Brazil has access to clean energy, which is an advantage, David L. Goldwyn says
19/09/2024
The energy transition to a low-carbon model is critical for at least three reasons, said David L. Goldwyn, president of Goldwyn Global Strategies.
One reason is the very extreme environmental consequences, such as those seen in Brazil, Europe, and the United States. Another is geopolitical, with climate migration having very serious impacts, such as civil unrest. The third is opportunity. “We are talking about a transformation of the global economy and this is a tremendous opportunity for jobs for Brazil,” he summed up.
Mr. Goldwyn pointed out that Brazil has access to clean energy, which is an advantage. “But it takes a lot of political work to get to where we want to be.”
Swedish fast-fashion chain expects to have stores nationwide within three years
09/19/2024
H&M will also sell products made in Brazil, in addition to imported items — Foto: Casper Hedberg/Bloomberg
Swedish fashion chain H&M will open its first stores in Brazil in the second half of 2025, the company said on Wednesday, in its first interview since revealing its entry into the country, which was announced by the group in 2023.
Valor has learned that the stores are expected to open between September and October of next year, in the cities of São Paulo and Rio de Janeiro. The first stores will be launched in Allos, Iguatemi, and Multiplan malls, as Valor previously reported.
The company has not confirmed these details. However, it stated that contracts have already been signed for the first two stores, said Maria Fernanda De Luca, H&M’s chief financial officer in Brazil.
“There is a well-researched strategic plan in place, and the pace of expansion will, of course, depend on the results [of the stores],” she said. “We had to explain to them [the controlling shareholders] that we are full of regulations, bureaucracies, and that it is already a complex subject to discuss. It’s even a bit embarrassing to address this because it truly takes time to get certifications and approvals, which surprised them quite a bit, as they couldn’t understand it,” she said during a presentation at the Latam Retail Show on Wednesday evening.
After being asked at the event in São Paulo, the company confirmed that, within a maximum of three years, it will have stores in every state. “Perhaps even before that,” Ms. De Luca said. If this progresses, an average of 8 to 9 stores will be opened each year.
Additionally, the plan is to enter the country with “affordable prices,” Ms. De Luca said, ensuring a competitive market position. Other foreign chains, like Zara, have a more premium brand positioning in Brazil.
H&M will also sell locally produced products, in addition to imported items, following a strategic shift by the global leadership.
“When I joined the company, the plan was for everything to be imported, but over time, the global team realized that it wouldn’t be feasible. Some things simply can’t be imported. So, we are working with local partners to purchase national products,” the CFO explained.
When asked about the risks other foreign brands faced in the country, like Forever 21, which ceased operations in Brazil after a few years, the executive dismissed such concerns.
“H&M has never exited any market it has entered, except for Russia, by choice. There’s no point in discussing the economy—we believe in our product. All the markets where we still operate speak for the company,” Ms. De Luca said.
“The Swedes conducted an in-depth study of all the local competitors. We have a luxury partner with expertise here who is also helping us,” said Augusto Krambeck, H&M’s director of human resources, at the event.
He added that the retailer would almost immediately begin omnichannel operations in the country. In other words, the website and store sales channels will already be integrated.
“It will take one to two months to launch the omnichannel,” Mr. Krambeck said.
He noted that H&M has been planning its entry into Brazil for the past ten years. “It’s been ten years of monitoring, ever since we started in Chile. We didn’t come here with just a year and a half of planning. The fact is, Brazil has been through a lot—World Cup, Olympics, recession, impeachment. And H&M wanted to create a ‘buzz.’ This entry would have gone unnoticed,” he said.
H&M has 51 stores and 3,800 employees in Chile, Peru, and Uruguay, after a decade of operations in these countries.
Maurício Tolmasquim, executive director of energy transition and sustainability at Petrobras, said on Thursday (19) that the state-owned company has set aside $11.5 billion to investments in renewable energies.
In a presentation at the Brazil-US Climate Impact Summit 2024, organized by Valor and AmCham at the United Nations (UN) headquarters in New York, Mr. Tolmasquim pointed out that the company has already reduced its absolute greenhouse gas emissions by 40% and its methane gas emissions by 70%. The company will allocate 11% of its investments to the energy transition.
According to him, these amounts are three times higher than emissions from Brazilian domestic aviation.
Mr. Tolmasquim, who used to be president of the Energy Research Company (EPE), responsible for planning the sector in Brazil, pointed out that the goal of limiting the rise in temperature to 1.5 degrees Celsius implies a 7% annual reduction in greenhouse gas emissions.
The Petrobras executive stressed that this 7% drop is equivalent to what happened during the COVID-19 pandemic. “We’d need one COVID a year to meet the target. So we can see the size of the challenge,” he said, noting that this reduction, unlike what happened during the pandemic, should happen without the impacts on the economy and society caused by COVID-19.
He pointed out that this need for reduction will have a significant geopolitical impact, increasing the need for dialogue between countries and a change in primary energy sources.
Mr. Tolmasquim pointed out that Brazil has the advantage of having a renewable energy mix, with 50% of the total coming from renewable sources. For this reason, he said, Brazil can deepen trade partnerships with the United States, China, and the European Union.
In electricity, the level jumps to 91%, while the world average is 30%. In transportation, he stressed, 35% of the Brazilian matrix is renewable.
*Por Robson Rodrigues, Rafael Rosas — Nova York, Rio de Janeiro
FGV Ibre’s regional report shows region’s economy is outpacing national average growth, but industrial sector lags behind
09/18/2024
The Northeast region of Brazil is experiencing sustained economic growth, surpassing the national average in 2024, but its industrial sector still lacks dynamism and lags behind the country’s average performance. This assessment comes from Flávio Ataliba, coordinator of the Center for Northeast Development Studies at the Brazilian Institute of Economics of Fundação Getulio Vargas (FGV Ibre), who is also responsible for the Northeast Macro Regional Bulletin, released on Tuesday (17).
Mr. Ataliba states that the industrial sector’s issues in the Northeast are structural, and production levels have not yet returned to pre-pandemic figures. “The key takeaway is that the Northeast’s industry needs to become more dynamic. It still faces structural problems and is below the national level,” he said.
The newly released document compiles a series of economic data from the nine states in the Northeast, showing, based on the Central Bank’s IBC-Br index, that the region’s economy fell by 1% in June compared to the previous month, while Brazil as a whole saw a 1.4% increase. However, for the year to date, the Northeast’s economy has grown by 3.1%, compared to the national average of 2.1%. In contrast, the industrial sector’s performance is different, with the Northeast decreasing by 0.4% for the year, while Brazil as a whole increased by 2.6%.
Mr. Ataliba suggests a deeper analysis is needed to identify the main bottlenecks in the Northeast’s industrial sector. “Is it financing? Access to markets?”
The bulletin also cites data from the National Confederation of Industry (CNI) to highlight that industrial business confidence in the Northeast remains low. In July, it dropped by 2.2 points to 48.7 points. “According to the indicator, there is some resistance among entrepreneurs to invest and increase production in the short term,” the document notes.
In stark contrast, the performance of the services sector has been more positive. The Northeast Macro Regional Bulletin, using data from IBGE, shows that seven out of the nine states in the Northeast recorded an increase in the volume of services in June compared to May. Only Rio Grande do Norte and Alagoas saw a decline, the same two states that reported a decrease for the year to date.
The study also analyzed data from IBGE’s continuous PNAD survey and found that in the second quarter of 2024, the unemployment rate in the Northeast was 9.4%, a decrease of 1.7 percentage points from the first quarter of the year, which stood at 11.1%.
Arthur Lira advocates agreement with government to define leadership of new body
09/18/2024
Arthur Lira — Foto: Brenno Carvalho/Agência O Globo
Brazil’s Lower House Speaker Arthur Lira has indicated to his allies that the creation of the Climate Authority, announced by the government last week, will only move forward if its leader is chosen through a consensus between the Executive and Legislative branches. The continuation of the body would depend on the approval of the National Congress, which is responsible for passing or rejecting provisional presidential decrees.
During the transition period in 2022, the government attempted to establish the body, one of President Lula’s campaign promises, but backed down in the face of resistance from the Legislature.
In private conversations, Mr. Lira has argued that attempting to impose a leader could increase the likelihood of resistance in Congress, even though recent episodes of wildfires across the country have bolstered the case for the need for such a climate authority.
The rural caucus has already signaled that it may mobilize against the appointment if not consulted in advance. The group aims to prevent the body from falling under the Ministry of Environment, led by Marina Silva.
Congressman Pedro Lupion, the head of the caucus, said, “Marina and her team have already shown their ability to manage a crisis like this.” He added, “Their incompetence has been proven. Congress will have to approve [the Climate Authority] and, in the meantime, find the best government area and the best candidates.”
“The climate authority is not a single person but a committee that evaluates both prevention and correction measures. If it operates like in Rio Grande do Sul, appointing someone like Paulo Pimenta as the authority, it won’t work because it politicizes the debate without solving anything,” said Congressman Alceu Moreira, a member of the Agricultural Parliamentary Front (FPA).
Mr. Moreira believes that if Minister Marina Silva were chosen to also head the Climate Authority, her appointment would be rejected by Congress.
“The Climate Authority should be appointed by the National Congress and established as an institution with a clear mandate. It should be a state entity, not a government one. If it merely reflects the government’s ideology, it serves no purpose and only causes harm. It needs to be a technical expert,” emphasized the congressman from Rio Grande do Sul.
“I think it’s a positive initiative, as long as it’s not an ideological appointee. This position requires a nonpartisan approach and strong coordination within and outside the government. If not, we already have the Ministry of Environment. I support constructing a name with the three branches of government,” said Congressman Zé Vitor, a member of the rural caucus and the Lower House’s Environment Committee.
The opposition has already started criticizing the creation of the Climate Authority. Congresswoman Bia Kicis, in a video posted on social media, claimed the government “only thinks about creating public agencies and spending more money.” She questioned, “Isn’t Marina Silva the minister? Shouldn’t she be the Climate Authority?”
In an interview with Valor, Minister Marina Silva stated last week that she has been discussing for months with Mr. Lira the need for a comprehensive policy to combat extreme weather events, which would include a Climate Authority.
Federal government investments reached their highest level for the first seven months of 2024 since 2016. However, economists consulted by Valor warn that these investments are still insufficient to significantly boost economic growth or ensure adequate infrastructure for the country. This responsibility largely falls to the private sector given Brazil’s fiscal constraints. Despite the recent increase, federal investment remains below the average of developed countries and continues to lack transparency.
From January to July this year, federal investments totaled R$32 billion, the highest level for this period since 2016, when disbursements reached R$36.8 billion. These figures, obtained by Valor from the official records of the National Treasury Secretariat (STN), are adjusted to July 2024 prices and exclude financial investments. Compared to the same period last year, there was a 31.8% increase.
In the early 2010s, annual federal investments hovered around R$50 billion. However, the increasing need for fiscal adjustments—culminating in adopting the spending cap in 2016—and the difficulty in cutting mandatory expenses led to fiscal adjustments primarily targeting discretionary spending, such as investments. Brazil’s budget rigidity, with over 90% of mandatory expenses, also limits the amount the government can invest.
Consequently, there were years when federal investments were insufficient even to cover the depreciation of federal infrastructure—a situation that has improved with increased disbursements in recent years.
Following the approval of the so-called Transition Constitutional Amendment at the end of 2022 and the new fiscal framework for federal accounts last year, these disbursements have started to grow again. The framework sets a minimum of 0.6% of GDP for federal investments.
The Annual Budget Bill (PLOA) for 2025, presented at the end of August, mandates that investments must reach at least R$74.3 billion. For this year, the minimum is R$68.5 billion. These figures include disbursements from the New Growth Acceleration Program (PAC), launched by President Lula in 2023.
“Public investments remain very low,” said Manoel Pires, coordinator of the Center for Fiscal Policy and Public Budget at the Brazilian Institute of Economics at the Getulio Vargas Foundation (FGV Ibre).
He noted that last year these disbursements amounted to 0.5% of GDP. Including investments by state-owned companies, which often serve as an outlet for infrastructure spending in Brazil, the figure rises to 2% of GDP.
In contrast, average federal disbursements by OECD countries are around 3.5% to 4% of GDP—a difference that, accumulated over the years, results in a significant gap in capital stock between Brazil and developed countries.
“Brazil’s case is particularly severe because our infrastructure is very poor. Other countries don’t have as much need for investment,” said José Ronaldo de Souza Jr., chief economist and partner at consultancy Leme Consultores, and a professor at the Brazilian Institute of Capital Markets (IBMEC).
While the economists consulted by Valor advocate for most investments to come from the private sector, they also acknowledge that federal contributions are often necessary to make projects viable. Mr. Souza Jr. cited the highway BR-381 as an example. Auctioned in August by the federal government, the BR-381, known as the “Death Road” for its dangerous conditions, involves technically challenging construction. The auction stipulates that 31 kilometers out of a total of 296 kilometers will be turned into a freeway by the federal government itself.
Despite agreeing on the need to expand investments, analysts emphasize the importance of maintaining the current fiscal framework to avoid greater imbalances in the federal budget. Currently, the gross government debt (DBGG), considered by many economists as the primary indicator of federal indebtedness, stands at 78.5% of GDP, according to the Central Bank. This figure represents an increase of 6.8 percentage points since the beginning of President Lula’s third term.
Moreover, there is near-unanimity among public finance experts that the indicator will continue to rise in the coming years. The Independent Fiscal Institution (IFI), a Senate-affiliated fiscal policy watchdog, projects that the DBGG will reach 100.6% of GDP by 2034.
A third complicating factor is that Brazil’s starting point is higher than most emerging markets. According to the International Monetary Fund (IMF) in March, Brazil’s gross debt exceeds the average for emerging countries by more than 15 percentage points, trailing only Egypt, Ukraine, and China.
“Everyone is scrutinizing Brazil’s public debt closely,” said Margarida Gutierrez, a professor at the Federal University of Rio de Janeiro who likens the federal government to “constantly using an overdraft line of credit.”
Economists say the main way to create fiscal space for increased investments would be to change the rules for mandatory federal spending. Among the suggested options are unlinking social security and welfare benefits from minimum wage hikes, indexing the minimum wage only to inflation without real increases, and modifying constitutional spending floors for health and education, currently tied to revenue. From January to July, the total federal expenditure was R$1.325 trillion, but only R$32 billion was allocated to investment.
As reported by Valor in recent weeks, the economic team is discussing changes to the rules governing several sources of mandatory spending pressures, such as unemployment insurance, the Workers’ Severance Fund (FGTS), wage bonuses, the Simples Nacional a simplified tax regime for small businesses), and the FUNDEB (Fund for Maintenance and Development of Elementary Education). These suggestions are expected to be formally presented only after the municipal elections to be held in early October.
“A country with such high public expenses cannot have such low spending on investments that create positive externalities for the economy and well-being,” said Mr. Souza Jr.
“Every time Brazil sees a bit of growth, we start running out of ports, airports, sanitation, highways, railways,” added Mr. Gutierrez.
Another issue highlighted is the lack of transparency in federal investments. The investments reported monthly by the Treasury include parliamentary budget allocations, which have been a subject of discussion among the Executive, Legislative, and Judiciary branches due to their lack of transparency.
“In accounting terms, the expenses are recorded as investments, but many items end up under this category,” said Bruno Lavieri, chief economist and partner at intelligence.
The economic team is weighing reduced payments for workers with larger severance packages and higher contributions from sectors with higher turnover
09/16/2024
Alexandre Manoel — Foto: Rogerio Vieira/Valor
With a strong job market and low unemployment, the government’s economic team is exploring ways to address what some experts view as double protection for workers dismissed without just cause: unemployment insurance and the 40% severance fine on deposits in the Workers’ Severance Fund (FGTS).
One proposal is to adjust the number of unemployment insurance payments based on the size of the severance fine. Under this plan, the higher the fine, the fewer unemployment insurance installments a worker would receive, creating a balance between the two forms of compensation. Notably, the proposal does not involve altering the FGTS fine itself.
Another idea under consideration is improving the funding of unemployment insurance. This benefit is financed through the Workers’ Support Fund (FAT), funded by a portion of the PIS and Cofins social taxes. The government is exploring the possibility of increasing contributions from industries with higher worker turnover, as these sectors rely more heavily on unemployment insurance. While the Constitution allows for differentiated rates, this provision has not yet been implemented.
These preliminary ideas have not yet been formally presented to the Ministry of Labor and Employment and will need to be refined through discussions with other government sectors, as well as reviewed by key ministers and President Lula. Whether they will become concrete proposals remains uncertain.
These discussions are part of a broader spending review aimed at curbing the rise in mandatory expenditures to ensure the fiscal framework’s sustainability.
The spending review focuses on three key areas: revising social benefits, modernizing automatic rules for budget allocations to specific sectors, and reformulating public policies.
The aim of adjusting government programs is to save resources, address inefficiencies, and improve productivity.
While experts agree that the government’s efforts to strengthen the spending review are moving in the right direction, concerns remain about the implementation of potentially unpopular measures.
“Reforming mandatory spending, such as adjustments to the Continuous Cash Benefit, wage subsidies, or unemployment insurance, is essential to restore fiscal credibility, which has been eroding since the start of the year,” says Alexandre Manoel, chief economist at AZ Quest. He believes the government has fallen short in managing the expectations of economic stakeholders since taking office.
Rafaela Vitória, chief economist at Banco Inter, adds that a reform and consolidation of benefits could positively impact the fiscal outlook in the medium and long term, potentially accelerating fiscal adjustments. “The current structure shows that stronger economic growth has led to faster spending, complicating the adjustment process,” she explains.
Manoel Pires, coordinator of the Fundação Getulio Vargas Center for Fiscal Policy and Public Budget, notes that many of the ideas being discussed are not new. “The issue is not formulating the ideas but getting them on the government’s agenda,” he says. “That has yet to happen.”
Echoing Mr. Pires’ observation, the government is internally resistant to the spending review. One official acknowledged that the economic team’s main challenge is “selling” the concept to the various ministries.
Professor Alberto Handfas from the Federal University of São Paulo (UNIFESP) views the government’s push to cut social program spending as excessive. “I don’t believe this will solve the fiscal tightening issue,” he remarked, suggesting that other expenses, such as the salaries of judiciary officials, high-ranking military personnel, and interest payments, should be addressed first.
In inflation-adjusted terms, the government spent R$52.3 billion on unemployment insurance in the 12 months leading up to July this year. Data from the Ministry of Labor indicates that despite a booming job market, the number of people claiming the benefit has not decreased.
“Unemployment insurance spending has grown by 7.5% above inflation this year, which starkly contrasts the more favorable labor market, characterized by record employment and formal job creation,” says Ms. Vitória. “This discrepancy reveals that the program’s design is not well-suited to the cyclical conditions of the economy, and it imposes a significant fiscal burden, complicating the necessary adjustment of government accounts.”
Ms. Vitória also highlights the overlap between support mechanisms for workers, such as the FGTS fine and unemployment insurance. “This duplication incentivizes turnover rather than fostering job stability.” A government technician echoed this sentiment, explaining that internationally, it’s typical to use one form of support or the other—but not both, as is the case in Brazil.
To qualify for unemployment insurance, beneficiaries must have worked under a formal contract for at least 12 of the 18 months preceding their dismissal when applying for the benefit for the first time. The requirement drops to nine months for a second application, and for subsequent applications, it falls to six months.
The number of installments a worker can receive ranges from three to five months, depending on how many months they were employed. The FGTS severance fine is paid to workers dismissed without just cause.
In cases of dismissal without agreement, the fine amounts to 40% of the total balance in the FGTS account, while it drops to 20% if the dismissal is part of an agreement between employer and employee.
In a booming economy, government experts suggest that many workers strategically seek the FGTS fine and unemployment insurance, confident they can quickly find new employment once their savings are depleted.
“If I’m fired, I can claim unemployment insurance, receive the FGTS fine, withdraw from my FGTS account, collect severance pay, and take accrued vacation plus an additional third. In other words, I leave with a compensation package and a guaranteed income through unemployment insurance. Evidence suggests this creates a tendency among workers to seek redundancy, which in turn encourages turnover,” explained a source.
This dynamic led to the proposal to adjust the number of unemployment insurance installments based on the FGTS fine. According to economic team technicians, this change could result in tax savings while also helping to reduce turnover.
José Luis Datena assaulted Pablo Marçal with a metal chair, who was rushed to hospital
09/16/2024
José Luiz Datena hit his Pablo Marçal with a metal chair amidst a fierce argument broadcast by TV Cultura — Foto: Reprodução TV
Physical violence marked a political debate live on television among two runners for mayor of Brazil’s largest city on Sunday evening. TV star José Luiz Datena hit his challenger, digital influencer Pablo Marçal, with a metal chair amidst a fierce argument broadcast by São Paulo state-run TV Cultura. Mr. Datena was immediately expelled from the debate, and Mr. Marçal was rushed to the hospital, where he stayed overnight.
The aggression occurred after Mr. Marçal mentioned that Mr. Datena had allegedly been involved in a past sexual harassment case, which was eventually dismissed. Off-camera, Mr. Marçal repeatedly provoked Mr. Datena, implying that he was a rapist.
Both candidates are newbies in politics. Mr. Datena is a famous journalist and hosts a popular afternoon TV show, considered by many as sensationalist. Mr. Marçal is a far-right digital influencer with millions of followers. Mr. Marçal has been surging in the opinion polls, and is currently in a statistical tie to win with incumbent Ricardo Nunes, and leftist Guilherme Boulos. Mr. Datena has been declining in the polls and rumors have it that he may leave the race.
Tensions between both candidates were high from the start of the debate, and even from previous debates. Mr. Marçal has used the strategy of making serious accusations against all his opponents during the campaign.
On Sunday’s debate, when chosen to ask the first question, Mr. Datena refused to direct it at Mr. Marçal as requested, arguing that his opponent only used the debates to stage a performance for his social media channels. In response, Mr. Marçal brought up the alleged sexual harassment case.
Mr. Datena claimed the case was dismissed due to lack of evidence and retaliated by calling Mr. Marçal a “petty bank thief.” In 2010, Mr. Marçal was sentenced to two years and six months in prison for participating in a group that committed bank fraud, involving the acquisition of victims’ account details for online banking access—he appealed, and the sentence eventually expired.
Off-camera, Mr. Marçal continued to provoke and accuse his opponent. In the fourth segment, after another mention of the harassment case, Mr. Datena approached Mr. Marçal and assaulted him. Mr. Marçal clutched his ribs, indicating pain, and was insulted by Mr. Datena as he left the auditorium.
Mr. Datena wanted to leave the live debate and ended up being expelled. His team watched the scene with surprise and disbelief.
Moderator Leão Serva announced that the debate would be paused and called for a commercial break. The event resumed about three minutes later.
Following the debate, Mr. Marçal’s campaign released a statement: “Pablo Marçal was cowardly attacked by José Luiz Datena, who struck him in the ribs with an iron chair. Unfortunately, Marçal had to leave the debate urgently in an ambulance to receive emergency medical care.”
The campaign expressed regret that the debate continued without the injured candidate. “It is regrettable that the debate continued without the presence of the attacked candidate. Pablo Marçal is injured, with suspected fractures in the thoracic region and great difficulty breathing,” the statement read. “We hope that appropriate legal measures will be taken and we count on the people’s prayers.”
Tassio Renan, Mr. Marçal’s lawyer, reported that the candidate was experiencing rib pain and hand injuries. Mr. Marçal was to undergo imaging tests and remain in the hospital overnight. His Monday schedule would be canceled. The campaign demanded security presence at future debates.
In a statement, TV Cultura expressed regret over the incident and said it took all necessary actions according to the established rules, including expelling Mr. Datena. “Additionally, the debate continued with the agreement of the remaining candidates,” the statement read.
Upon leaving the studio, Mr. Datena admitted to losing his temper. “Unfortunately, I lost my temper. Should I have left? Probably. I could have simply walked out and gone home, which would have been much better. But just as I weep as a human reaction, this was a human reaction I couldn’t contain,” he added. Asked by a TV Cultura reporter if he regretted his actions, he replied, “Of course not.”
Speaking to journalists, Mr. Datena said it was up to the party to decide his candidacy, but he intended to stay in the race. “I intend to remain a candidate until the end. It depends on the party. It depends on everyone. I intend to continue as a candidate,” he said. “Was I wrong? Yes. But what can I do? It’s done.”
The remaining candidates attempted to capitalize on the episode. Tabata Amaral used the assault to highlight the minority status of women in the race. The candidate called the “men’s behavior” in the debate “outrageous” and thanked Marina Helena for being the only one to maintain the debate’s level by asking about proposals for São Paulo’s adaptation to climate change.
Candidate Guilherme Boulos and the incumbent Ricardo Nunes condemned the assault. The São Paulo mayor used his closing remarks to try to attract Mr. Datena’s voters, betting that the TV presenter would exit the race after the attack. “The assault is unjustifiable, but he was provoked and defended his family’s honor,” he said. After the debate, Mr. Nunes, Ms. Amaral, and Mr. Boulos reiterated that Mr. Marçal had provoked Mr. Datena off-camera and called the incident unfortunate.
The debate marked a significant point in the history of televised political battles in Brazil. With no time in the free electoral broadcast slots, Mr. Marçal was constrained by TV Cultura’s rules and struggled to replicate his previous debate strategy, where he had become the center of attention by insulting all his opponents. He encountered Mr. Datena’s emotional instability, evident in the candidate’s recent public appearances and interviews.
*Por Cristiane Agostine, Murillo Camarotto, César Felício, Maria Cristina Fernandes — São Paulo
Justice argues that the fiscal costs of wildfires outweigh the expenses needed to combat them
09/16/2024
Flávio Dino — Foto: Rosinei Coutinho/SCO/STF
Supreme Court Justice Flávio Dino authorized the federal government to issue extraordinary credits beyond the fiscal target until the end of the year, exclusively to combat wildfires affecting Brazil.
“We cannot deny the maximum and effective aid to over half of our territory, its respective populations, and the entire flora and fauna of the Amazon and Pantanal, based on compliance with an accounting rule not found in the Constitution, but rather in the realm of sub-constitutional laws,” Mr. Dino stated in his decision on Sunday (15).
Additionally, the justice argued that the negative impact on fiscal responsibility would be more attributable to the erosion of productive activities in areas affected by the fires and drought than to the temporary suspension of fiscal rules through the end of 2024.
Mr. Dino also ordered the relaxation of rules for hiring and retaining wildfire brigades, waiving the current law’s three-month waiting period for rehiring staff who have previously provided service.
The ruling emphasizes the need for increased involvement of the Federal Police in investigating the role of human activity in the majority of the fires in the Pantanal and Amazon regions.
Mr. Dino’s decision followed a warning from the legal advisory office of the Ministry of Planning and Budget about the risks that extraordinary credits for combating wildfires—outside the fiscal framework’s spending limit—could pose to the balance of public finances.
The legal advisory’s terms were included in a submission by the Attorney General’s Office (AGU) sent to Mr. Dino to support the decision to release extraordinary credits for the 2024 budget. Last Tuesday, the justice gave the AGU 48 hours to present its position.
“The impact on macroeconomic indicators, such as inflation, interest rates, and public debt, could be significant, especially if these extraordinary expenses are financed by increased public debt. Therefore, caution is recommended in issuing extraordinary credits, along with compensatory measures to mitigate fiscal and macroeconomic risks, ensuring the sustainability of public finances in the medium and long term,” said Richard Marinho Cavalcanti, coordinator of Budgetary Affairs for the Ministry of Planning’s legal advisory office.
Mr. Cavalcanti further explained that these exceptional resources might force the government to make fiscal adjustments to meet the targets set by the fiscal framework.
“Although these credits are exempt from the spending limits of Supplementary Law 200/2023, they still impact the primary result target established in the 2024 Budget Guidelines Act. This requires strict fiscal adjustments from the government to ensure compliance with this target, under penalty of fiscal imbalance and economic deterioration.”
Wildfires in Brasília
A large wildfire broke out on Sunday in Brasília National Park, also known as Água Mineral Park.
Mauro Pires, president of ICMBio (Chico Mendes Institute for Biodiversity Conservation), said the fire shows signs of being intentionally set. He stated that the blaze began near the Granja do Torto region and quickly spread into the park due to hot and dry conditions.
As of Sunday night, no arrests had been made. “The cause of the fire is undoubtedly criminal. It started at the border of Granja do Torto and spread into the park,” Mr. Pires said.
The firefighting efforts include teams from the Federal District Fire Department and ICMBio brigades. The teams remained on site as of Sunday evening. The park is a vital conservation area, protecting rivers that supply the region.
As of Sunday afternoon, Brazil still had 6,251 active wildfire hotspots, according to data from the National Institute for Space Research (INPE). Pará had the most fires, with 1,765 hotspots, followed by Mato Grosso with 1,150 and Tocantins with 637.
In São Paulo, at least 12 cities had active fires on Sunday, according to the state’s Civil Defense. On Saturday, the state government deployed 20 aircraft with 100% of its resources to combat fires in 13 municipalities.
From January through Saturday, Brazil recorded 182,568 fire hotspots, nearly triple the number in Bolivia, which ranked second with 64,091. Venezuela had 39,000, and Argentina followed with 22,130.
International debt holders are divided amid negotiations for additional funds
09/13/2024
Airline has begun discussions with lessors and bondholders to find solution to its current financial situation — Foto: Leo Pinheiro/Valor
Groups holding Azul’s international debt bonds are at odds amid negotiations for the airline to raise additional capital, sources informed Valor.
The airline, undergoing a fresh financial restructuring, is seeking to raise between $300 million and $400 million from these creditors by using its logistics arm, Azul Cargo, as collateral.
The primary issue is the discrepancy in the collateral received by various creditors for their past bonds and how these differences might be reconciled to facilitate new capital for the airline.
“Azul has issued multiple bonds with varying maturities and collateral. Some creditors believe these negotiations must take this into account,” an insider revealed. This has led to disagreements within the group, which needs to make a decision regarding the additional funds for the airline.
A report by Debtwire on Wednesday (11) indicated that some creditors had split from the main group and were seeking an advisor, including Oaktree Capital Management.
In a market statement, this group of creditors denied any split but did not detail the internal disagreements regarding the collateral.
“The Ad Hoc Group of Azul Noteholders remains united and intends to engage constructively with Azul,” the group stated. This faction represents about 90% of the senior secured notes maturing in 2028, 2029, and 2030. They also hold 90% of the outstanding convertible notes due in 2028. Cleary Gottlieb Steen & Hamilton LLP and Mattos Filho have been hired as legal advisors, while PJT Partners is serving as the financial advisor.
Azul has started discussions with both lessors and bondholders to find a solution to its current financial situation and to avoid a more extensive restructuring through a Chapter 11 bankruptcy filing. Meetings were held last week in New York.
Valued at approximately $800 million, Azul Cargo is expected to be the main asset used as collateral to raise funds and avoid Chapter 11. This operation would follow the same strategy employed with TudoAzul, the airline’s loyalty program, which was used as collateral for a loan last year.
A source familiar with the talks mentioned that Azul needs an influx of funds this year to gain financial breathing room, and it is most likely that this money will come from its current creditors.
The airline sought its bondholders to raise between $300 million and $400 million.
Joana Bontempo, a consultant and head of corporate restructuring at CSMV Advogados, noted that securing new money from creditors holding different bond issues is typically complex, as the bonds need to be renegotiated to allow new collateral and align divergent interests.
“The different payment priorities and creditor rights need to be accommodated to reach a swift and consensual solution,” she said.
According to sources, negotiations with bondholders are closely tied to discussions with aircraft lessors. This is because the holders of international debt have shown interest in providing more resources to Azul, but this new money cannot be used to pay lessors. Therefore, the debt with the lessors must be settled before new funds can be raised.
As for the lessors, total debts amounted to approximately R$18 billion by the end of the second quarter. Current talks involve five major lessors, who hold over 90% of this debt: AerCap, Avolon, Azorra, NAC, and Falko.
Last year, Azul reached an agreement to renegotiate its debt with aircraft lessors, involving the issuance of $370.5 million in unsecured debt maturing in 2030 at a cost of 7.5%, with an option to receive an additional $570 million in Azul preferred shares, priced at R$36 per share.
As the airline’s stock has underperformed due to exchange rate fluctuations and the crisis in Rio Grande do Sul, Azul has initiated a new round of talks to avoid significant dilution.
Sources indicate that current discussions with lessors involve offering a fixed portion of the company in exchange for converting the debt into equity. The dilution is expected to be around 25%.
Behind the scenes, Azul sees a favorable negotiation window. On one hand, the company is not in default on its bonds, which allows for more amicable discussions. Default situations typically force companies into adversarial positions, giving creditors the power to enforce debts—often leading to Chapter 11 protection filings.
On the other hand, Azul will also benefit from the Brazilian government’s release of the National Civil Aviation Fund (FNAC) as collateral for loans. However, the market expects airlines to officially access these funds only next year.
Azul and Oaktree Capital Management declined to comment.
*Por Cristian Favaro, Fernanda Guimarães — São Paulo
/i.s3.glbimg.com/v1/AUTH_63b422c2caee4269b8b34177e8876b93/internal_photos/bs/2019/7/9/2hVq65TnuaX3kl7Rv7lw/foto29emp-101-moda-b6.jpg)
/i.s3.glbimg.com/v1/AUTH_37554604729d4b2f9f3eb9ad8a691345/internal_photos/bs/2024/R/C/2icyhyRKSTy6lLDFQfiA/climate-summit-mauricio-tolmasquim-da-petrobras-vanessa-carvalho-valor.png)
/i.s3.glbimg.com/v1/AUTH_63b422c2caee4269b8b34177e8876b93/internal_photos/bs/2024/8/B/ICNCbETUmPHCAZB1B0VQ/18bra-100-autorida-a13-img01.jpg)
/i.s3.glbimg.com/v1/AUTH_63b422c2caee4269b8b34177e8876b93/internal_photos/bs/2024/L/U/L0RKeARSSIOR4ADL97zw/foto18bra-101-investe-a6.jpg)
/i.s3.glbimg.com/v1/AUTH_37554604729d4b2f9f3eb9ad8a691345/internal_photos/bs/2024/h/b/rD6RZLSxmiOfxpbKGtzA/260124alexandremanoel007.jpg)
/i.s3.glbimg.com/v1/AUTH_63b422c2caee4269b8b34177e8876b93/internal_photos/bs/2024/1/T/BwndQbSeA3cN2VPCGfTA/captura-de-tela-2024-09-15-231433.png)
/i.s3.glbimg.com/v1/AUTH_63b422c2caee4269b8b34177e8876b93/internal_photos/bs/2024/q/F/0BVnjYR7yDVzzareNOqg/foto16bra-301-fogo-a2.jpg)
/i.s3.glbimg.com/v1/AUTH_63b422c2caee4269b8b34177e8876b93/internal_photos/bs/2024/Q/o/NIzSQUQe6150LiHrAC1w/foto13emp-101-azul-b2.jpg)