Lower House rejects wealth tax, advances tax reform regulation

Proposal was introduced by the Socialism and Freedom Party (PSOL) in bill establishing Goods and Services Tax committee

10/31/2024

Brazil’s Lower House rejected the creation of a Wealth Tax (IGF) and, with this decision, completed the second phase of tax reform regulation on Wednesday (30). The proposed tax was introduced by the Socialism and Freedom Party (PSOL) within the bill to create the administrative committee for the upcoming Goods and Services Tax (IBS). The text now moves to the Senate.

The committee will be comprised of state and municipal representatives to manage administrative operations, oversight, and the allocation of the IBS, which will replace the Tax on the Circulation of Goods and Services (ICMS) and the Service Tax (ISS) under the new tax system. The bill sets operational guidelines for the committee and outlines the transition to the new framework, including fund distribution among states and municipalities.

The primary debate in the Lower House focused on PSOL’s amendment to create the Wealth Tax, which was rejected by a vote of 262 to 136. The proposal called for a 0.5% annual tax on wealth between R$10 million and R$40 million, 1% on assets between R$40 million and R$80 million, and 1.5% on wealth exceeding R$80 million.

Congressman Ivan Valente (PSOL, São Paulo) argued that the payment would be a “pittance” for multimillionaires and would still include deductions. He noted that the tax is already provided for in the Constitution but has never been regulated.

On the other hand, Congressman Gilson Marques (New Party, Santa Catarina) criticized the tax proposal, arguing that the wealthy would move their money out of Brazil. “Multimillionaires invest in cities, create jobs, and support the economy,” he said.

The initiative only gained support from left-leaning parties: PSOL, Brazilian Socialist Party (PSB), Workers’ Party (PT), Communist Party of Brazil (PCdoB), and Green Party (PV). Meanwhile, the Social Democratic Party (PSD), Brazilian Democratic Movement (MDB), Republicans, and Podemos, from the governing coalition, along with opposition parties Liberal Party (PL) and New Party, voted against taxing millionaires and billionaires. The coalition of the Brazil Union Party, Progressive Party (PP), Brazilian Social Democracy Party (PSDB), Citizenship Party, Democratic Labor Party (PDT), Democratic Republican Party (PRD), and Solidarity allowed members to vote freely due to internal differences.

Despite advocating for taxing the wealthy, the Lula administration remained neutral due to disagreements among coalition parties in Congress. “The government understands that the world is debating this and that it will be a central issue at the G20 discussions next week,” said Congressman Reginaldo Lopes (PT, Minas Gerais), who is also the deputy government leader.

On the other hand, lawmakers upheld a provision for a five-year review of products and services with reduced tax rates to assess the effectiveness of these tax expenditures. The PL had called for the removal of this requirement, but the proposal was rejected by a 292-106 vote.

Other adjustments made on Wednesday were the result of agreements between parties and the bill’s rapporteur, Congressman Mauro Benevides Filho (PDT, Ceará). He introduced four changes to the base text approved by the Lower House in August.

The Lower House rejected a proposal to apply the Inheritance and Gift Tax (ITCMD) to VGBL (Free Benefit Generator Life) pension plans left as an inheritance. This tax was requested by governors, who claim that these instruments are used to bypass inheritance taxes, but it faced resistance from plan operators.

The rapporteur also accepted that companies contracting self-employed business owners for services will not be held liable for unpaid taxes. “If an Uber driver doesn’t pay tax, the platform should pay. But now, no one will be responsible,” Mr. Benevides criticized. However, he included this amendment as part of the agreement to pass the bill.

Additionally, the bill removed the provision to apply the ITCMD tax to the disproportionate distribution of profits among business partners and the ban on companies within the same economic group from transferring the ICMS or future IBS credits to one another.

*By Raphael Di Cunto, Marcelo Ribeiro, Valor — Brasília

Source: Valor International

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Banks become shareholders in restructured companies

Strategy is being used in bankruptcy processes involving multiple creditors

10/31/2024

The conversion of debt into equity during company restructurings has firmly established itself as a debt reduction and deleveraging strategy in the Brazilian market. This mechanism has been increasingly employed in major bankruptcy processes, with more creditors, including financial institutions, more comfortable with the idea of becoming shareholders in restructured companies. This approach also enhances the recovery potential of loans previously considered irrecoverable, thereby avoiding more drastic write-offs.

In the case of retailer Americanas, banks became shareholders as part of a debt conversion, a necessary step in efforts to rescue the company, which was embroiled in a fraud scandal. Another example is the logistics company Sequoia. For Brazilian airline Azul, debt conversion is also on the table as a solution to its crisis. This practice is included in Light’s restructuring plan. It is similarly part of the out-of-court recovery plan for 2W.

In Brazil, significant cases of debt conversion first emerged between 2015 and 2016, such as construction firm OAS, in the wake of the anticorruption task force Car Wash. Companies owned by former billionaire Eike Batista also ended up in creditors’ hands, like MPX, now known as Eneva. According to experts, in many instances, conversion was the only viable alternative. In Eneva’s case, the energy sector company managed to recover.

Giuliano Colombo, a restructuring partner at law firm Pinheiro Neto, explains that the trend of converting debt into equity in restructuring processes is on the rise, a shift noticeable after the 2020 amendment to the Bankruptcy Act, which reduced the risks associated with creditors becoming shareholders. “A better legal framework was established, and now the perception is that it’s possible to manage the risk,” he states.

According to Mr. Colombo, before this legislative change, banks historically failed to capture potential operational improvements in companies to which they were creditors. Today, financial institutions feel more at ease participating in conversions, especially in processes involving publicly traded companies, since monetizing shares is easier when they can be sold in the secondary market.

In some negotiations involving conversion, a lock-up period—market jargon for a temporary restriction on selling shares—may be established, although this is not a standard practice.

“Some creditors have the flexibility to receive shares through other vehicles [within the financial institution], such as FIPs [private-equity investment funds],” Mr. Colombo notes. “This perspective shift is here to stay,” he adds.

Mr. Colombo highlights that the effect of conversion is immediate in calculating a company’s value, as debt can be quickly reduced, which also reflects in the value of shares traded on the stock market, since the cost of debt servicing, which was consuming cash flow, is reduced.

The Pinheiro Neto partner also explains that conversion is often a component in restructuring strategies and creditor negotiations, alongside other options like receiving discounted payments or issuing new debt with a longer maturity, allowing creditors to be paid later but without a discount.

Thomas Felsberg, one of Brazil’s leading bankruptcy experts, says that debt conversion is “extremely useful” for adjusting the capital structure of insolvent companies. “Reducing debt can make a company viable. Often, this may even result in a change of control.” Mr. Felsberg notes that conversion is often partial and involves debt considered “unpayable.”

Mr. Felsberg points out that this instrument is quite common in the United States, where notable restructuring successes have involved debt conversion into equity. A well-known example is General Motors, where creditors who converted debt into shares recovered more than those who received cash.

Daniel Lombardi, a partner at G5 Partners, notes that debt-to-equity conversion is not new but is increasingly used in crafting debt solutions for companies undergoing restructuring. He emphasizes that such conversions are complex, especially for commercial banks. Public banks, he reminds, face restrictions on this type of operation.

The G5 executive mentions that there are now funds specializing in special situations, or “special sits,” that lend to companies with mechanisms for equity participation in problem cases and are prepared to take over management—unlike banks. “Commercial banks have less incentive for this solution.”

Mr. Lombardi explains that, within the framework designed to cater to various creditor profiles, debt conversion is one of several options. Other components of a solution can include debt extension and asset sales. These alternatives are pursued when others do not adequately address maturities. “It’s a mosaic of solutions, and debt conversion is one more option,” he says.

Fabiana Balducci, a partner at BR Partners in the restructuring area, notes that a complication in debt-to-equity conversion arises because many fixed-income funds have statutory restrictions against holding shares. Today, she says, many managers are seeking more flexibility to avoid significant write-downs on receivables.

Azul, Light, Sequoia, Americanas, and 2W declined to comment.

*By Fernanda Guimarães — São Paulo

Source: Valor International

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CSN to sell up to 11% of mining unit, still eyeing InterCement

Exclusive agreement for the acquisition was renewed this week, with expectations that the deal will be finalized by year-end, according to people close to the Brazilian steelmaker

10/31/2024

Benjamin Steinbruch’s Companhia Siderúrgica Nacional (CSN) announced the sale of up to 11% of its mining subsidiary to Japan’s Itochu Corporation, in a deal potentially exceeding R$4.3 billion, people familiar with the matter told Valor. The funds will be used to reduce the steelmaker’s leverage, providing greater financial strength as the group also negotiates the acquisition of InterCement, owned by Mover.

The sale of the minority stake includes a premium ranging from 20% to 30% over the current stock price of the mining company on Brazil’s B3 stock exchange, according to sources. CSN stock ended the Wednesday’s session up 2.23% at R$11.94, while CSN Mineração shares dropped 0.67%, closing at R$5.91.

Based on Tuesday’s closing price, the 11% stake is valued at around R$3.6 billion, with the premium pushing the deal’s total value to over R$4.3 billion. However, people close to the deal noted that some steps remain before the transaction is finalized, including the signing of a definitive agreement and approval from Brazil’s antitrust authority, CADE. The deal is expected to close within 30 days.

CSN had previously indicated its intention to sell a portion of its mining business and to seek a minority partner for its energy division to reduce debt. Itochu already holds just under 10% of CSN Mineração’s shares.

As of June, CSN’s net debt-to-adjusted EBITDA ratio stood at 3.36 times, driven by the depreciation of the real in the second quarter and higher investment levels. The company’s goal is to reduce this ratio to between 1 and 2 times. Adjusted net debt totaled R$37.2 billion at the end of Q2.

For analysts from Itaú BBA and Bradesco BBI, the sale of 11% of CSN Mineração at Tuesday’s closing price would reduce financial leverage by 0.3 to 0.4 times, which they considered modest compared to CSN’s target.

In parallel with the mining sale, CSN is continuing negotiations to acquire InterCement, owned by Mover (formerly Camargo Corrêa). The exclusive agreement was renewed this week, with sources close to CSN expecting the deal to be signed by December.

Negotiations are progressing, though pressure remains for Mover shareholders to fully assume the liabilities tied to the deal, which total R$4 billion. Initially, part of this amount—R$1.5 billion—was to be covered by creditor banks, said a person close to InterCement.

Another sensitive issue for CSN is the involvement of lawyer Thomas Felsberg as an advisor in the transaction, as he is known for handling corporate restructuring for companies facing bankruptcy.

People with knowledge of the situation indicated that InterCement’s out-of-court restructuring process is advancing, with no immediate risk of a bankruptcy filing.

If the company seeks protection from creditors, asset sales would occur through productive units.

CSN is interested in acquiring InterCement’s Brazilian operations, which would position it as a competitor for leadership in the cement sector alongside Votorantim, as well as a 51% stake in Loma Negra, providing CSN entry into the Argentine market.

A person close to the negotiations said CSN does not plan to use cash or take out loans to finance the acquisition, given InterCement’s high debt. Instead, CSN aims to restructure InterCement’s liabilities as part of its out-of-court recovery, with a portion of the purchase price financed through debt.

Another portion of InterCement’s debt would be converted into equity in the resulting company formed by combining CSN Cimentos and InterCement, with creditor banks holding shares. While an agreement is expected to be signed by year-end, the transaction itself would likely close in 2025.

Negotiations gained momentum at the end of the first half, with the automatic renewal of CSN’s exclusivity agreement. In August, InterCement initially declined to renew the deal, but talks continued, and a new exclusivity agreement was signed in September.

In addition to InterCement’s heavy debt load, sources pointed to CSN’s financial leverage and the relative delay in selling assets that could improve liquidity as hurdles for the acquisition. In the case of CSN Mineração, iron ore price volatility this year prolonged talks with potential buyers. Negotiations related to CSN’s energy business, including the Rio Grande do Sul-based CEEE, were also impacted by damage caused by heavy rains in the state in May.

In 2021, Mr. Steinbruch’s company acquired the Brazilian assets of Swiss cement maker LafargeHolcim, in a transaction fully approved by the CADE without conditions. This added 10 million tonnes of capacity, making CSN the third-largest cement producer in Brazil.

In 2023, Brazil sold 62 million tonnes of cement, a 1.7% decline from 2022, which had already seen a 2.8% drop, according to the National Cement Industry Union (SNIC). The volume sold in 2023 matches the levels seen in 2011.

CSN said it had no further comment beyond its statement to the Securities and Exchange Commission of Brazil (CVM). InterCement and Mr. Felsberg also declined to comment.

*By Stella Fontes, Mônica Scaramuzzo — São Paulo

Source: Valor International

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IBAMA upholds denial for Petrobras drilling in Amazon basinrazil’s environmental agency listed technical issues they believe prevent reversing previous decision against permit

10/30/2024

Twenty-six analysts from the Brazilian Institute of Environment and Renewable Natural Resources (IBAMA) signed a report recommending the environmental permit denial for Petrobras to drill a well in Block FZA-M-59, located in the Foz do Amazonas Basin on the Equatorial Margin, should be upheld. The team listed technical issues they believe prevent reversing the previous decision against granting the permit.

Although higher-level authorities supported the report, IBAMA’s president, Rodrigo Agostinho, sent an official letter to Petrobras allowing the state-owned oil company to provide “clarifications” on the points raised in the report before a final decision is made. Petrobras did not immediately reply to a request for comment.

IBAMA’s recommendation comes as a setback for Petrobras, which, under Magda Chambriard’s leadership, has been stressing the need to open new exploratory frontiers in oil and gas. Last week, the company’s chief exploration and production officer, Sylvia Anjos, said, “We will do everything that IBAMA requests.”

In May 2023, IBAMA had denied Petrobras’s request for an environmental permit to drill a well in deep waters in the Foz do Amazonas. Petrobras appealed to the agency and submitted several documents revising environmental plans to overturn the decision. Key points in the revised plans focused on the impact of air support operations at Amapá’s Oiapoque Airport on Indigenous communities and a wildlife rescue plan in the event of spills.

In Report 223/2024, reviewed by Valor, the 26 environmental analysts argued that Petrobras’s revisions do not present a “viable alternative” to adequately mitigate biodiversity loss in case of an oil spill. This issue, according to the analysts, is “especially critical” given what they described as “significant marine biodiversity” and the “high environmental sensitivity of ecosystems likely to be impacted.”

“Thus, we did not find, in the documents analyzed, sufficient elements to reconsider the recommendation to deny the environmental permit and archive this licensing process,” the 26 analysts said. The report was electronically signed between October 10 and 11. However, subsequent communications have left room for further input from the company until IBAMA’s president issues a final decision.

Following the report’s release, IBAMA’s offshore oil and gas exploration licensing coordinator, Ivan Werneck Sanchez Bassères, issued an official letter acknowledging “significant” technical improvements by Petrobras in emergency response plans but still considered information regarding wildlife rescue strategies for oil-affected animals insufficient to reconsider the process’s archival recommendation, advising that the license denial be maintained.

IBAMA’s general coordinator for marine and coastal project licensing, Itagyba Alvarenga Neto, recommended sending the report to Petrobras for “review and addressing of all issues raised by Ibama’s technical team,” calling this step a “reasonable alternative.” Mr. Alvarenga disagreed with Petrobras’s positions on the impact of air traffic on Indigenous communities but acknowledged progress on the wildlife plan, though he did not find the advancements sufficient for plan approval.

IBAMA’s licensing director, Claudia Barros, aligned with Mr. Alvarenga’s approach: “It is deemed reasonable to forward the Technical Report … to the company for review and response to all issues raised by IBAMA’s technical team,” Ms. Barros said. In September, she had estimated a resolution on the matter by the end of the year.

Air traffic and potential impacts on Indigenous communities in the area were among the reasons Petrobras appealed the license denial. In its revised studies, Petrobras argued it would “use the pre-existing, licensed airstrip within its already established operational capacity without expanding capacity,” and that the noise from aircraft is not a direct impact of drilling but rather of the airport, which is licensed by the State Environment Secretariat of Amapá.

In the report, the analysts noted that IBAMA did not question the Oiapoque airstrip’s legality, which Petrobras will use as a support base for drilling activities. They also pointed out that Petrobras’s environmental study indicates the airport’s use “represents a 3,000% increase in its activity,” with flights over areas where no other routes exist.

“The fact that the airstrip is licensed and the company’s intended use falls within its operational capacity does not mean the project will not cause specific impacts due to its presence in the region,” the report says.

Petrobras had also proposed a new Wildlife Protection Plan, which included setting up a wildlife rescue base in Belém, but IBAMA deemed the distance too long in case of an accident. Petrobras then proposed establishing an advanced wildlife response base in Oiapoque, enabling access by sea, river, or air, and potentially installing a mobile reception unit in Vila Velha do Cassiporé, a district of Oiapoque.

The rescue proposals in Oiapoque were considered to have the potential to reduce response times in case of an oil spill, but the analysts noted “inconsistencies” in the rescue strategy, including the definition of response teams, travel times, adverse “metoceanographic” conditions, and the inability to use the drillship or rescue and stabilization vessels.

*By Fábio Couto — Rio de Janeiro

Source: Valor International

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CVM streamlines regulations for public takeover bids

New guidelines, part of the 2024 regulatory agenda, take effect on July 1, 2025

10/30/2024

The new rules concerning the so-called OPAs—public takeover bids—were issued on Tuesday as part of the Brazilian Securities and Exchange Commission’s (CVM) regulatory agenda for this year. These measures will come into force on July 1, 2025.

Public takeover bids, conducted outside organized securities markets, can take several forms and aim at acquiring shares of a publicly traded company. They may occur, for instance, during a change of control block, delisting, and other scenarios.

The CVM has issued two norms: the first, Resolution 215, establishes a new regulatory framework applicable to OPAs, replacing CVM Resolution 85, which has been in effect since 2022. The second, Resolution 216, modifies other rules to align them with the new regulation.

The regulation was well-received by experts consulted by Valor. Among the innovations, they highlight the simplification of the criteria that mandate an OPA for increased participation, which was previously calculated based on a formula applied by the CVM that was sometimes challenging to apply in practice, causing legal uncertainty.

Now, in an OPA for increased participation, the CVM has determined that the operation will be mandatory whenever the acquisition of outstanding shares by the controlling shareholder or an affiliated person leads to the reduction of the total outstanding shares of the same class and type to below 15%.

Another significant change is the possibility of combining a takeover OPA with an OPA for delisting.

“This was a long-standing market demand, previously prohibited based on case-specific decisions, and now it is explicitly allowed,” said Evaristo Lucena, a partner in the transactional area at Trench Rossi Watanabe.

In the case of a differentiated quorum (OPA for delisting), it was established that a simple majority would suffice when the number of outstanding shares of the “target company” is less than 5% of the share capital.

According to Marcos Sader, a partner at I2A Advogados, the simplification acknowledges that companies with a smaller number of outstanding shares relative to total capital (“free float”) can have a lower quorum for a delisting OPA. “Thus, the quorum shifted from two-thirds of circulating shares to a simple majority. This facilitates the closing of capital when there is little shareholder dispersion.”

In cases of automatic waiver of the valuation report, the new regulation allows the price of the shares subject to the OPA to be determined based on alternative criteria that serve as a reference for fair value.

In the OPA auction, the hiring can be automatically waived in situations of low shareholder dispersion or when the auction costs are disproportionately high compared to the offer’s value. The new regulation also covers the roles performed by the intermediary and establishes rules for registration procedures and confidential consultations.

CVM President João Pedro Nascimento said that the resolutions consider previous practical experiences and reflect market developments and international standards.

*By Victoria Netto, Valor — Rio de Janeiro

Source: Valor International

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China to demand full traceability for beef supply chain

First shipments of 100% traceable beef expected by 2025, according to Chinese NGO Global Enviromental Institute

10/28/2024

China, the main destination for Brazilian beef exports, signaled during its last technical visit to Brazil in December that it will soon require full traceability across the beef supply chain, from the birth of the animal to its export.

Although this requirement is already included in the trade agreements between the two countries, Chinese importers have not enforced it until now.

“The Ministry of Agriculture informed us that the mission was positive, but the key takeaway is that China will indeed start demanding traceability,” said Danielle Schneider, traceability coordinator for the Brazilian Association of Meat Exporting Industries (ABIEC), during an event hosted by Imaflora in Cuiabá.

Ms. Schneider said these changes are expected to unfold over the next two years, with China establishing its own traceability protocols. “Unlike Europe, China is not yet asking for information related to deforestation, only traceability. However, by doing this, we know that addressing deforestation could be the next step,” she acknowledged.

A study by the Chinese Academy of Social Sciences and the Getulio Vargas Foundation, supported by the American NGO The Nature Conservancy, found that Chinese consumers would be willing to pay up to 22.5% more for Brazilian beef if it came with guarantees of being sourced from zero-deforestation areas.

Peng Ren, project manager at the Chinese NGO Global Environmental Institute, stated that discussions to develop traceability solutions between the two countries will begin next month, with the goal of starting the first shipments of 100% traceable beef as early as next year. “We are at the start of this negotiation,” the executive said.

Following audits conducted in December 2023, China approved 38 new Brazilian meat processing plants for export, including 24 dedicated to beef. According to Brazil’s Ministry of Agriculture, this was the largest number of plant approvals granted in a single instance in the history of trade relations between the two countries.

By Cleyton Vilarino, Globo Rural — Cuiabá

Source: Valor International

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Municipal election results weaken Lula-Bolsonaro polarization

Centrist Social Democratic Party emerges as the big winner, electing 887 mayors; Brazilian Democratic Movement secures 854

10/28/2024

This year’s municipal election results have diluted the national polarization between President Lula and former President Jair Bolsonaro. In most of the 50 runoff contests, candidates occupying the political center emerged victorious. Those who remained strictly within their party’s ideological spectrum were largely defeated.

The centrist Social Democratic Party (PSD)—formed by dissidents from various parties, led by former São Paulo Mayor Gilberto Kassab—finished the electoral race with the highest number of municipalities, winning 887. PSD claimed victory in 9 out of 10 runoff elections, including in Belo Horizonte and Curitiba, with Fuad Noman and Eduardo Pimentel, respectively.

In terms of the number of municipalities, the also centrist Brazilian Democratic Movement (MDB) ranked second, re-electing Ricardo Nunes in São Paulo and Sebastião Melo in Porto Alegre, while electing Igor Normando in Belém, totaling 854 municipalities. Regarding governed electorate size, MDB and PSD were nearly tied, with MDB overseeing 27.7 million voters and PSD 27.6 million.

“The election showcased a defined right, a defined left, and a center that’s taking shape,” Mr. Kassab said, identifying Mr. Bolsonaro as the right wing’s leader and Mr. Lula as the leader of the left. Mr. Kassab places his party, the MDB, and Brazil Union at the center, saying that the political landscape for 2026 remains open. “The issue for the center in Brazil is the lack of major options,” he said. According to Mr. Kassab, Governor Tarcísio de Freitas (Republicans) of São Paulo is a state leader rather than a national one. The national president of the MDB, Congressman Baleia Rossi, also mentioned to Valor on Thursday that “nothing is decided for 2026” and that “everything is open.”

Mr. Bolsonaro’s Liberal Party (PL) won only 6 out of 22 runoff contests. Of the 9 capitals where it competed, it secured victories in just two: Cuiabá with Abílio Brunini and Aracaju with Emília Corrêa. However, the party achieved significant results in larger country town cities, with its most crucial win in Guarulhos, the largest city in São Paulo’s metropolitan area, with Lucas Sanches. Overall, the PL governs 516 municipalities, representing 19 million voters.

Where Mr. Bolsonaro directly confronted governors in runoffs, he lost. This was the case in Goiânia, where he campaigned on the day of the election in an attempt to defeat Governor Ronaldo Caiado (Brazil Union). However, the Bolsonaro-backed candidate Fred Rodrigues (PL) lost to Sandro Mabel (Brazil Union).

Mr. Bolsonaro also faced setbacks in some capitals where the governor played no significant role in the runoff. In Manaus, he and his family actively campaigned for Capitão Alberto Neto (PL), but the winner was incumbent Mayor David Almeida (Avante). In Belo Horizonte, Mr. Bolsonaro and his political group threw their weight behind Bruno Engler, who had led in the first round. Still, Fuad Noman prevailed after a highly aggressive campaign. A newcomer to elections, Mr. Noman secured the runoff with late support from the left, but his victory was primarily attributed to his image as an experienced and mature administrator, in contrast to his opponent.

*By César Felício — São Paulo

Source Valor International

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Petrobras tops dividend yield rankings for the year

Metric derived from the ratio of shareholder payouts to stock price

10/25/2024

Petrobras has emerged as the Brazilian company with the highest dividend yield this year. The preferred and common shares of the oil giant are leading the list of stocks with the highest “dividend yield” (DY) percentage, according to a report by financial information platform Comdinheiro share with Valor.

This indicator is calculated from the ratio of dividends paid to shareholders to the stock price. For Petrobras, the preferred shares show a DY of 12.43% for the period from January to September. The common shares have a rate of 11.8%. Cemig’s preferred share follows, with a DY of 10.31%.

CPFL, Taesa, Vale, BB Seguridade, PetroRecôncavo, Banco do Brasil, and Usiminas complete the list of the ten stocks with the highest dividend returns for the year up until September. See below:

1. Petrobras ON (PETR4): 12.43%

2. Petrobras ON (PETR3): 11.80%

3. Cemig PN (CMIG4): 10.31%

4. CPFL ON (CPFE3): 7.88%

5. Taesa units (TAEE11): 7.85%

6. Vale ON (VALE3): 7.81%

7. BB Seguridade ON (BBSE3): 7.44%

8. PetroRecôncavo ON (RECV3): 7.14%

9. Banco do Brasil ON (BBAS3): 6.85%

10. Usiminas PNA (USIM5): 6.57%

From an investor’s perspective, it is advisable not to rely solely on the “dividend yield” when selecting a stock, but also to consider factors like inflation, sector crises, and the company’s investor remuneration policies, said Filipe Ferreira, director at Comdinheiro, a Nelogica company.

“Investors need to take a broader view and analyze the macroeconomic context in which the company operates, secular trends, and the company’s performance,” he said in a statement.

He emphasizes the importance of examining the company’s dividend policy, particularly the average DY over the past five and 10 years.

A report by Valor this month indicates that dividend payments in 2024 have reached the same level as the entire previous year, defying the more pessimistic expectations seen at the end of 2023.

By September, R$222.18 billion had been distributed as dividends, interest on equity (JCP), and other forms of shareholder remuneration, surpassing the R$171.8 billion paid during the same period last year. Throughout 2023, Brazilian companies returned R$224.2 billion to shareholders.

*By Rita Azevedo, Valor — São Paulo

Source: Valor International

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High inflation reading shows challenging outlook

ith a rise of 0.54% in October, the IPCA-15 presents concerning data, according to economists, and inflation estimates for this year may worsen

10/25/2024

Mid-month inflation index IPCA-15— a barometer for Brazil’s full month official inflation—presented “concerning” data in the eyes of economists, potentially triggering upward revisions in inflation estimates for 2024. The index rose 0.54% in October compared to September, surpassing the median of 0.51% among forecasts gathered by Valor Data. With this result, the IPCA-15 now shows a 4.47% increase over the past 12 months. Year-to-date, the index reached a 3.71% increase, according to data from statistics agency IBGE.

The largest impact came from the 5.29% increase in electricity prices, which accounted for 0.21 percentage points of the overall 0.54% rise in the IPCA-15, representing 38.9% of the month’s total increase. Vehicle insurance prices surged by 3.64%, bottled gas prices climbed by 2.17%, and meal prices increased by 0.70%—these were the main drivers of inflation in October. Consequently, household food inflation rose 7.05% over the 12 months leading up to October, exceeding the 4.47% increase in overall inflation during the same period.

On the other hand, transportation prices intensified their deflation, dropping to -0.33% in October from -0.08% in September, driven by an 11.40% decrease in airfare prices and free public transportation during the first round of municipal elections.

In light of these figures, the J.P. Morgan team has already revised its inflation estimate for 2024 to 4.7% from 4.5%, which exceeds the Central Bank’s target cap.

“Looking ahead, the October IPCA-15 seems to signal a more challenging fourth quarter. First, wholesale and consumer price tracking suggests that food prices will rise further, mainly due to a spike in meat prices, leading to an upward surprise in our estimates as well. Second, the effects of exchange rate depreciation on goods prices will likely remain in play,” the bank noted in a message to clients.

J.P. Morgan also justified the revision by announcing that it no longer expects a temporary discount on electricity prices by the end of the year.

According to Alberto Ramos, chief economist for Latin America at Goldman Sachs, the October IPCA-15 results reflect a “hostile” composition due to the spread of higher-than-expected price increases, including core inflation.

In addition to the Diffusion Index, which measures the proportion of goods and services that experienced price increases, rising to 58.3% in October from 55.0% the previous month, the average of the five core inflation measures tracked closely by the Central Bank accelerated to 0.43% in October, up from 0.18% in September, according to calculations by MCM Consultores. Over 12 months, the average of the core indices rose from 3.60% to 3.81%.

“The core inflation surprise was even greater than the headline. We saw a slightly worse reading for industrial goods, but still at a relatively low level. However, when we look at services, particularly underlying services, the variation is considerably worse than expected,” said Andrea Damico, chief economist at Armor Capital.

Underlying services inflation increased by 0.59% compared to the previous month. “I see a deterioration in data quality that the Central Bank is genuinely giving importance to,” Ms. Damico remarked, reinforcing the probability that the Central Bank will raise the base interest rate by another 50 basis points in its November meeting, bringing it to 11.25% per year.

For André Valério, an economist at Banco Inter, the IPCA-15 is unlikely to change the Central Bank’s stance, which has already signaled further rate hikes at its November 6 meeting. The data also heightens pressure on the government to implement stricter fiscal adjustments.

According to Carla Argenta, chief economist at CM Capital, the scenario highlighted in this IPCA-15 report strengthens the Central Bank’s monetary tightening stance. “For the Central Bank, the economy is operating at full capacity, and with growing demand, the adjustment occurs through prices. To address this, the institution believes in an even more restrictive monetary policy,” Ms. Argenta noted.

By Rafael Vazquez, Lucianne Carneiro — São Paulo and Rio de Janeiro

Source: Valor International

https://valorinternational.globo.com/
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Be8 will start producing  a new biofuel to accelerate  decarbonization

With a competitive cost, Be8 BeVant reduces carbon monoxide emissions by up to 50%, becoming a solution for companies seeking to meet short-term sustainability goals

10/24/2024

With a green coloration, Be8 BeVant will be offered at an estimated cost up to 50% lower than the current international market price for renewable diesel.
With a green coloration, Be8 BeVant will be offered at an estimated cost up to 50% lower than the current international market price for renewable diesel. — Photo: Disclosure

Be8,  the  leading  biodiesel  company  in  the  country,  announces  the  start  of  production of Be8  BeVant for the next month. Be8 BeVant is an innovative bio-distilled methyl ester  biofuel, which fully replaces fossil diesel and can reduce  greenhouse  gas  emissions  by  up  to  50%. The  company  is  currently just  waiting for the license from the National Agency of Petroleum, Natural Gas and Biofuels (ANP) to start the operation. It is expected that the preliminary production capacity of 28 million liters of biofuel per year will be sold by the end of this year.

A  higher  ester  content  reduces  carbon monoxide  emissions  by  up  to 50%, particulate  matter  emissions by  85%,  and  black  smoke  by  90%. The  use  of  this  new  fuel  is  focused  on  the key economic sectors looking to  accelerate  decarbonization. 

“The great advantage of Be8 BeVant is that, unlike other technologies that depend on future infrastructure and investments, it is ready to be used immediately in current engines and new truck versions at a competitive cost”, explains Erasmo Carlos Battistella, president of Be8.

Negotiations are already underway with clients in the agricultural, urban transportation and mining sectors, with deliveries expected by the end of 2024. Besides being an accessible and easy-to-implement solution, the product doesn’t require significant changes in infrastructure or engines, unlike alternatives like hydrogen or electric vehicles.

The new biofuel has proven quality, higher lubricity, and the engine testing phase on a test bench has confirmed its advantages and characteristics. Proofs of Concept (PoC) were conducted in partnership with engine manufacturers and fleet operators.

Innovation stems from the experience Be8 gained in Europe and the United States, including operating a biodiesel plant in Switzerland.

Erasmo Carlos Battistella, president of Be8: We are facing an immediate solution for companies seeking to meet their short-term decarbonization goals” — Foto: Disclosure
Erasmo Carlos Battistella, president of Be8: We are facing an immediate solution for companies seeking to meet their short-term decarbonization goals” — Photo: Disclosure

Depending on market demand, Be8 plans to expand its production at the Passo Fundo (RS) and Marialva (PR) units. The product will be offered at an estimated cost up to 50% lower than the current international market price for green diesel (hydrotreated vegetable oil — HVO). It also has the distinguishing feature of a green color to set it apart from other biofuels.

“We are facing an immediate solution for companies seeking to meet their short-term decarbonization goals”, says Battistella. Biofuel is ideal for large consumers of traditional diesel oil committed to reducing their emissions, especially in high-intensity transportation sectors such as mining and logistics. The product has the potential to fuel generators and meet the demands of road, rail, waterway and maritime modes.

Accelerating the decarbonization goal

In a scenario where many companies are commited to achieve carbon neutrality by 2030, the new biofuel emerges as a strategic ally— especially after the enactment of Law 14.993/24. The Future Law, as it is called, is an important chapter in the national strategy to meet the decarbonization goals set out in the Paris Agreement and the Global Commitment for Renewable Energy and Energy Efficiency— signed by 116 countries at the last COP. The goal is to triple the world’s installed renewable energy production capacity and double the global annual rate of improvements in energy efficiency by 2030. Brazil is one of the countries with the potential to become a global power in renewable energy.

“Be8 BeVant arrives at a crucial moment when companies are looking for practical ways to meet their sustainability goals,” emphasizes Battistella. The potential is significant, considering the urgency to find short-term decarbonization solutions for the transportation sector and the companies’ commitments to net zero emissions in the coming years. “In the logistics sector, the reduction in emissions helps client companies meet their ESG goals in Scope 3, which involves the entire supply chain,” adds Battistella.

*By Be8 Energy

Source: Valor International

https://valorinternational.globo.com/
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