Brazil’s real wage bill expected to grow up to 5.6% in 2023, but consultancy sees “modest” impact of employment in result


Fabio Silveira — Foto: Silvia Zamboni/Valor

Fabio Silveira — Foto: Silvia Zamboni/Valor

With the decline in inflation and the increase in the minimum wage, Brazil’s real wage bill is expected to grow 4% to 5.6% in 2023 year over year, economists say. Employment will have a “modest” effect on this figure, since the increase of this indicator this year is estimated at 0.5% to 0.6%, according to sources heard by Valor – Bradesco’s projections indicate stability compared to 2022.

The volume of people employed in the formal and informal markets, combined to the average salary, is expected to result in a real wage bill of R$289 billion per month in 2023, according to a calculation by the consulting firm MacroSector. The calculation does not include government benefits.

If the Bolsa Família, the federal government’s main cash-transfer program, is included, the monthly total reaches R$300.4 billion. During the year, R$3.6 trillion will circulate in the economy. “It’s a significant wage bill in a country with a GDP of R$10 trillion,” said Fabio Silveira, an economist and partner at MacroSector.

“It’s not very appropriate to make this comparison, given the way GDP is calculated,” he said. “But the parallel shows whether the wage bill is important or not for the economy to grow.”

After a period of consecutive annual declines in 2020 and 2021, due to the economic slowdown caused by the pandemic, the real wage bill rebounded last year. If only wages are considered, it grew between 6.6% and 7% – and it varies depending on the source of information.

“The value of Bolsa Família has basically tripled in a short period of time [since 2022], and the number of beneficiaries has increased by almost 50%. This turbocharges consumption in the short term, not necessarily in the healthiest way,” said Alberto Ramos, head of Latin America economics research at Goldman Sachs.

It has been significant income growth that has had an impact on consumption of food, goods, and services, even though inflation was a concern for Brazilians. “There is an individual problem [because of] the pandemic: we saw an episode of pent-up demand for services that could not be consumed in 2020 and 2021 because of social distancing measures,” said Bruno Imaizumi, an economist at LCA Consultores.

“In 2023, there are still remnants of this consumption,” Mr. Imaizumi said. In other words, even in a country facing high inflation, there is consumption. The real wage bill will rise a bit less in 2023, but it is still recovering, mainly due to the appreciation of the average income level – and less due to the effects of employment growth.

“The minimum wage is a reference for other incomes, and the two adjustments made in 2023 will end up benefiting informal workers as well,” said Lucas Assis, an analyst at Tendências Consultoria. The increase in the minimum wage affects the calculation base for social programs and pensions.

There has also been an adjustment for public servants, a reduction in fuel prices, and a drop in inflation, all of which have had a positive impact on household income.

However, some economists believe that the impact of higher incomes on consumer spending may be hampered by high interest rates in the coming months. “[Household consumption] will continue to grow, but with a slowdown over the months. We expect growth of 2.5% in 2023, which is lower than in previous years [3.7% in 2021 and 4.3% in 2022],” Mr. Imaizumi said.

Mr. Silveira, with MacroSector, said that “families can only go into debt once,” and with the current level of interest rates, the pace of credit expansion is slowing. “This is already happening. Defaults on personal loans, which represent a significant share of consumer credit, have increased.”

In the view of Mr. Ramos, with Goldman, a certain “restriction” in the credit panorama cannot be seen as a bad factor for the economy. “In the short term it is [bad], but it brings something positive later, which is lower inflation and interest rates and sustainable growth,” he said.

Given the level of interest rates, at the beginning of the year Bradesco expected a greater slowdown in household consumption, or even a decline. “But the GDP data did not show that. There is a gradual slowdown,” said Myriã Bast, an economist at the bank. According to her, the second quarter of the year will still reflect the higher wage bill.

“But the effect of monetary policy will probably be more pronounced in the second half of the year, when we expect a stronger slowdown in household consumption, because the other effects [minimum wage adjustment, government benefits, lower inflation] will dissipate,” Ms. Bast said.

Once the recovery phase of the post-pandemic period is over, the annual increase in the wage bill tends to return to pre-2020 levels. It is expected to increase between 2.5% and 3% per year this decade.

*Por Érica Polo — São Paulo

Source: Valoar International
Banks have been seeking investors to gauge their interest in possible bid for Assaí shares


Initial plan would be to make a block trade on B3 of the Casino’s stake in Assaí — Foto: Julio Bittencourt/Valor

Initial plan would be to make a block trade on B3 of the Casino’s stake in Assaí — Foto: Julio Bittencourt/Valor

In recent days, banks have been seeking investors to gauge their interest in Assaí shares. The consultation is about potential interest in Casino’s 11.7% stake in the cash-and-carry company, three sources told Pipeline, Valor’s business website. A sale would mean Casino’s departure from the Brazilian company.

As the French group has sold several businesses to raise funds, while renegotiating a €6.4 billion debt with creditors and seeking a new capital injection, the banks want to move before Casino cuts a deal. Casino and Assaí declined to comment.

The initial plan would be to make a block trade on B3 of the Casino’s stake in the company. Considering the closing price of the stock Tuesday, the transaction could raise about R$2 billion.

The stock gained 14.7%, to R$12.8, after Pipeline run the story Tuesday morning. The market reaction may indicate both the interest in the company as a reaction to the continuous change in the leadership of the retailer, said an executive. In the year, however, the stock is down 32.6%.

Investors consider that the company will take the opportunity to place a primary tranche, which would turn the block trade into a secondary offering. The offering would help reduce the company’s leverage ratio. However, this has not yet been signaled by Assaí.

The French group can also leave the cash-and-carry chain at a less attractive price than in previous deals. In March, Casino sold 254 million shares of Assaí in a secondary offering, raising R$4.06 billion. Because of this offering, the shareholder was blocked from selling new shares for 90 days. The period ends on June 16, opening a window for a new sale. In that secondary offering, Casino sold shares for R$16. In a previous offering, it managed to sell them for R$19 each.

Casino also announced last year the spin-off of the Éxito chain, of which it now owns 47%, including GPA’s 13% stake, to carry out an IPO in Colombia.

In 2019, with the acquisition of Éxito, Casino transferred to Assaí the debt incurred to finance the acquisition of the Colombian chain, which today represents 80% of the debt of the cash-and-carry chain, which closed the first quarter with a net debt of R$8.5 billion and a financial leverage of 2.78 times.

Casino’s board of directors is currently analyzing the proposed injection of €1.1 billion by Czech billionaire Daniel Kretinsky, the second-largest shareholder of the company. The capital injection is expected to remove Jean-Charles Naouri from the control of the group, but helps to reassure the creditors. The timing of the sale of the Assaí shares will depend on the progress of these negotiations by the group of shareholders in Europe.

The original story in Portuguese was first published on Valor’s business website Pipeline.

*Por Silvia Rosa, Maria Luíza Filgueiras — São Paulo

Source: Valor International
Volume of credit granted for 2022/23 Crop Plan between July last year and May this year grew by 18% compared to previous cycle


Paulo Teixeira — Foto: Wenderson Araujo

Paulo Teixeira — Foto: Wenderson Araujo

For the first time, the volume of rural credit granted in the 2022/23 Crop Plan, from July last year to May this year, exceeded the R$300 billion mark. The record disbursements of the 11 months reached R$317.2 billion, 18% more than in the same period of the previous season, according to data from the Central Bank consulted on June 5 and compiled by Valor.

The amount is also 8% higher than the consolidated financing for the entire 2021/22 cycle, when it was R$293.4 billion, according to the report released at the time by the Ministry of Agriculture. Of the amount disbursed until May of this year, R$86.7 billion came from lines with compensation from the National Treasury.

The crop loan operations led to the disbursements of this harvest. In 11 months, R$188.1 billion was granted, almost 34% more than the R$140.5 billion granted between July 2021 and May 2022. Despite the scarcity of funds to subsidize the equalized investment lines, which were blocked for most of this season, the financing in this modality advanced 5% in comparison with the previous cycle, going to R$83.8 billion from R$79.8 billion.

The pace is even slower in the commercialization and industrialization operations, which have had disbursements of R$30.7 billion and R$14.5 billion, respectively, since July 2022.

The performance of rural credit in May has already been counted with the reinforcement of the new equalable limit distributed in the last week of the month, as a result of the budgetary supplementation of R$200 million to subsidize the financing lines of the 2022/23 Crop Plan. Banco do Brasil (BB), Brazilian Development Bank (BNDES), and Caixa were authorized to lend almost R$7.5 billion with equalization.

At Banco do Brasil, the release started in May. As a result, the amounts disbursed by the market leader reached R$176 billion by the end of last month, including the amounts lent through agribusiness bonds.

At Caixa, more than half of the R$1 billion available to Moderfrota [the main credit line for investments in the Crop Plan] the purchase of agricultural machinery and equipment has already been used in the first week that the line has been open.

According to the Ministry of Agriculture, R$27.59 billion of equalable controlled funds and R$19.75 billion of free resources were still available for loans in the 2022/23 Crop Plan on May 22nd. The initial program for the plan was R$340.88 billion.

No date has been set for the announcement of the 2023/24 Crop Plan. Agriculture Minister Carlos Favaro is working to have more than R$400 billion of funds available for the contracts of medium and large producers, but it would need a budget of R$18.5 billion for the equalization of interest rates, but the economic team is having difficulties to meet the request.

For this cycle, R$12.4 billion have been planned for the equalization of the interest rates, of which R$8.6 billion for family agriculture and R$3.8 billion for medium and large producers, distributed over several years.

Mr. Favaro’s team is developing guidelines to link the granting of credit with the adoption of sustainable practices in the rural areas. The goal is to offer a reduction of up to 3 percentage points in the final interest rates on the financing lines of the 2023/24 Crop Plan for those who apply environmentally correct techniques in production, such as direct planting, the use of bio-inputs and integrated production systems, as well as social and economic criteria.

The Agrarian Development Minister Paulo Teixeira plans similar actions for the Crop Plan of family farming. The goal is to stimulate, through more attractive interest rates, the production of foods that make up the basic food basket or that go directly to the consumer’s table, such as rice, beans, manioc, and vegetables.

The expectation among family farming entities is that the National Program to Strengthen Family Farming (Pronaf) will have more than R$ 70 billion in credit in the 2023/24 Crop Plan. But it is still difficult to predict the scenario for next season. To have this volume of financing, most of it subsidized, the sector would demand an increase in the equalization budget, to more than R$14 billion from the current R$8.6 billion.

“The financial cost of the economic subsidy to the credit, added to the high costs with the Agricultural Activity Guarantee Program (Proagro), which has a forecast of more than R$5.8 billion for 2023, depending on the winter harvest in southern Brazil, complicates the planning of the harvest,” said source familiar with the discussions.

*Por Rafael Walendorff — Brasília

Source: Valor International

Juristas que elaboraram o anteprojeto, assim como pesquisadores de tecnologias de inteligência foram convidados ao debate.

6 de junho de 2023

A Audiência pública interativa do Conselho de Comunicação Social discute o PL 2.338/23, que cria regras para a oferta dos sistemas de inteligência artificial no Brasil e define critérios para o uso desses sistemas pelo poder público.

Foram convidados para a audiência pública o ministro do STJ, Ricardo Villas Bôas Cueva; a presidente e relatora da comissão de juristas que elaborou o projeto, Laura Schertel, o matemático, filósofo e professor de lógica da Unicamp – Universidade Estadual de Campinas, Walter Carnielli; a professora Dora Kaufman, do Programa de Tecnologias da Inteligência e Design Digital da PUC de São Paulo; e o professor Juliano Carvalho, do Departamento de Comunicação Social da Universidade Estadual Paulista.

O PL 2.338/23 é resultado do trabalho de uma comissão de juristas que analisou, ao longo de 2022, outras propostas relacionadas ao assunto, além da legislação já existente em outros países. 

O texto, que será analisado pelas comissões temáticas do Senado, cria regras para que os sistemas de inteligência sejam oferecidos no Brasil, estabelecendo os direitos das pessoas afetadas por seu funcionamento. Também define critérios para o uso desses sistemas pelo poder público, prevendo punições para as eventuais violações à lei e atribuindo ao Poder Executivo a prerrogativa de decidir que órgão irá zelar pela fiscalização e regulamentação do setor.

Presidente do CCS, o advogado e editor-chefe do portal jurídico Migalhas, Miguel Matos, disse que “há 20 anos resolvemos não estabelecer esses regramentos para a internet e hoje vemos que talvez tenhamos errado um pouco”, em alusão à necessidade de se regulamentar esse campo da ciência da computação.

Ministro do STJ, Cueva destacou que uma das grandes virtudes do trabalho da comissão foi a compilação das sugestões apresentadas por especialistas, pela sociedade civil e por todos aqueles que quiseram se manifestar. Para S. Exa., todas essas contribuições refletem o que se pensa hoje sobre a inteligência artificial em caráter mais inovador.

“A ideia que presidiu o trabalho da comissão é a criação de um marco legal com um duplo objetivo. O primeiro eixo visa criar direitos para a proteção do elo mais vulnerável de todas as pessoas afetadas pela inteligência artificial que já é usada no nosso dia a dia. O segundo eixo consiste em definir, com base no modelo europeu de regulação geral da inteligência artificial, alguns riscos e deveres de conduta para os operadores da inteligência artificial.”

Relatora da comissão de juristas sobre a inteligência artificial, Laura Schertel disse que com a propositura do PL 2. 338 será possível amadurecer a proposta de um marco geral, “tão complexo e também tão urgente”.

“Conseguimos perceber os benefícios da inteligência artificial, mas também conseguimos perceber de forma rápida a suas falhas”, afirmou a relatora ao chamar atenção para os riscos reais, como erros, discriminações e ampliação de desinformação.

Matemático e professor do Departamento de Filosofia da Universidade Estadual da Campinas, Walter Carnielli considera que o que está acontecendo hoje com a inteligência artificial “é um tsunami”.

Ele mencionou o caso do ChatGPT, assistente virtual de inteligência que ele considera uma “inteligência muito boa”, mas que também apresenta casos de “alucinação”, como a impossibilidade de fazer cálculos matemáticos e a geração de informações errôneas. 

Professora do Programa de Tecnologia da Inteligência e Design Digital da Pontifícia Universidade Católica de São Paulo (PUC-SP), Dora Kaufman salientou que o ChatGPT trouxe o IA para a pauta; mas para a acadêmica, a “repercussão alertando sobre o risco de extinção da humanidade” ainda está no plano da ficção cientifica.

A professora sugeriu que o Senado crie uma comissão que levante como a IA está sendo usada no Brasil e quais são os danos reais. Para esse debate, Dora diz ser essencial a participação de agências regulatórias setoriais, como o sistema bancário e financeiro, que usa a IA há muitos anos, assim como da sociedade.

O professor do Departamento de Comunicação Social da Universidade Estadual Paulista (Unesp) Juliano Carvalho defendeu que o setor de comunicação e informação passe a ser uma área de interesse prioritário no marco legal.

Ele destacou a natureza do trabalho jornalístico e problemas, como os relacionados a questão ética. Carvalho também destacou os “ecossistemas de desinformação que alimentam a produção de conteúdo que podem levar a opiniões e a desastres como capacidade para ampliar noticiais faltas e gerar deep fakes.


O Conselho de Comunicação Social do Congresso tem como atribuição a realização de estudos, pareceres, recomendações e outras solicitações encaminhadas pelo Congresso a respeito do tema da comunicação social no Brasil.   

Instituído pela Constituição de 1988, o Conselho foi regulamentado em 1991 e é composto por membros da sociedade ciivl, representantes das empresas de rádio, televisão, imprensa escrita, engenheiros com notórios conhecimentos na área de comunicação social e representantes das categorias profissionais dos jornalistas, radialistas, artistas e profissionais de cinema e vídeo.

Sob a presidência de Miguel Matos, os novos membros foram escolhidos para um mandato de dois anos em março de 2020, mas não chegaram a ser empossados em razão da pandemia de covid-19.

A posse desta gestão foi realizada em maio deste ano, pelo presidente do Congresso Nacional, senador Rodrigo Pacheco.


Embattled company hired Moelis, Felsberg; sources say reorganization is imminent


Petrobras fertilizer plant in the Northeast, which was leased by Unigel — Foto: Divulgação

Petrobras fertilizer plant in the Northeast, which was leased by Unigel — Foto: Divulgação

After hiring Citi to find a partner for its green hydrogen project and postpone investments to complete a sulfuric acid project in Bahia, petrochemical company Unigel has hired Moelis & Company to advise it on a financial restructuring and the law firm Felsberg Advogados. According to sources close to the talks, the group intends to avoid a court-supervised reorganization. However, this risk is already on the radar of creditor banks, which see the filing as imminent, Valor found.

“The company wants to be well prepared to make decisions and avoid a court-supervised reorganization,” one source said. But the news of the hiring of Moelis and intense talk with Felsberg rumors that the company had also hired Felsberg Advogados added to the creditors’ concerns. Moelis and Felsberg specialize in financial crisis. The law firm has been working for the company the last 10 years, but was hired in the last few days to try and solve the crisis. Two sources say that some creditors are already seeking to accelerate debt repayment.

With high investments for ongoing expansion, Unigel is facing the negative effects of the downcycle in the global petrochemical industry and the mismatch between urea and natural gas prices. About two years ago, the group resumed operations at two nitrogen fertilizer plants (Fafen) leased from Petrobras in Bahia and Sergipe, and the business initially proved profitable. In the second half of last year, urea prices fell sharply abroad, while the cost of natural gas in the country did not follow the same pace, which affected the profitability of the operation.

In view of this, Unigel decided to extend the scheduled maintenance period at the Sergipe plant, suspending industrial operations until the end of August while it attempts to renegotiate the natural gas purchase price with Petrobras and other suppliers.

Prior to this decision, the company had obtained a surety letter from Santander for more than R$100 million to have access to the natural gas supplied by the state-owned company for the two plants. The guarantee was required by Petrobras. The bank was surprised by the closure of the Sergipe unit and may be sued by the Brazilian oil company to honor the contract, sources say.

With $135 million in cash as of March 31, Unigel has $39 million in debt maturing this year. The majority of the debt, $566 million, does not mature until 2026, but debt service and negative operating cash generation in the first quarter (-$23 million) are putting pressure on liquidity.

The recent deterioration in financial metrics and the prospect of the margin stress scenario continuing into 2023 has led financial institutions to seek an early repayment of some of the group’s debt. The company reportedly offered assets as collateral for these bonds, sources say.

Unigel has committed not to exceed a financial leverage of 3.5 times when it issued R$500 million in debentures last year and $110 million in bonds in 2021. At the end of the first quarter, it was at 2.2 times, within the agreed terms, but a deterioration is expected.

In a note to Valor, Unigel confirmed the hiring of Moelis “as an advisor to support the analysis of financial strategies aimed, among other things, at improving its capital structure.”

The company also said that Felsberg Advogados had been providing services to the group for more than a decade “with its support in several legal fields.” Santander declined to comment.

*Por Stella Fontes, Mônica Scaramuzzo — São Paulo

Source: Valor International
Plans presented to Ministry of Finance include changes in the use of Workers’ Severance Fund, in financing of states and municipalities, and in payroll-deducted loans


Rita Serrano — Foto: Cristiano Mariz/Agência O Globo

Rita Serrano — Foto: Cristiano Mariz/Agência O Globo

Caixa Econômica Federal presented to the Ministry of Finance proposals to improve the credit environment in the country, at a time of difficulty and scarcity in the financial market.

The topics were taken by the state-owned bank to Finance Minister Fernando Haddad last week with ideas that include changes in the use of the Workers’ Severance Fund (FGTS) for investments, increased limits of financing for states and municipalities, expansion of payroll-deduction lines, especially for the private sector, and reduction of compulsory payments.

The ideas presented to the Finance Ministry involve changes that go beyond the bank, since they involve Central Bank norms and deliberations of the National Monetary Council (CMN) and the board of trustees of the FGTS. They would help to increase the supply of credit and could also be used by private-sector banks.

Caixa CEO Rita Serrano confirmed that she had taken the proposal to the Finance Ministry, but declined to elaborate, saying they would be presented at the right time by the ministry if they are considered feasible. In the bank, they were designed by chief financial officer Marcos Brasiliano. In principle, the Finance Ministry considered the measures as positive, and they will now be analyzed by the ministry’s officials.

Last month, the National Monetary Council (CMN) raised the limits for credit granting to states, the Federal District, and municipalities. Currently, for this year, the global limit for financing without guarantee is R$10 billion with the changes already adopted by the CMN, while the limit for guaranteed loans reaches R$6 billion.

Caixa, which has tried to get closer to subnational entities at the request of President Luiz Inácio Lula da Silva, was asked to coordinate an increase in this limit and took the proposals to Mr. Haddad. The subnational entities claim that the current limit, despite the increase implemented by the CMN, is still insufficient and mainly affects infrastructure projects.

With regard to payroll-deduction loan, the bank considers that there is room to deepen the offer to the private sector – today the portfolios are concentrated in civil servants and pensioners. Regarding compulsory deposits, a possible reduction in the interest rates charged by banks would increase liquidity in the economy. Today, the rates are fixed at 20% for time deposits and 21% for demand deposits.

In an interview with Valor at the bank’s headquarters last week, the CEO also said that Caixa remains solid, despite recent news that indicated an increase in defaults on lines launched during the Bolsonaro administration, such as those linked to cash-transfer program Auxílio Brasil (now Bolsa Família) and microfinance, which were made available to customers in 2022.

In total, according to the bank, the credit lines amount to more than R$10 billion in disbursements to the poorest segments of the population. In the case of microfinance, the default rate is already above 80%, according to the lender.

“There are no financial problems due to these controversial operations, which was demonstrated in the presentation of the first-quarter report,” Ms. Serrano said. Last month, the bank reported a recurring profit of R$1.9 billion in the first quarter of this year. “Our loan portfolio is very good, with growth,” she noted. The loan portfolio reached R$1.037 trillion in March, up 2.4% in the quarter and 16.6% in a year.

Despite the suspension of the microfinance program, Ms. Serrano said the bank is at the government’s disposal to study measures related to microcredit, mainly using the expertise of other state-run banks.

“These targeted programs must work as a concrete public policy and not with isolated actions aimed at getting votes,” she said. “You can only make microcredits to generate income if there is business advice, financial education, and follow-up, with analysis of the local market.”

With regard to the payroll-deduction loan linked to Auxílio Brasil, the concrete default rates will be known in the next quarter’s financial report, since some beneficiaries who took the loan were excluded from the program by the Ministry of Development and Social Welfare, Family and the Fight against Hunger.

“These were two excesses. These actions of the previous administration led to an increase in the indebtedness of the vulnerable population,” she said.

She confirmed that there are internal investigations to verify the feasibility and motivation of these operations. Externally, the Federal Comptroller General’s Office (CGU) is also carrying out audits – last year, the Federal Court of Auditors (TCU) did not point out any irregularities.

*Por Guilherme Pimenta — Brasília

Source: Valor International
Index that follows sector shows that spreads on securities are beginning to narrow and primary market is growing again


Alexandre Muller — Foto: Leo Pinheiro/Valor

Alexandre Muller — Foto: Leo Pinheiro/Valor

The prospect of an ever-closer cycle of interest rate cuts and the progress of the government’s fiscal plan in Congress led to a rebound in corporate debt in May that surprised even the sector’s managers. The improvement is reflected in the market figures. The Idex-CDI index, created by asset manager JGP to track the segment, noted a sharp increase in liquidity during the month, which came close to the level of December before the Americanas case. There was also a reduction in rates and in the daily average of withdrawals from funds, which fell by 49% compared to April — considering only the last 10 days of the month, the decrease was 65%.

“We had already noticed the improvement, but it was difficult to quantify it. Now the Idex CDI shows the development. There is a cooling movement in withdrawals and if the trend continues, we could have a balanced flow in June,” said Alexandre Muller, corporate debt manager at JGP.

Created in 2017 for internal use, the Idex-CDI became public in 2019 and has become a reference because it captures market movements very quickly. It is based on buy and sell offers between banks, brokers, and debenture investors with a minimum volume of R$100 million, which were present in at least 70% of trades in the last two months.

After Americanas unveiled a hole in its financial statements in January and utility Light’s problems began to worsen, the most acute moment captured by the index was in March, when the number of securities traded fell by 38% compared to December. At the end of last year, this index sample included 322 debentures. In March, the number dropped to 201 with liquidity to be included in the index, which shows how the market has stopped. Now, June starts with a sample of 299 securities, a level close to the pre-crisis one.

Not only was the trading volume surprising, but also the decline in spread, or the rate above the interbank deposit rate CDI charged in the negotiations. The higher the spread, the greater the investors’ perception that there is risk in that security. “We believed that spreads would move from rising to a stable phase. But, looking at the Idex, we had a contraction of 2.93 percentage points, on average, to 2.76, an expressive drop,” Mr. Muller said. The rates, however, are still far above the pre-crisis level, when the average was 1.9 points (December 2022) and 1.6 (May 2022).

Another piece of data that shows a relevant change is that of withdrawals, which battered the corporate debt funds between February and April, with a daily average of redemptions above R$400 million. In the average for May, the daily volume dropped to R$219 million and, in the last 10 days of the month, to R$150 million, in 180 funds of independent managers monitored by the index.

Still in May, the return on debentures was the highest since August 2020, with 0.67 percentage points above the CDI on average. “It’s a very positive number because market liquidity could have risen with negative returns,” Mr. Muller said. “The fiscal framework and the beginning of key interest rate Selic cuts are the foundation of this recovery. In the future trajectory of rates, the forecasts are for interest rates below 10% by the end of 2024, which greatly alleviates the debt capacity of companies. All this helps in the perception of lower credit risk,” he added.

But the scenario is still very challenging. There are companies with high spreads, in different sectors, and a wide dispersion of fund results. A survey by Legacy Capital shows that the number of debentures paying more than the CDI plus 4%, which is considered a high level, has increased. At the end of last year, only seven were in this range, representing 0.8% of the universe of securities. “Today, we have 48 debentures from 24 issuers above this level, representing 9.4% of the total. These are securities in which the market sees a non-negligible credit risk in the future,” said Leonardo Ono, corporate debt manager at Legacy, which manages R$29 billion.

These debentures were issued by the likes of CVC, C&A, Guarararapes, Light, Magazine Luiza, Movida, Tenda, and Via. Despite the improvement in market sentiment, some companies, especially in the retail sector, still face distrust from investors. “After five months, it is clearer to everyone that this is not a systemic crisis. The market has calmed down, but that doesn’t mean that there won’t be a company in a difficult situation in the coming months,” Mr. Ono said.

And having the securities of these companies in one’s portfolio is what will make funds yield well or poorly. “Interest rates are slowly coming down, starting in August or September, from a very high level. For companies, if the key interest rate Selic falls to 12% from 13.75%, it will help, but it won’t solve the problem. There is a tough path until the end of next year with interest rates at 10%. This will suffocate companies, which will have to devote a large part of their cash generation to paying interest,” Mr. Ono said.

Mr. Muller, with JGP, points out that there are companies in the same industry in different situations. “It’s case by case. The biggest concern is with companies that are reducing cash. But even there we find surprises. BRF, for example, had a worrying dynamic until the first quarter and announced a capital increase at the end of May, a positive operation for its credit profile,” he said.

Other companies, such as Orizon, Equatorial Distribuição, and Localiza, have capitalized themselves by selling assets or raising funds, Mr. Muller said, which removes the fear of bankruptcy. Mr. Ono believes that banks are flush with cash. “The crisis is always more serious when banks are in bad shape and unable to roll over debt,” he said.

In the primary market, issuance is slowly returning: Cemig, Autoban (CCR), LM Frotas, Ecorodovias, Iguá, Copel, and Celg are examples of companies raising money through debentures. “I don’t think there will be a flood of issuances. It’s still a tentative recovery because those who can are waiting for the market to improve more,” Mr. Ono said.

Amid the widening spread, which hit high-quality securities first because they are more liquid, funds took advantage and improved the profile of their portfolios. This is because in the wave of redemptions after Americanas and Light, those that allow same-day or next-day withdrawals had to sell securities very quickly to make cash and meet investor requests. “It was more a tactical move by the market to deal with redemptions than a fundamental one,” said Luiz Felipe Novaes, a partner at Polo Capital.

He recalled that from February to April, funds were holding more cash than normal because of redemptions. Polo has two credit products offered on digital platforms, one with a minimum redemption period of 30 days and another of 90 days, while at Legacy the credit fund has a 45-day redemption period. And at JGP, the redemption period is a minimum of 30 days.

“This rush to sell at all costs ended up exacerbating price volatility, but it also transferred assets to other funds that had more stable liabilities,” Mr. Muller said. “Investors need to understand that they are not going to get their money immediately and for free. A fund that allows redemption in one day already attracts an investor with a more volatile behavior.”

*Por Liane Thedim

Source: Valor International
Government plans to distribute more than 90% of 2022 profit to ensure gain above inflation and expects Supreme Court decision


The Worker’s Severance Fund (FGTS) ended last year with a profit of R$15.4 billion, an increase of almost 16% compared to 2021 results, according to estimates calculated in April by the Ministry of Labor and Employment. The government plans to distribute more than 90% of the profit in 2022 to ensure profitability above inflation for the fund’s shareholders. For 2023, the profit is expected to remain at around R$15 billion.

The preliminary result of the FGTS for last year and 2023 is included in a document sent by the Federal Attorney General’s Office (AGU) to the Federal Supreme Court (STF), which is analyzing a case on whether the Reference Rate (TR, which adjusts savings accounts) can be used as an index to correct the FGTS. The announcement of the final profit for 2022, as well as the percentage that will be distributed to the fund’s shareholders, is expected to be made by July, when the data will be approved by the FGTS board. The transfer of the profit distribution to the workers’ accounts is expected to take place by the end of August.

The positive performance of the FGTS, according to a government specialist interviewed by Valor, is supported by yields from FGTS investments and increased collections. The sharing of the FGTS profits with workers has ensured the fund’s profitability above inflation. From 2016 to now, only in 2021 the correction of the fund was lower than Brazil’s official inflation index IPCA – a correction of 5.83%, compared with a inflation of 10.06% in the period.

Last year, the FGTS board approved the transfer of 99% of its profits, corresponding to R$13.2 billion in 2021. If the government decides to propose the same percentage of profit distribution, the fund’s return to be paid this year, based on the 2022 result, is estimated at 7.64%, according to projections by the Ministry of Labor and Employment, compared with an IPCA forecast of 5.79%. For 2023, this return would be 7.85%, higher than the inflation estimate of 5.95% for the period.

According to the specialist, the intention is to maintain the strategy of transferring to the workers more than 90% of the profits calculated in 2022 and 2023, but the distribution is linked to the decision of the STF. If the government loses the case, the negative impact on the federal government could reach R$661 billion. In other words, the possibility of a review of FGTS investments to help absorb the impact is not ruled out.

“If the claim is granted and the effects are not limited, the fund’s assets could be insufficient to pay the debt corresponding to the amounts that would be owed retroactively in the case of application of an index such as the INPC, since it would generate a liability for the FGTS of more than R$661 billion, an amount much higher than its net assets,” AGU’s document says.

For the time being, the government waiting a decision. The case before the STF has been suspended due to a request for examination of the case records by Justice Nunes Marques, who has indicated that he may return the case in the coming weeks. Two justices have already agreed that the correction should not be lower than that of the savings account. By law, FGTS accounts are corrected by TR plus 3%.

In the case of the savings account, the rule of the Central Bank is that if the key interest rate Selic is below 8.5% per year, the annual adjustment of the savings account is 70% of the Selic plus TR. If the Selic is above 8.5%, the return is fixed and equal to 0.5% per month plus the TR.

*Por Edna Simão — Brasília

Source: Valor International
In important markets, the price is already 30% lower than last year


The increase in the supply of cattle brings down prices; in some regions of Mato Grosso, prices have already fallen by 30% in one year. — Foto: Luis Ushirobira/Valor

The increase in the supply of cattle brings down prices; in some regions of Mato Grosso, prices have already fallen by 30% in one year. — Foto: Luis Ushirobira/Valor

Prices of live cattle have plummeted in the past few months as a consequence of the greater availability of animals for slaughter due to the turn of the cycle in the segment. This drop, however, has not yet reached final prices.

The price is already 30% lower than last year in the same period in some regions of Mato Grosso and Pará, cattle breeders say. In the state of São Paulo, according to a survey by Scot Consultoria, the average decrease is 17%. In the São Paulo retail trade, beef fell by an average of only 2.5% compared to the same period last year.

In this scenario of falling cattle prices, ranchers do the math and indicate a significant reduction in the intent to confine animals this year, while meatpackers are reduce the pace of animal purchases and suffer lower results with the drop in exports in the first four months of 2023 and weak domestic consumption.

Cattlemen and slaughterhouses say it is necessary to balance the chain’s margins to encourage protein consumption in supermarkets and improve the business environment far from Brazil’s large cities.

Since the beginning of the new cattle cycle two years ago, the price of live cattle in São Paulo fell 23.1%, to R$236.50 per arroba (a metric unit equal to 15 kilos). In the same period, wholesale meat in the state fell only 2.7%, to R$29.73 per kilo. The meatpacking industry says the decline was more intense, around 6%.

In São Paulo retail, Scot Consultoria estimates that the protein is, on average, 19.5% more expensive than two years ago, at R$50.32 per kilo.

According to Mariana Mioto, an analyst at Scot Consultoria, retailers may be taking advantage of the moment when other links in the chain decline to rebuild margins after a period of tightness, so that prices do not fall at the same rate.

She also said that, on the other hand, the inflationary environment is pushing consumers toward cheaper proteins, such as chicken, pork, and eggs. “Even in the week they are paid, when demand is usually higher, there is no expressive increase in beef purchases,” she said.

According to the Brazilian Association of Meatpacking Companies (Abrafrigo), a proportional drop and at the appropriate pace in the prices of meat to the consumer would help balance the rest of the chain and boost consumption in a difficult economic moment.

“With higher demand at the end, prices to cattle ranchers and at the slaughterhouses have a breakeven point,” said Paulo Mustefaga, president of Abrafrigo.

The data from the Ministry of Agriculture show that the problem is not a lack of supply. Slaughtering increased by 9% in the first two months of this year in comparison with 2022. The volume of exported beef decreased 12% from January to April, to 640,000 tonnes, which reinforces the availability of the product in the domestic market.

Ms. Mioto, with Scot Consultoria, says companies have reported that some of the meat that was no longer exported to China due to the embargo in March after an atypical case of mad cow disease is being released to the domestic market. “Part of the production was still stored in slaughterhouses,” she said.

The Brazilian Association of Supermarkets (Abras) sayid that the price reduction will be gradual. The trade group explains that in recent years there has been a substitution of beef for chicken or pork and eggs, but that consumption is resuming the pace with funds injected into the economy.

“Throughout Brazil, the shelves are full, and companies continue to make promotional activities to meet the consumer,” the association said in a note.

Abras also said it is important to consider other factors in the formation of prices in this link of the chain, such as the logistics and energy costs of the perishable chain in transportation, storage, and display in stores. The demand for beef in the international market also plays a role.

One factor that could contribute to the decline in beef prices is a possible decline in chicken prices if avian flu spreads to commercial farms and leads to embargoes on poultry exports. “The possible impact of avian flu would reinforce an already existing trend for beef, which is on a downward bias,” said Felipe Sawaia, market intelligence analyst at StoneX.

*Por Rafael Walendorff, José Florentino — Brasília, São Paulo

Source: Valor International
Jean Paul Prates defends that company can meet agency’s requests to drill well in Amazon basin


Jean Paul Prates — Foto: Leo Pinheiro/Valor

Jean Paul Prates — Foto: Leo Pinheiro/Valor

Petrobras CEO Jean Paul Prates says the company can meet the conditions presented by the federal environmental agency Ibama to drill a well in the mouth of the Amazonas basin. “The license must not be given at any cost, but we have to appeal. We are asking Ibama to resume the licensing,” said Mr. Prates in an interview with Valor.

The executive said that he had an “environmentalist to environmentalist” conversation with the Environment Minister Marina Silva since he has a master’s degree in environmental management: “I know what licensing is.” Despite the efforts to drill a well in the mouth of the Amazon River, Mr. Prates recognizes that the decision on the activity in the region is up to Ibama and that the agency can maintain the denial, as it did last May.

The exploration of the Equatorial Margin, where the mouth of the Amazon River is located, is part of Petrobras’ efforts to replenish reserves. Oil exploration and production will continue to be a priority for the company, in part to finance the energy transition to a low-carbon economy. On Thursday, the company published guidelines for its 2024-2028 strategic plan, in which it signals an increase in investments in decarbonization to 15% from 6%.

Asked whether he intended to nationalize Braskem, Mr. Prates replied: “No, what kind of language is that? This is typical of a Chávez administration [Hugo Chávez, former president of Venezuela].” Read below the main excerpts of the interview with Valor:

Valor: One of the priorities of your administration so far has been the fuel price policy, which was changed in May. On the day of the announcement, the market reaction was positive because it was understood that nothing had changed in the short term. But in the long term, there were doubts about what Petrobras would do if it had to raise prices.

Jean Paul Prates: We were able to explain that the IPP [import parity price] did not make sense for a company like Petrobras. It was good, but we were losing market share. I was asked: What if oil goes up? Maybe it will not go up as fast and as accurately as the IPP, but the price will go up at some point or someone thought that Lula [President Luiz Inácio Lula da Silva] would be elected and we would come here and promise that the price would never go up, it would only go down… It makes no sense.

Valor: Will the change in the formula for collecting the sales tax ICMS on gasoline and alcohol, and the return of the social taxes PIS/Cofins in July test Petrobras’ commercial strategy?

Mr. Prates: No [it will not be a test], because it is not a factor that affects oil, it is a tax that existed and came back. So, it would not make us change [the price] unless, by chance, other adjustments might be appropriate. It would be different if there was a high on oil pricing.

Valor: But when the price goes up at the pump, the public tends to understand that Petrobras is increasing the prices, even if in this case it is the effect of taxes.

Mr. Prates: Our merit is that we have been transparent in explaining [the new system] to people. We have been careful to show what the drop at the pump can be from the reduction in prices at Petrobras’ refineries. It is something that forces the production chain to reduce prices. Otherwise, it appropriates the margins, and everything stays the same. When we announced the cancellation of the IPP, we were careful to say in quotes that the expectation was to lower the pump because there is a gasoline blend and a distributor margin. We are not going to dictate the closing price, but we are giving an estimate. But it is not price fixing. Who has to take care of this is Procom [consumer-protection watchdog], the antitrust regulator agencies, and the end consumer. With the commercial strategy, we will be close to the reference prices, but [the domestic price] will fluctuate less.

Valor: Has there been criticism from the market about the lack of transparency?

Mr. Prates: Why do I have to be transparent? Do you know how McDonald’s makes the price of the sandwich? The Brahma beer, do you know how the price is calculated? Do I have to tell you how much a liter of gasoline costs in each region of Brazil? We use more than 40,000 variables in a platform that uses linear programming. It considers, among other things, the refineries, what oil I buy and the quantity from each unit, how the products are combined, and what the best logistics are to reach each market. But the international [oil] price has a great weight in the model. There has to be a vote of confidence that we are responsible managers. Tropicalizing the prices is different from nationalizing the prices, nor is it fixing the prices or isolating it [Petrobras and Brazil] from the world. People understood that it is not [something] evil, it is not a government that is going to use gasoline prices demagogically. I fully understand the accusations and I accept them; I am trying to deal with the reassurance that the post-trauma [resulting from Petrobras’ involvement in the Car-Wash operation] requires.

Valor: Petrobras disclosed the assumptions for the 2024-2028 business plan, indicating that it can expand investments in low-carbon projects. Is that true?

Mr. Prates: It is about renewables and sustainability, and the decarbonization business, which includes oil and gas. The investment in low-carbon projects [of Petrobras] is 6% of capex and we can go up to 15%. With this percentage, we will be equal to and even exceed what American companies are doing [in this area]. The percentage of the European [oil companies] is higher. Petrobras has lost ten years without an energy transition. Before the Car-Wash operation, there were other reasons to say that Petrobras was an oil-only company, the pre-salt itself led us even more to that. Then there were other issues, it was no longer the Car-Wash operation, but the political crisis. With Temer and Bolsonaro, Petrobras closed itself to the idea of being only an oil company, to profit from the pre-salt and sell the rest [of the assets].

Valor: But the fact is that the oil is still needed to finance the energy transition.

Mr. Prates: We need that revenue to finance renewables. Everything is reasonable, nobody is going to make radical changes. Exploration and production are the company’s core business. The energy transition of an oil company is doubly challenging. Decarbonizing Petrobras or any other large company in the sector is not changing a tire while the car is running, it’s turning a car into an airplane while it is running. I cannot neglect the replenishment of our reserves. I have to produce oil in 40 years from now. Maybe I need a plan that looks 30 years ahead. We thought of doing something like this for the investor to understand the direction we are going in because our main thesis is that we want Petrobras to exist for at least another 70 years, to be strong, being a good investment, unlike the previous management which made the company occasionally profitable and then sold it.

Valor: Is the bet on Equatorial Margin seeking to replace oil reserves?

Mr. Prates: The Equatorial Margin is made up of several sedimentary basins, from Rio Grande do Norte to Amapá. It is a region that had received less attention in the past because everything has been focused on the Southeast [Campos and Santos]. It has a horizon [on the Margin] and we have to go after it. The problem there has always been environmental licensing in the mouth of the Amazonas basin. We inherited this situation from a block that Petrobras bought, and the license had already been transferred. We are trying to see if we can get [the license]. If the government decides that it should not be explored now or the well should not be drilled, there is no problem.

Valor: Would it be up to the government to decide where it is more interesting to explore in that region?

Mr. Prates: In the previous administration, we had a request to take all the equipment there. We are trying to complete an operation that was started. The rig, the planes, and the helicopters are there because a real simulated test was needed. What we are asking in the appeal to Ibama is that the licensing process be resumed and that we be able to meet the additional requirements of the new management [of the institute]. The new Ibama is better and more conscious. I am not the one to say that Ibama is useless or that it harms the country. This is a speech that others can make, not me.

Valor: How was the meeting with Minister Marina Silva?

Mr. Prates: We had a conversation from environmentalist to environmentalist. I have a master’s degree in environmental management, I know how licensing works. I told her that I wanted to reconcile a situation we inherited, and added: ‘Can we give you guarantees that at least the prospective drilling of the well, to see if there is oil in place, can be done now? Let’s do something else with that rig. No one has broken the law with what is being done [in the Amazon]. There was a joint decree [from the Ministry of Mines and Energy and the Ministry of the Environment] that suppressed or waived the need for the AAAS [Sedimentary Area Environmental Assessment] for the bidding on these blocks. The decree is from 2012, and in 2013 there was an auction, someone went there and bid. Then Petrobras bought the block, which is a federal concession. We are committed to the National Petroleum Agency [ANP] to drill a well. The license does not have to be granted at any cost, but we have to appeal. There was a denial with conditions, and I say we can meet these conditions.

Valor: Who is in charge of the AAAS?

Mr. Prates: The AAAS is an achievement of Minister Marina during the Rousseff administration. The AAAS is like a regional study, it is not micro-localized, a well from a specific place. It is how I use the natural resources of an entire sedimentary basin. The Amazon Mouth is the projection into the sea, it is more a geological concept than a geographical one. It is called that because it is there, but [the extension] is much broader. The AAAS will say which segment can have a license for each grade, where more care is needed, and where there will be no license. The AAAS serves to sectorize a large area and say what you can and cannot do there.

Valor: But who should do it?

Mr. Prates: The Mines and Energy Ministry, according to the regulations, with the Environment Ministry. It has nothing to do with Petrobras. It is something that should have preceded the bidding for the block. Petrobras and other companies would only enter the liberated areas.

Valor: Does Petrobras expect a deadline to get the license?

Mr. Prates: No, because the environmental agency does not have a deadline. Ibama will make its decision based on the appeal. They can ask for more requirements, grant the license now or maintain the denial. Ibama can say that it will not issue a license for the time being and propose a deadline for the AAAS to be carried out. But it will not take six years, Minister Marina told me. It can be done in 2,5 years.

Valor: Will Petrobras make an offer for the Margin block in Guyana?

Mr. Prates: We are collecting data; I cannot say if we will make an offer. But it is a decision that has nothing to do with Ibama’s decision. It is not a vendetta: ‘Ah, I’ll go there if it doesn’t work here. It is a knowledge of the geology of the whole region; we are looking for reserves.

Valor: Changing the subject, is there criticism about the weakening of Petrobras’ governance, partly due to the role of the Mines and Energy Ministry in the company’s board. How do you respond to this criticism?

Mr. Prates: The board is sovereign, I cannot comment. The country has to decide whether it wants to have a ministry [of Mines and Energy] or not. If there must be one, I prefer to have the minister as president of the [Petrobras] board, as it was before. There is no movement in the board to reduce governance. Governance is good in a mixed economy company; it helps not to have undue interference. There is not one person in the management and the executive board who was imposed on me by a politician or someone from Brasília. President Lula gave me the freedom to choose the board of directors. They are renowned technicians in refining, logistics, exploration, and production. They all have a resume.

Valor: Why appoint an ex-advisor of Nestor Cerveró, implicated in the Car-Wash Operation, to the legal department?

Mr. Prates: He [Marcelo Oliveira Melo, the company’s general attorney] has not been indicted, investigated, nothing. He had a law firm when he left Petrobras. Someone called him from Uruguay and asked him if he could create a Brazilian legal entity, not an offshore, which in turn had the participation of an offshore. Years later Car-Wash Operation found offshores that belonged to Cerveró. It was an offshore to rent his apartment, a tax planning company.

Valor: Wouldn’t there be other lawyers for the job at Petrobras?

Mr. Prates: Melo was my boss; we have a personal relationship. He is not corrupt, nor has he helped any corrupt person. I insist he is not accused of anything. He is a person that I met at the beginning of my career; he was my first boss at Petrobras. And he was the first person I called when Lula talked about me taking over Petrobras. I called Marcelo and said: ‘I need you to go with me.’ He went through all the instances of governance [to take the position] and there was nothing against him.

Valor: Are you in favor of changing the State-owned Company’s Law?

Mr. Prates: I would make certain changes. I am here without violating anything in the original law. The questions that existed in my case related to the fact that I was running for mayor of Natal [Rio Grande do Norte state] have been resolved. The law prohibits party leaders [in state-owned companies]. The change I would make as a legislator would be [to veto] the party leader who is responsible for approving campaign accounts or defining candidates, something specific.

Valor: Will you nationalize Braskem?

Mr. Prates: No, what kind of language is that? This is typical of a Chávez government [Hugo Chávez, former president of Venezuela]. We will work according to the stock market rules. I can buy and sell, just observe, but we cannot say what we are going to do. We will not do anything that is not interesting for Petrobras.

Valor: Could Petrobras return to the distribution segment?

Mr. Prates: I don’t know. Will it go back to being a service station company when it is going through an energy transition? We want to be close to the consumer again. [It will be necessary to analyze] how this will be done, if through Vibra [formerly BR Distribuidora] or through a new distributor, creating a new configuration.

Valor: Will you review the agreement with the antitrust regulator Cade for the sale of refineries?

Mr. Prates: I expect that we will cancel this agreement without litigation and by consensus.

*Por Kariny Leal, Fábio Couto, Francisco Góes — Rio de Janeiro

Source: Valor International