Trump’s trade stance eases pressure on Brazilian real

Reduced emphasis on tariff policies at the start of the new U.S. administration is providing support for Latin American currencies

01/23/2025

A softened outlook on U.S. trade tariffs under President Donald Trump contributed to a significant drop in the dollar on Brazil’s local market, with the currency falling below R$6 to close at its lowest level since November 27. This date marked the announcement of Brazil’s fiscal measures package on national television.

The real’s strengthening was further supported by reports of foreign capital inflows into Brazil and the unwinding of short positions established during last year’s market turbulence. The Brazilian real emerged as the best-performing currency among the world’s 33 most liquid currencies on Wednesday (22).

By the end of the day, the exchange rate per U.S. dollar had dropped 1.40% in the spot market, closing at R$5.94. Meanwhile, the euro fell 1.38% to R$6.19. The U.S. currency also weakened against other emerging-market currencies, especially in Latin America, losing 0.82% against the Mexican peso, 1.26% against the Chilean peso, and 1.15% against the Colombian peso.

On Tuesday evening, in the Oval Office, Mr. Trump threatened to impose 10% punitive tariffs on China, citing an influx of the opioid fentanyl, which he attributed to routes through Mexico and Canada. While the market had anticipated tariffs as high as 100%, the lower rate provided relief, particularly as no additional tariff measures were announced during Mr. Trump’s first days in office, a move that many had feared.

Market sentiment

Huang Seen, fixed-income and multi-market director at Schroders Brazil, said market participants had positioned themselves for a harsher trade policy, expecting Mr. Trump to begin his term with sweeping tariff measures.

“(Leading up to Mr. Trump’s inauguration) There was significant long positioning in the dollar, both against emerging-market currencies and those of developed nations. The risk was clear: if no tariffs were announced immediately, we could see a reversal or unwinding of these dollar positions. The last three days suggest that’s precisely what is happening,” Mr. Seen said.

Schroders maintains a cautious but constructive view of the Brazilian real, particularly against a basket of non-dollar currencies. Mr. Seen noted that the Central Bank’s strict monetary policy supports holding long positions in the real while avoiding Brazilian equities, even with their attractive valuations. “The challenging economic environment will likely weigh on companies,” he added.

Luis Garcia, chief investment officer at SulAmerica Investimentos, observed that Mr. Trump has been focusing more on immigration issues than on trade tariffs. “This shift in focus has relieved pressure on currencies tied to major trade markets, particularly those linked to China,” he said.

Mr. Garcia added that, compared to Mexico, Brazil has been less affected by Mr. Trump’s immigration agenda, making the real more attractive to investors. “Emerging-market investors often rotate between countries, and the real has become more appealing now, especially given Brazil’s interest rate environment and the Central Bank’s recent moves to curb volatility,” Mr. Garcia explained.

Foreign capital inflows have also boosted Brazil’s assets. Over the last four trading days, the B3 stock exchange saw foreign inflows exceeding R$10 billion, largely driven by Cosan’s sale of Vale shares. Additionally, Central Bank data showed a net positive financial flow of $1.2 billion between January 13 and 17, with a total net inflow of $806 million during that period.

While the currency markets experienced notable gains, the Ibovespa saw a more subdued performance, closing down 0.3% at 122,972 points. Losses in Vale’s stock, which dropped 2.52%, and Petrobras shares, down 1.01% (ordinary shares) and 0.56% (preferred shares), weighed on Brazil’s benchmark stock index.

In the commodities sector, uncertainty about U.S. tariff policies has led some firms to reduce exposure. Ricardo Kazan, commodities manager at Legacy Capital, described the environment as highly uncertain. “We don’t yet know if tariffs will be imposed or the rationale behind them. They could serve as a negotiating tool for the fentanyl issue or to address the U.S. trade deficit,” Mr. Kazan said, adding that he expects some form of tariff to be implemented.

The interest rate market also reflected the dollar’s decline, with future rates closing lower. The January 2026 interbank deposit (DI) rate fell from 14.96% to 14.92%, while the January 2031 DI rate dropped from 15.03% to 14.96%.

“Considering how prominent tariffs were during Trump’s campaign, it’s surprising they haven’t been emphasized more since his inauguration,” noted Citi’s global macro strategy team in a report. The bank suggested that broad-based tariffs are now less likely, while specific measures targeting Canada and Mexico would likely remain below 25%. However, China is expected to remain a priority for Mr. Trump’s trade policy in his second term

*By Arthur Cagliari, Gabriel Roca, Bruna Furlani, Gabriel Caldeira e Maria Fernanda Salinet  — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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As the US withdraws from the Paris Climate Agreement, Brazil and China may lead COP30 negotiations

Brazil laments US withdrawal from agreement to curb climate change, but says decision ‘can be circumvented’

 23 de janeiro de 2025

The Paris Agreement, launched in 2015 to curb climate change, was ratified by almost all of the international community, except Iran, Libya and Yemen.   – Pxhere

Brazil, which will host in November the UN environmental conference, known as COP 30, spoke on Tuesday (21) about his concerns regarding Donald Trump’s decision to withdraw the United States from the Paris Agreement, an international treaty to curb climate change.

“We are still analyzing President Trump’s decisions, but there is no doubt that it will have a significant impact on the preparation of the COP and on how we will have to deal with the fact that such an important country is leaving this process,” said André Corrêa do Lago, appointed by President Lula, also on Tuesday, to preside over the conference.

The Brazilian ambassador stressed that the United States, one of the world’s biggest polluters, is “an essential player” in the fight against climate change.

However, despite the decision of the far-right billionaire-turned-president, who had already done the same during his first term (2017-2021), “It doesn’t mean that the agreement can’t find a way around” this absence, said the secretary of Climate, Energy and Environment at the Brazilian Ministry of Foreign Affairs.

Brazil and China’s leading roles

China expressed concern about Trump’s announcement through Foreign Ministry spokesman Guo Jiakun. “Climate change is a common challenge faced by all of humanity and no country can remain indifferent or solve the problem alone,” said the representative.

During the first US withdrawal from the climate agreement, Beijing upheld the Paris Agreement and did not reject long-term goals. Currently, China produces more than half of the world’s electric vehicles, 70% of wind turbines and 80% of solar panels, essential measures for combating carbon emissions and climate change worldwide.

“China’s performance in implementing green technologies could be a lifesaver,” Li Shuo, an expert at the Asia Society Policy Institute, told AFP.

At the COPs, Beijing is considered an indispensable player. The country informally leads negotiations with rich countries on behalf of BRICS, a group of developing countries of which Brazil is a member and will temporarily preside in 2025.

“BRICS exists to build things. We have a lot of things to work on together. There is no focus on other countries and leaders,” stated Eduardo Saboia, a Brazilian diplomat responsible for the groups, during a recent interview with AFP before Trump’s announcement.

“This can possibly be a year for the Global South to lead discussions,” assessed Tim Sahay, co-director of the Net Zero Industrial Policy Lab at Johns Hopkins University.

COP30 in Brazil and countries’ positions

At COP 30 in Belém do Pará, Brazilian diplomats will be promoting an increase in financial aid from developed countries to support developing countries in their energy transition process, a target that was not met at COP 29 in 2024 in Azerbaijan.

It will also debate the “adaptation issue”, highlighted in Brazil last year, especially after the floods in Rio Grande do Sul.

COP 30, which will mark the tenth anniversary of the Paris Climate Agreement, will be an opportunity to review countries’ most recent commitments to reduce their greenhouse gas emissions.

The 2015 Paris Agreement to combat climate change has been ratified by almost the entire international community, with exceptions such as Iran, Libya and Yemen. Now, governments have until next month to submit to the United Nations a revision of their climate goals until 2035.

Despite hosting the event, Brazil defends its right to continue exploiting hydrocarbon resources. According to the Brazilian government, organic compounds can generate clean energy thanks to its water resources, despite the need to extract them from oil, which is considered a polluting energy source.

A similar understanding is found in India, whose Prime Minister, Narendra Modi, talks about his country’s “leadership” in solar and wind energy, while defending coal exploitation.

The European Union, on the other hand, has a long tradition of climate leadership and has reduced its emissions by 7.5% between 2022 and 2023, well ahead of other major rich countries.

“The Paris Agreement remains humanity’s greatest hope. Europe will stay the course and continue to work with all nations that want to protect nature and stop global warming,” said Ursula von der Leyen, head of the European Commission.

But countries like Germany have already asked the European Commission to slow down the energy transition in sectors like the car industry.

Other small players are showing goodwill, such as Colombia, which is leading international efforts to gradually eliminate oil, coal and fossil gas, even though they are the country’s main source of foreign revenue.

Edited by: Dayze Rocha

Fonte: Brasil de Fato | São Paulo |

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Drought, heat take toll on Brazilian coffee production

The nation’s harvest declined 1.6% from 2023 levels, reports Conab

01/23/2025

Brazil produced 54.2 million 60-kilo bags of coffee in the 2024/25 harvest, according to data released yesterday by the National Supply Company (CONAB). This volume is 1.1% below the agency’s previous estimate and represents a 1.6% decline compared to the 2023 harvest.

This was Conab’s fourth report on the 2024/25 cycle, which has concluded across all coffee-growing regions, including Espírito Santo’s later-harvesting areas. Despite the decline from 2023, the harvest is 6.5% higher than the 2022 cycle, another positive biennial harvest when productivity is naturally higher due to the crop’s alternating high and low-yield years.

The past four years have been challenging for Brazilian coffee growers, marked by adverse weather conditions, including frosts, extreme heat, droughts, and erratic rainfall. These events have severely impacted plant performance.

In 2024, average productivity across Brazilian coffee plantations dropped 1.9% from 2023, reaching 28.8 bags per hectare. This decline was largely attributed to unfavorable weather conditions in the prior year affecting central coffee-growing regions.

While the dry weather during winter and early spring helped accelerate bean ripening and harvesting, the hot, arid conditions caused uneven bean development, reducing quality. Many crops yielded a mix of green and ripe beans within the same batch.

In some areas, smaller beans—below standard size—needed to be harvested, requiring more beans to meet the commercial standard of 60 kilos per bag. Additionally, the yield of processed coffee fell, with lighter-than-usual beans exacerbating the situation.

In Minas Gerais, Brazil’s leading coffee-producing state, the harvest totaled 28.1 million bags, a 3.1% decline compared to 2023. Coffee plantations in the region faced significant challenges due to prolonged droughts and high temperatures after April when rainfall virtually ceased.

This weather pattern severely impacted conilon coffee production, which dropped 5.9% to 14.6 million bags. In contrast, arabica coffee production grew by 1.8%, reaching 39.6 million bags.

In Espírito Santo, another key coffee-producing state, the conilon harvest fell 3.1% to 9.8 million bags, largely due to episodes of intense heat between October and December 2023.

In São Paulo, coffee plantations fared better, with the harvest increasing 8.2% to 5.4 million bags. However, this was lower than the 11.5% growth initially projected, as extended droughts and high temperatures impacted productivity.

Bahia also saw coffee production decline, with the harvest totaling 3.1 million bags, a 9.7% drop from 2023. The state’s main crop, conilon, fell sharply by 14.8% to nearly 2 million bags, while arabica coffee production increased slightly by 0.8%, reaching 1.1 million bags.

In Rondônia, coffee production faced a significant downturn due to adverse weather at the end of 2023 and a reduced cultivation area. As a result, conilon output in the state plummeted 31.2% to just over 2 million bags.

*By Gabriella Weiss  — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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U.S. exit from Paris Agreement adds challenge to COP30

UN conference in November aims to transform negotiations into concrete actions to accelerate global climate response, says Ambassador André Corrêa do Lago

01/22/2025

Ambassador André Corrêa do Lago takes the helm of the upcoming UN Climate Change Conference, COP30, set to take place in Belém this November, as the world surpasses the critical 1.5°C global warming threshold. At the same time, the United States withdraws from the Paris Agreement under President Donald Trump’s directive. “We cannot give up,” Mr. Corrêa do Lago told Valor in an interview.

As Brazil’s Secretary for Climate, Energy, and Environment, he described Mr. Trump’s decision as “a significant shift in the stance of the American government and certain economic sectors,” but noted that the U.S. is a country with many facets, “ranging from the federal government to science, business, universities, and subnational governments (…). We are still studying how we can constructively engage with these various dimensions.”

Mr. Corrêa do Lago emphasized that “the COP is not just about negotiating documents but serves as a tool to achieve tangible results.” He stressed the need to accelerate the transformation of past negotiations into “real actions that impact countries, people, and economies.”

Here are excerpts from the interview:

Valor: What are your expectations regarding the United States’ role in climate action under President Trump, following the U.S. exit from the Paris Agreement?

André Corrêa do Lago: The U.S., like Brazil, represents multiple realities, from the federal government to science, business, universities, and subnational governments. What we see today is a significant shift in the stance of the American government and certain economic sectors within the U.S. We are still studying how we can constructively engage with these various dimensions of the United States to combat climate change effectively.

Valor: COP30 takes place as the global average temperature surpasses 1.5°C. How do you view this immense challenge?

Mr. Corrêa do Lago: The 1.5°C threshold is one of the key benchmarks of the Paris Agreement, which also aims to keep temperatures well below 2°C and, if possible, at 1.5°C. This is a long-term projection. The recent news that this threshold was exceeded in 2024 is deeply concerning. However, this information can be interpreted in different ways. Unfortunately, some might say, “We’ve already crossed 1.5°C, let’s give up.” We cannot give up.

Science makes it increasingly clear that once we surpass 1.5°C, climate threats become ever more tangible. We saw this in 2024, as millions of Brazilians directly experienced the consequences of climate change. Reaching 1.5°C only underscores that the urgency of climate action is even greater than previously thought and that we must act faster.

Valor: The multilateral system is under scrutiny. What role does COP30 play in this context?

Mr. Corrêa do Lago: I believe even the harshest critics of COPs recognize that, from a negotiation standpoint, these conferences have achieved positive decisions, texts, principles, and initiatives. However, we must acknowledge that the implementation of what has been negotiated has not advanced at the pace required by the urgency of the climate crisis.

We are convinced that COP30 must accelerate the translation of all negotiated agreements into real actions that directly impact countries, people, and economies. COP30 should be viewed as a tool to correct course and restore public confidence that COPs are not just about negotiating documents but serve as a tool to achieve tangible results.

Valor: What might be the central theme of COP30?

Mr. Corrêa do Lago: There are themes predetermined by the negotiation process. Brazil has a mandate in the financial area and must address issues related to adaptation, technology, and a just transition. All these topics are already on the agenda.

Beyond the negotiations, there’s an opportunity to launch various initiatives within the action agenda. In this context, the topic of forests is unavoidable. Hosting COP30 in Belém brings a focus on forests, which have often been viewed negatively due to deforestation and wildfires. However, forests can play an extraordinarily positive role—not only through their preservation and efforts to curb deforestation but also through restoration. Presenting forests as a positive factor in combating climate change is a key goal.

Valor: In Baku, it was established that COP30 will negotiate the Baku-Belém roadmap for $1.3 trillion in climate financing by 2035. How do you envision structuring this roadmap?

Mr. Corrêa do Lago: We will work with the Ministry of Finance, the Central Bank, and multilateral organizations. This effort has already begun through the Climate Task Force at the G20. We will continue this work because transitioning to $1.3 trillion is an immense challenge.

We need to engage with leading economists, integrate climate considerations into the global economy, and determine how financial resources can be mobilized more quickly and efficiently. Speed is a priority.

Valor: What will your strategy be? Will you travel and engage with key stakeholders?

Mr. Corrêa do Lago: The COP president has an intense pre-set agenda, as they are expected to attend the top annual meetings worldwide, such as the G7, the BRICS summit, and the African Group. These international gatherings bring together key authorities and provide opportunities to deliver strong messages.

Additionally, we need to visit key countries to prepare negotiations well in advance. Brazil does not engage in diplomacy by surprise. We have a diplomacy rooted in the outcomes of long negotiations and great respect for our counterparts. This will also require a significant number of trips.

We are also planning to establish advisory councils—a scientific council, a financial council, and a just transition council. These groups will include national and global special envoys, allowing us to draw on expertise across various areas. Over the next several months, we aim to listen to their expectations and gather insights on what all these stakeholders consider achievable outcomes for COP30.

Valor: Why is there so much anticipation for a COP hosted by Brazil?

Mr. Corrêa do Lago: Part of it stems from Itamaraty’s diplomatic tradition in this area. Brazil’s Foreign Ministry has played a positive role in negotiating several major international agreements, which creates expectations for strong results.

Another key element is President Lula, who has been a particularly important figure, as he is one of the leaders who strongly believes in multilateralism, science, social justice, and poverty reduction—all of which are central issues in the climate change debate.

In some wealthy nations, efforts to combat climate change, such as transitioning to renewable energy, have led to higher electricity bills, eroding public support as these measures are perceived negatively. The president is keen for us to emphasize the importance of a just transition and climate justice.

Climate change is already significantly impacting transportation, cities, energy, and agriculture. We must engage in broad discussions with various sectors, including the private sector, to address these challenges comprehensively.

Valor: What are the biggest challenges in combating the climate crisis?

Mr. Corrêa do Lago: The first concern is raising awareness of the urgency. Science tells us we have very little time. Preferably, according to the IPCC (Intergovernmental Panel on Climate Change), we have until the end of the decade to implement high-impact initiatives.

The second dimension is financing. I believe it’s too narrow a view to think that climate financing should be restricted to specific climate funds. Climate issues need to become a natural part of all financial flows, investments, and government programs.

In this regard, Brazil has set an example with the commitment from the Ministry of Finance. Through the Ecological Transformation Plan, the ministry is already developing policies, in coordination with the government, to guide Brazil toward a modern economy. This is an economy where certain decisions could position Brazil with significant comparative advantages.

Valor: Is this why COP30 is being referred to as the turning-point COP?

Mr. Corrêa do Lago: Partly, yes. But COPs have traditionally focused heavily on negotiations. We are convinced that, for this agenda to gain broader support and convince more people, we need to demonstrate action—tangible, positive results that impact the economy and the lives of the most vulnerable populations. This won’t be a COP like previous ones.

Valor: How will Brazil ensure all societal voices are heard?

Mr. Corrêa do Lago: We will listen extensively and learn a lot. We are considering forming councils representing youth, businesses, science, and finance. Among the last four COPs, Brazil stands out as the country with the most dynamic civil society. President Lula wants civil society to play a central role in this COP.

*By Daniela Chiaretti  — São Paulo

(Fabio Murakawa in Brasília contributed reporting.)

Source: Valor International

https://valorinternational.globo.com/
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Trump’s return escalates tensions for Brazil’s economy

Concerns mount over potential U.S. trade retaliations against Brazil amid an already challenging economic outlook

01/22/2025

The return of Donald Trump to the U.S. presidency has introduced an additional layer of uncertainty to Brazil’s already challenging economic landscape, analysts warn.

Over the past two years, Brazil’s “strongly expansionist” fiscal stance has pushed the economy beyond its potential, raising inflationary risks. This domestic backdrop now intersects with “strong headwinds from abroad,” which are expected to worsen, wrote Silvia Matos and Armando Castelar in the January edition of the FGV Ibre Macro Bulletin, shared exclusively with Valor.

For Elizabeth Johnson, an analyst at TS Lombard, Mr. Trump’s return adds another element of unpredictability to Brazil’s economic prospects. Despite being one of the least U.S.-dependent nations in Latin America and running a trade deficit with the country, “there’s concern that Brazil and its leftist leader, President Lula, could become easy targets for Trump as he pushes his ‘America First’ agenda,” Ms. Johnson explained in a report to clients.

FGV Ibre researcher Lia Valls also recalled Mr. Trump’s past comments about Brazil’s “high import tariffs” and lack of reciprocity, raising the possibility of Section 301 investigations. This U.S. trade law allows for retaliatory actions if American companies are deemed disadvantaged.

Ms. Valls explained that with the WTO dispute resolution mechanism currently paralyzed by U.S. blockages, Brazil could face difficulties in challenging such measures or imposing counter-retaliation. “As during Trump’s first term, the way forward is through negotiation,” she said.

While a blanket increase in tariffs on Brazilian goods seems unlikely, Ms. Valls did not rule out sector-specific hikes, particularly on steel or possibly meat products, influenced by U.S. industry lobbying.

Global trade war

Indirect impacts could be equally significant. Ms. Johnson of TS Lombard warned that a promised trade war could destabilize China—Brazil’s largest trading partner—and the global economy. Facing multiple challenges, including soaring public debt, high inflation, and slowing growth, Brazil risks a hard landing ahead of its 2026 presidential elections, especially if the trade conflict disrupts agricultural exports or prompts populist policy measures to manage the fallout.

Luis Otávio Leal, chief economist at G5 Partners, noted that Mr. Trump’s apparent moderation toward China during his inaugural speech, alongside his recent outreach to Chinese President Xi Jinping, might indicate a willingness to negotiate. However, this could harm Brazil’s soybean exports, which had benefited during Mr. Trump’s first term due to U.S.-China trade tensions.

“I don’t believe lightning strikes twice,” Mr. Leal said. “I think regarding China and the U.S., Brazil will be harmed either way. Whether due to a reduction in international trade, a global trade war, or because the U.S. and China reach an agreement, which would reduce our agricultural exports there.”

China currently absorbs nearly 75% of Brazil’s soybean exports. While the 2025 soybean harvest is largely secured, a U.S.-China agreement in the first half of the year could jeopardize Brazil’s mid-year corn exports and the 2026 harvest, Mr. Leal added.

Brazil’s commitment to non-alignment in foreign policy and trade could be tested by intensifying U.S.-China tensions. Ms. Valls of FGV Ibre emphasized the significance of Brazil signing the Mercosur-European Union trade agreement as a step toward diversifying its trade relations.

“The agreement still requires approvals and, even once approved, includes a tariff reduction schedule that spans up to 18 years in some cases. However, it could result in trade diversion from U.S. imports, particularly in the industrial sector. Notably, a framework was negotiated for the treatment of critical minerals, which could affect U.S. interests in this area,” Ms. Valls noted.

At the same time, China has been preparing for potential U.S. retaliation under Mr. Trump. In late 2024, during Chinese President Xi Jinping’s visit to Brazil, the two nations signed 37 agreements, including memoranda on technology, health, and innovation. Significantly, China opened its market to Brazilian sorghum exports, a move Ms. Valls interpreted as a preemptive strategy against potential U.S.-China conflicts.

Paris Agreement

Mr. Trump’s withdrawal from the Paris Agreement, executive orders curtailing incentives for the energy transition, and announcements of increased oil production signal that the U.S. is “turning its back on the world,” Mr. Leal of G5 Partners warned. He noted that these actions could present challenges for Brazil, which holds a key position in global climate discussions, and potentially undermine the COP30 climate conference set for November in Belém.

Diplomatically, Brazil’s 2025 presidency of the BRICS bloc—with members including China, Russia, and Iran—adds another layer of complexity. The U.S. has long viewed BRICS with skepticism, and any renewed discussions about a common currency within the bloc could provoke retaliatory actions from the Trump administration, Mr. Leal cautioned. As BRICS president, “Brazil will be in the spotlight,” he said, and Mr. Trump will not hesitate to push back if the bloc challenges U.S. interests.

*By Marta Watanabe, Marcelo Osakabe e Anaïs Fernandes — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Gerdau outlines conservative plan for 2025

Early months of Trump’s administration, high interest rates in Brazil are key for company’s strategy

01/21/2025

Gerdau has developed a conservative plan for 2025 to navigate the early months of Donald Trump’s administration and the high interest rate environment in Brazil. In an interview with Valor, CEO Gustavo Werneck said the company is prepared to operate in any scenario, even the most complex ones.

“Gerdau believes that under the Trump administration, the industry in general, including the steel sector, has the potential to perform well in the medium term. However, we do not expect Trump’s measures to significantly impact our sector in the very short term,” he said.

According to Mr. Werneck, Gerdau’s operations in the U.S. market have seen improvement since Mr. Trump’s first term. The United States accounts for about 40% of the steel group’s revenue.

In the U.S., Gerdau produces long steel products (used in the infrastructure industry), including rebar. “Everything we produce there is consumed by the U.S. market. Interestingly, in recent years, our performance in the United States has surpassed that in Brazil. We will observe the impacts of the first months of Trump’s administration to understand the outlook for the second half of the year.”

In Brazil, steel imports remain the primary challenge for the national industry, particularly from China, despite the implementation of tariffs, according to Mr. Werneck.

The steel sector, according to the CEO, continues to engage in discussions with the Brazilian government to address the persistent import issue. “The government has been very open to the industry. Therefore, our current debate focuses on what additional measures should be taken to reduce the penetration of imported steel.”

He said that historically, imports represented about 10% of the total in the country—now it stands at 25%. The expectation is to discuss additional measures.

The weak Brazilian real scenario is favorable for Gerdau, the executive note. On the other hand, the exchange rate and current interest rate levels raise concerns about the economy. He noted that the construction sector is performing well, but there is concern about prospects for real estate financing. “Will it continue to generate demand from the second half onward?” the executive questions. He sees the same situation in the automotive sector.

Gerdau plans to maintain its investment schedule both in Brazil and abroad. Mr. Werneck did not provide details on the amount but mentioned that Gerdau invests around R$5 billion to R$6 billion annually. According to him, the company has always maintained a trusting relationship with the country and intends to continue its growth plans.

An exception will be in Mexico, where the company already has a strong presence but had planned to invest in a new plant—an investment estimated at $600 million. The group plans to wait a few more months to assess the commercial relationship between Mexico and the United States before making a final decision on the new investment.

In the U.S., the expectation is to continue investments in the group’s plant in Texas.

Gerdau currently has no plans to shut down additional capacities in Brazil. Last year, the group halted operations at the Barão de Cocais plant in Minas Gerais. An important new rolling mill is expected to be inaugurated in Ouro Branco, also in Minas Gerais. “This is an important investment for us, even in the face of predatory imports of hot coil in Brazil at the moment,” the CEO said.

Currently present in seven countries (down from thirteen), Gerdau does not intend to withdraw from any of its current locations.

With low debt levels, the company is set to complete its share buyback program this year and will evaluate in the coming months whether to extend the program.

Mr. Werneck emphasized that having low leverage (a debt-to-EBITDA ratio of 0.32 times) is important and healthy in the current high-interest-rate environment in the country. “Over time, we will continue to analyze opportunities for acquisitions and consolidation in the countries where we operate.”

For the executive, the group has been doing its homework. “This year, we will focus internally, seeking greater efficiency,” he said.

*By Mônica Scaramuzzo  — Davos

Source: Valor International

https://valorinternational.globo.com/
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Rainfall brings relief to Brazil’s energy consumers

Outlook indicates reservoir recovery and reduced reliance on thermoelectric plants following worst drought in 80 years

01/21/2025

The heavy rains that have swept across much of Brazil since December have significantly improved hydropower reservoir levels after 2024 saw the worst drought in over 80 years. With projections suggesting further reservoir recovery, experts foresee reduced reliance on costly thermoelectric plants in 2025. However, specialists warn that challenges remain.

Prior to 2024, Brazil’s last major water crisis occurred in 2021, prompting the government to activate all available thermoelectric plants and hold an emergency auction for new power plants—a move that faced scrutiny. Conditions improved as rains returned in 2022 and persisted, albeit in smaller volumes, in 2023.

The combination of reservoir recovery, increased wind and solar energy production, sugarcane bagasse-fueled thermoelectric generation during the harvest season, and strategic thermoelectric dispatching by the National Electric System Operator (ONS) helped Brazil navigate the historic drought last year without significant disruptions. The Electric Sector Monitoring Committee (CMSE) reported on January 9 that ONS projections indicated reservoir levels in Brazil’s national grid (SIN) could reach between 62% and 92% by the end of the dry season in June.

ONS Director-General Márcio Rea said as of January 15, reservoir levels were at 57.2% in the Southeast/Central-West subsystem—Brazil’s primary energy region—and 59.5% in the Northeast.

Mr. Rea expressed optimism, noting that preventive measures combined with river flows at 97% of the historical average indicate a “very good” situation if rains continue in critical areas. “We are working to store as much as possible,” he said.

Optimizing resources

ONS Operations Director Christiano Vieira explained that the operator’s strategy is to maximize water storage during the rainy season for use during the dry season. This usage, he explained, tends to be less intense from April to June due to increased wind and solar generation, with consumption rising from July, when temperatures are typically higher. “There’s a depletion [reduction in levels] of 7% to 10% per month until October and November, when the rainy season returns,” Mr. Vieira said.

Valor columnist Edvaldo Santana, a consultant and former director at the National Electric Energy Agency (ANEEL), emphasized the significant rainfall in December and January, noting, “It hasn’t rained this much in December for 20 years.”

Fred Menezes, executive director of Armor Energia, echoed this, highlighting accelerated reservoir recovery in the North, Central-West, and Southeast regions since November. Mr. Menezes mentioned that on January 4, the average level was 54.8%, with expectations that by the end of the wet season in November, reservoir levels will reach or exceed those of 2024.

“The pace of reservoir recovery in 2025 is faster and more consistent,” Mr. Menezes said. According to the ONS, all subsystems should exceed 60% of reservoir storage by the end of January, with three surpassing 70%.

Franklin Miguel, president of Electra Energy, noted reservoir levels have risen nearly ten percentage points since late 2024, making the current levels the third highest in five years. “This above-average rainfall was crucial in reversing the decline in hydraulic storage levels nationwide.”

The Generation Scaling Factor (GSF)—a measure of hydroelectric output relative to guaranteed capacity—is expected to average around 70% during the dry season, allowing wind, solar, and sugarcane bagasse plants to support hydroelectric generation.

Ampére Consultoria projects a GSF of 84.3% for 2025, slightly below the preliminary figure of 87.3% in 2024, according to the Electric Energy Commercialization Chamber (CCEE). Higher reservoir levels will ease pressure on the grid, reducing reliance on high-cost thermoelectric plants and keeping market energy prices low.

Electricity prices in Brazil’s free market are projected to average around R$60 per megawatt-hour in the first half of 2025, with some increases expected in the latter half of the year to R$130/MWh–R$150/MWh. “This price rise, despite favorable conditions, reflects a more conservative operational approach with heightened risk aversion parameters,” Mr. Miguel of Electra Energy, noted.

For regulated market consumers, favorable hydrological conditions should keep tariff flags green in the first half of the year, with yellow flags—indicating minimal additional charges—possible in the second half, Ampére Consultoria predicted.

While the improved hydrological conditions provide short-term relief, specialists urge caution. Consultant Santana warned that even if reservoirs reach 90% capacity by March, a severe dry season combined with high temperatures and heavy reliance on hydroelectric plants during evening demand peaks could diminish “hydraulic comfort” by September.

Despite uncertainties, Mr. Rea and Mr. Vieira affirmed that energy security for 2025 is assured, even under the ONS’s most severe climate scenarios. They emphasized, however, that weather forecasts beyond 15 days remain uncertain, requiring continued vigilance.

*By Fábio Couto  — Rio de Janeiro

Source: Valor International

https://valorinternational.globo.com/
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Trump’s support for oil could impact Brazil’s trade balance

U.S. President’s speech reaffirms campaign promises to focus on fossil fuels, countering global decarbonization trends

01/21/2025

In his inaugural address on Monday (20), U.S. President Donald Trump reaffirmed his administration’s intent to prioritize hydrocarbon production over renewable energy sources. Mr. Trump announced plans to declare a national energy emergency, signaling a shift away from transitioning to a low-carbon economy and emphasizing fossil fuels such as oil and gas.

“The inflation crisis was caused by excessive spending and skyrocketing energy prices. Therefore, today I declare a national energy emergency. We will drill, baby, drill,” he said, referencing oil and gas field exploration—a central theme of his campaign. Mr. Trump outlined a strategy to replenish U.S. strategic reserves and increase exports.

While his commitment to boosting U.S. oil exports was clear, its impact on Brazil’s market appears limited, according to Décio Oddone, a former managing director of Brazil’s National Petroleum Agency (ANP). Mr. Oddone said that Brazilian oil differs from U.S. oil, ensuring demand for both.

Felipe Perez, an analyst at S&P, noted that the Brazil-U.S. relationship would hinge on Mr. Trump’s tariff policies. Other factors, such as Brazil’s focus on local content in the oil industry and strengthening ties with BRICS nations (Russia, India, China, and South Africa), will also play a role, he added.

The global impact of Mr. Trump’s measures on oil prices remains uncertain. On Monday (20), U.S. crude (WTI) fell 2.35% to $75.57 per barrel, while Brent crude, traded in London, declined 0.59% to $79.10.

Analysts interviewed by Valor believe it’s too early to predict oil price trends. Victor Arduin, risk management manager for energy and currency at Hedgepoint, said Mr. Trump’s decisions might not affect prices in the short term. However, an increase in U.S. supply could drive prices lower in the medium term. “If regulations are relaxed, U.S. production—currently at approximately 13 million barrels per day—could expand,” Mr. Arduin noted.

According to Mr. Arduin, the energy emergency scenario mentioned by Mr. Trump creates favorable conditions for expanding U.S. production. The impact of his measures on prices will also depend on decisions regarding sanctions on Iran and Russia, as well as relations with Venezuela, experts said.

A potential decline in oil prices could challenge Brazil’s trade balance, according to Mr. Arduin. Oil became Brazil’s top export item in 2024, with exports totaling $44.8 billion—a 5.23% increase from 2023—accounting for 13.3% of the country’s total shipments, per the Ministry of Development, Industry, and Trade (MDIC).

“The Brazilian trade balance, currently benefiting from higher prices and increased oil output, could face difficulties,” Mr. Arduin pointed out. If prices fall, Brazil would need to significantly ramp up production to maintain oil’s contribution to the trade balance—a challenging task without investments in expanding reserves.

Brazil’s oil production is projected to reach 3.6 million barrels per day by 2025, a 6% increase from the 2024 average of 3.4 million barrels per day, according to the Brazilian Institute of Petroleum (IBP).

As global forums discuss climate change mitigation, Mr. Trump’s statements contradict the global agenda. Mr. Oddone, currently the CEO of Brava Energia, believes Mr. Trump’s actions could slow the energy transition. “His measures will likely cool renewable energy plans, especially in areas with strong U.S. influence,” Mr. Oddone said. In addition to declaring the exit from the Paris Agreement, the U.S. President is expected to roll back environmental regulations governing oil activities.

Brazil’s Environment Minister Marina Silva, who leads the government’s environmental policy under President Lula, expected strong rhetoric from Mr. Trump. In a statement, Ms. Silva said Mr. Trump’s speech confirmed pessimistic forecasts about upcoming challenges. “His initial announcements contradict efforts for energy transition, climate change mitigation, and the promotion of renewable energy,” Ms. Silva remarked. She described the coming times as “challenging” but emphasized the importance of information, commitment to life, and political negotiation.

The Brazilian government believes President Trump’s measures will be tempered to avoid harming the U.S. economy. Officials close to Ms. Silva noted that formally withdrawing from the Paris Agreement requires a year’s notice, limiting its impact on the upcoming COP30 climate conference, scheduled for November in Belém, Pará.

Brazil’s environmental team is confident that the fight against climate change will have broad international support, particularly from the European Union and emerging economies. That reinforces the notion that energy transition policies are an “irreversible path.”

Observers also anticipate resistance from U.S. state governors heavily invested in renewable energy sources such as wind and solar. These subnational actors may oppose Mr. Trump’s fossil fuel agenda.

Mr. Trump’s comments are expected to reverberate at the World Economic Forum in Davos, Switzerland, which began Monday (20). Energy Minister Alexandre Silveira, representing Brazil, was reportedly instructed by President Lula to position Brazil as a safe destination for renewable energy investments.

In Davos, Mr. Silveira will highlight opportunities in green hydrogen, biofuels, and solar and wind power—key government strategies to drive economic growth, job creation, and income generation. The minister, the sole high-ranking federal official attending the forum, will participate in a panel on Brazil’s energy market—on Tuesday (21)—and meet with international executives and delegations.

*By Kariny Leal e Rafael Bitencourt  — Rio de Janeiro, Brasília

Source: Valor International

https://valorinternational.globo.com/
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Amid crisis, Unimed Nacional to receive R$1bn capital injection

Regional Unimed units to aid Brazil’s largest healthcare operator contributing 10% of technical reserves to avoid intervention

01/20/2025

Unimed Nacional, a healthcare plan operator with 2 million clients nationwide, has reached an agreement to receive a R$1 billion capital injection from 300 regional cooperatives in Brazil. This move aims to balance its accounts and stave off an “intervention” by the National Regulatory Agency for Private Health Insurance and Plans (ANS).

The regional Unimed units will disburse 10% of their technical reserves this year. This is the first time local medical cooperatives are required to use their own funds to rescue Unimed Nacional—the largest in the sector, which has amassed a net loss of nearly R$1 billion between 2023 and the first nine months of 2024, Valor has learned.

Under market rules, local cooperatives participate in Unimed Nacional, and cooperative member physicians have stakes in regional Unimed units. Thus, when profits are realized, the cooperative members receive earnings, and when there are losses, they are required to make contributions. Despite using the same brand nationwide, each regional Unimed operates independently.

The capital injection was contingent upon a change in leadership. A new election is expected, and a new Unimed Nacional leadership will likely be determined within this quarter. “I believe that with this capital injection and new management, the Unimed Nacional issue should be resolved. The situation will be solved this year,” a person familiar with the matter said.

When approached, Unimed do Brasil, the entity responsible for medical cooperatives, did not comment on the Unimed Nacional case.

The largest medical cooperative in Brazil, with revenue of R$6.5 billion by September, secured this funding, but its situation raises a red flag for the Unimed system—including around 300 cooperatives and 20 million healthcare plan users, accounting for nearly 40% of the entire market.

Industry experts interviewed for the report unanimously state that most medical cooperatives lack professional management, with leadership changes every three or four years and physicians maintaining their own schedules.

“Once elected, they continue with both roles, as a practitioner and a manager simultaneously, without an exclusive dedication,” said doctor José Carlos Abrahão, former president of ANS and the National Healthcare Confederation (CNSaúde).

Among the few cooperatives that boast a professionally managed leadership, are Unimed units in Belo Horizonte, Curitiba, Porto Alegre, and Seguros Unimed, which show positive figures, dividend distribution, and lower complaint rates.

According to ANS data, 109 Unimed healthcare and dental plans faced operational losses from January to September 2024—combined, they total 7 million clients. Considering net loss (including financial revenue), 69 ended in the red. Under the sector’s rules, healthcare operators are required to have reserves in case of bankruptcy, and many only achieve a positive bottom line through financial revenue.

Currently, the most emblematic case is Unimed Ferj, which represents all Unimed units in the Rio de Janeiro state and took over Unimed-Rio’s portfolio last year. Its financial statements do not post a deficit, but this comes at the cost of delayed payments to physicians, hospitals, and other healthcare facilities, with debts generated in 2024 already reaching R$400 million (considering Unimed-Rio’s liabilities, the debt is around R$2 billion). In nine months, Ferj recorded revenue from health plan subscriptions of R$2.9 billion, while expenses for payments to healthcare facilities amounted to R$1.9 billion—a R$1 billion deficit. The margin in the sector is tight. For comparison, Unimed Porto Alegre also had revenue of R$2.9 billion, but medical expenses were nearly R$2.5 billion.

“Just because the ownership has changed doesn’t mean everything will improve. Ferj lacks the expertise to manage a portfolio of that size. I believe the regulator [ANS] should have been stricter, as the issue has persisted for many years,” said another person familiar with the matter. The crisis at Unimed-Rio has dragged on for over a decade, with public accusations of fraud in previous managements.

In December, ANS and Unimed FERJ reached a new Term of Commitment, granting FERJ until March 2026 to resolve issues of supplier payments, provision regularization, and complaints. Among major healthcare operators, FERJ leads the regulatory agency’s complaint index, with an indicator of 448.7 compared to 143 for the second place, Unimed São Gonçalo-Niterói. This new agreement did not have the support of the Prosecution Service, Public Defender’s Office, and other Unimed units, as happened with the 2016 agreement, which was not fulfilled.

FERJ said that the commitment term does not provide extended deadlines for adjustments. It adds that it is a document that formalizes operational monitoring and commitments then assumed as provided by law and imposes a fine in case of non-compliance. FERJ also argued that 65% of the R$1.6 billion debt has been renegotiated, with payments up to date. Regarding the delay in payments to physicians, it noted a cash flow issue in December.

Other emblematic cases also involve mismanagement, a problem reported for many years. One such case is Unimed Paulistana, which served 740,000 clients in the São Paulo capital and closed in 2015. This cooperative was created to replace Unimed São Paulo, which also went bankrupt years earlier. Paulistana’s clients shifted to the insurance company, FESP, and Unimed Nacional, currently facing issues. Currently, the city of São Paulo—the largest market in the country—does not have its own Unimed.

In 2023, Unimed Vitória (Espírito Santo) lost R$145 million by investing a significant portion of its reserves in the Infinity fund, which failed. The investment was maintained even after the Brazilian Financial and Capital Markets Association (ANBIMA) disqualified the asset manager in December 2022. The new management that took over the medical cooperative after this incident stated that it “has been acting with austerity and agility in all its actions, especially in the financial sphere,” and that the loss was recorded in the third quarter of 2024’s financial statements.

Last year, the Federal Prosecution Service of Mato Grosso initiated investigations into possible misconduct at Unimed Cuiabá during the 2019-2023 management period. According to the Federal Prosecution Service, “indications of illegal practices related to the financial and administrative management of the entity were identified, including the submission of documents with serious accounting irregularities to ANS, which concealed a deficit of around R$400 million in its 2022 balance sheet.”

Unimed do Brasil reported that “the Unimed System shows operational performance above the market, with 63% of medical cooperatives posting positive results, compared to 51% of healthcare operators in other modalities.”

*By Beth Koike, Valor — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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St George Mining secures niobium sales deal

Fangda commits to purchasing at least 20% of niobium output from the Araxá Project in Minas Gerais, with upfront payment to St George

01/20/2025

Australian mining company St George and China’s Liaoning Fangda Group, one of the world’s largest steel producers and heavy mining equipment manufacturers, signed a memorandum of understanding to collaborate on the development of a niobium and rare earth elements extraction project in Araxá, Minas Gerais. St George expects to finalize similar agreements in the coming weeks.

Under the agreement, Fangda has committed to purchasing at least 20% of the niobium output from the Araxá Project, providing upfront payments to support the project’s financing. Production, projected to begin in 2027, is expected to reach 5,000 tonnes of niobium annually. Thiago Amaral, St George’s director in Brazil, noted that Fangda also manufactures mining equipment that could be utilized at the Araxá site, located adjacent to CBMM’s mine. Additionally, Fangda will provide technical consultancy and support for the mine’s development and construction.

The deal took approximately four months to negotiate. “As a private company with significant niobium consumption, Fangda proved to be the ideal partner for this process,” said John Prineas, executive chairman of St George Mining.

Mr. Prineas noted that discussions with other potential buyers are ongoing, with plans to secure more niobium pre-sale agreements in the coming weeks. In addition to Fangda’s commitment, St George has a similar deal with SKI HongKong Limited (SKI), which also involves pre-purchasing 20% of the Araxá Project’s niobium output.

The pre-sale agreements come as a strategic solution for St George, which has faced difficulties raising funds.

Last week, St George announced commitments to raise A$20 million in a new share placement on the Sydney Stock Exchange. The funds will be used to pay for the Araxá Project.

The Araxá Project encompasses three licenses owned by Itafos Araxá Mineração e Fertilizantes, a subsidiary of Itafos. In August 2024, St George signed a binding agreement to acquire the project for $21 million plus a 10% equity stake in St George. Of the total, $10 million has already been paid, with $6 million due by May 2025 and the remainder by February 2026.

St George aims to produce 5,000 tonnes of niobium annually by 2027. For comparison, CBMM, the global leader in niobium production, processes 150,000 tonnes annually.

To advance the project, St George will conduct additional drilling to evaluate the mine’s resources, with only 10% of the area currently explored. The next phase involves establishing an industrial complex, estimated to cost R$2 billion. Financing for this phase will rely on loans and additional pre-sale agreements for niobium.

The primary product will be ferroniobium, although the company is also considering producing niobium oxide. The Araxá mine contains reserves of rare earth elements, which St George also plans to exploit.

Mr. Prineas emphasized that the company does not intend to compete directly with CBMM, which dominates 80% of the global niobium market and is controlled by the Moreira Salles family. “Our goal is to meet the demand currently unmet by CBMM and supply the market,” Mr. Prineas said.

*By Cibelle Bouças  — Belo Horizonte

Source: Valor International

https://valorinternational.globo.com/
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