away from the day’s highest levels after the government signaled that it was trying to meet the targets of the framework.

The interbank deposit rate (CDI) for January 2026 jumped to 11.31% from 11.185%, but closed below the 11.40% mark it was trading at before the government’s announcement.

The Ibovespa, already closed during the announcement, fell 1.39% to 127,652 points.

*Por Renan Truffi, Fabio Murakawal Julia Lindner, Anaïs Fernandes, Marcelo Osakabe, Ívina Garcia, Gabriel Roca, Gabriel Caldeira, Victor Rezende — Brasília, São Paulo

Source: Valor International

https://valorinternational.globo.com/
/by

Amazon, Cerrado agribusiness at risk due to environmental pressures

Report warns that 74% of agricultural land in the region may become unviable by 2060

07/18/2024

Agriculture in jeopardy: large-scale monocultures, with intensive irrigation systems and excessive use of inputs, fertilizers, and pesticides — Foto: Valter Campanato/Agência Brasil

Agriculture in jeopardy: large-scale monocultures, with intensive irrigation systems and excessive use of inputs, fertilizers, and pesticides — Foto: Valter Campanato/Agência Brasil

If the current agribusiness model is maintained in the future, with pressure on natural capital and producing major environmental impacts, the activity runs the risk of becoming unviable. Scenarios project that the viability of 74% of current agricultural land on the border between the Amazon and the Brazilian savanna (“Cerrado”) could be compromised by 2060.

This data is part of the executive summary of the “Thematic Report on Agriculture, Biodiversity and Ecosystem Services” produced over three years and launched on Tuesday by a group of 100 researchers from several fields linked to 40 institutions in all Brazilian biomes.

“We want to highlight the importance of an integrated agenda between agriculture and conservation in Brazil, alerting people to the environmental liabilities generated by conventional farming,” said biologist Rachel Bardy Prado, one of the coordinators of the report and a researcher with the soil department of the Brazilian Agricultural Research Corporation (Embrapa) for 21 years.

Brazilian ecosystems are home to nearly 20% of the planet’s described species. The country is first in the ranking of the 17 most megadiverse nations in the world. On the other hand, agribusiness is responsible for 20% of formal jobs and 27% of the country’s GDP—or R$403.3 billion in 2020. “For the most part, it is marked by large-scale monocultures, with intensive irrigation systems and excessive use of inputs, fertilizers, and pesticides,” said the note to press.

The report mentions that crops dependent on pollinators account for 55% of the annual monetary value of national production. “This service is very important and has been compromised by pesticides, the fragmentation of the landscape, and the destruction of forests,” said Ms. Prado. “Pollination is one of the essential services, like clean water.”

“The conservation and production agendas are separate. Our proposal is for them to be shared”, she added. The biologist said what has been known for years in the country, but has not become a reality: “We have to stop seeing biodiversity as an obstacle to development. It’s the other way around. This is our great wealth, for different sectors of production and especially for agriculture.”

The summary of the report was produced by the Brazilian Platform on Biodiversity and Ecosystem Services (Bpbes), an initiative launched in 2017 that brings together 120 university professors, researchers, environmental managers, and holders of traditional knowledge.

The summary indicates what is in the six chapters of the report: the first is about the benefits provided by nature, the second mentions the trajectory of land use. The third shows future scenarios, and the fourth practical solutions for managing agriculture and natural resources.

The fifth chapter discusses opportunities for greater social inclusion and income generation. The last is about governance, where the main successful examples of reconciling conservation and agriculture with international requirements have been consolidated.

about:blank

“We have to look at a multifunctional rural landscape. This means a landscape that can provide more than food, but all the ecosystem services essential to human well-being such as clean water, fertile soil, climate regulation, and pollination,” said the biologist.

*Por Daniela Chiaretti — São Paulo

Source: Valor International

https://valorinternational.globo.com/

/by

Ahead of spending cuts, Ministry of Finance maintains growth forecast

Macrofiscal Bulletin is expected to endorse official growth projection of 2.5% for this year

07/18/2024

Fernando Haddad — Foto: Leo Pinheiro/Valor

Fernando Haddad — Foto: Leo Pinheiro/Valor

The Ministry of Finance is unlikely to make any major changes to its new macroeconomic projections, according to a source consulted by Valor on Wednesday. The figures will be released this Thursday by the ministry in the Macrofiscal Bulletin.

The Macrofiscal Bulletin is important because it serves as a guide for the preparation of the federal budget and the calculations of the spending freeze—necessary for the federal government to comply with the spending limit established by the fiscal framework and the primary result target.

The economic team was working on a total expenditure freeze of R$10 billion. The official figure will be released on Monday in the revenue and expenditure assessment report.

According to the source, the tendency is for the document not to bring “major news” and to follow a “more parsimonious scenario”. Currently, the Ministry of Finance projects a GDP growth of 2.5% for this year and 2.8% for next year.

On Tuesday, President Lula said that “if the money we put into circulation in this country is circulating, we will grow by more than 2.5%” in 2024.

The statement was made at a meeting with representatives of the food industry at the Planalto Palace, where the executives announced investments of R$120 billion by 2026. Of this total, R$23 billion was already invested last year.

At the same event, Finance Minister Fernando Haddad also said that it is “likely” that the ministry’s official projection for this year’s GDP growth will be revised upwards.

“We’re always parsimonious because we don’t want to suffer setbacks. But everything indicates that, even with the calamity in Rio Grande do Sul, which affected a state that accounts for almost 8% of Brazil’s GDP, the economy hasn’t stopped growing. Even with the external lockdown, the concerns about the Fed, the repercussions on our Central Bank here, the economy continues to grow,” he said.

On Tuesday morning, after a meeting with Mr. Haddad, the president of the Brazilian National Bank of Social Development (BNDES), Aloizio Mercadante, also said that the Finance Ministry would need to recalculate its projections upwards.

“For the BNDES, we’re going to have greater growth than what has been projected so far,” he said, citing the expansion of both approvals and disbursements of credit operations carried out by the institution.

In the case of inflation indicators, the Ministry of Finance’s respective projections for 2024 and 2025 are Brazil’s benchmark inflation index IPCA of 3.7% and 3.2%; National Consumer Price Index (INPC) of 3.5% and 3.1%; General Price Index – Internal Availability (IGP-DI) of 3.5% and 3.4%.

*Por Estevão Taiar — Brasília

Source: Valor International

https://valorinternational.globo.com/
/by