Analysts’ median projection for Selic at end of 2023 was stable this week at 10.5%
07/12/2022
Central Bank’s building in Brasília — Foto: Divulgação/Rodrigo Oliveira/Caixa Econômica Federal
Economic analysts have once again increased their inflation projections for 2024 and continue to bet on cuts in the basic interest rate in 2023, shows the Focus survey, released on Monday morning.
Overall, this movement in expectations reveals that the financial market is questioning the strategy of the Central Bank’s Monetary Policy Committee (Copom) of raising interest rates less now, but avoiding cuts next year.
At its last meeting in June, the committee said that if it raises the key interest rate less in the next few meetings, combined with keeping interest rates higher in 2023, it could bring inflation down “around the target” as early as 2023.
On that occasion, the Copom disclosed an alternative projection for inflation that shows that if interest rates were maintained at 13.25% per year during 2023, projected inflation for 2023 itself would drop to 3.7% from 4%. At this percentage, it would still be above the target, set at 3.25%, but the committee considers that it would be close enough to the target, given the great uncertainties affecting the economic scenario.
The Focus survey shows that, at least for now, the market has not bought the thesis of higher interest rates in 2023. The median projection of analysts for the Selic policy interest rate at the end of 2023 was stable this week, at 10.5% per year.
The market has doubts if, in fact, the Copom will keep interest rates stable in 2023 because, if it does, the inflation projected by the Central Bank itself for 2024 would be too low. In mid-June the Central Bank projected inflation at 2.7% for 2024, already below the center of the year’s target of 3%.
Some experts noted, when the Central Bank unveiled its strategy of higher interest rates for longer, that it is inconsistent with the usual way the Copom acts. The natural thing to do would be for the Central Bank to take care of inflation for the following year, cutting interest rates so that they do not get too low.
Moreover, the Central Bank’s own policy director, Diogo Guillen, said in the Inflation Report interview that signaling higher interest rates for longer in 2023 was not forward guidance. Forward guidance could tie the hands of the Central Bank and force it to keep interest rates higher even if circumstances over time suggest it should do otherwise.
Another set of data from the Focus survey that puts the Central Bank’s strategy in doubt is the evolution of market inflation expectations.
In the case of the figures projected for 2023, they rose to 5.09% from 5.01% last week. The figures expected for 2024 rose to 3.3%, against a target of 3%, after remaining stable at 3.25% for several weeks.
In part, this is a sign of market disbelief that the Central Bank will be able to meet targets with the current monetary policy strategy. It also reflects the fiscal risks, with tax cuts and increased transfers, that are likely to make disinflationary work difficult for a long period of time.
Judges decide that skyrocketing prices unbalance future crop purchase contracts
07/12/2022
Fernando Bilotti Ferreira — Foto: Divulgação
Farmers have been sentenced to pay compensation for losses and damages to trading companies that operate in the commodities market. The reason is a contractual clause called washout. With the rise in grain prices, this clause has been activated more often by the companies.
Future crop purchase contracts generally include this clause. They establish that farmers will be held responsible for losses if they fail to deliver the product on the agreed date and the buyer is forced to make a new purchase at a higher market price.
This clause is meant to prevent the producer from being seduced at harvest time by higher offers than those closed at the time of the contract and sell the grains to someone else.
Until last year, however, before the record surge in prices of agricultural commodities, this clause was hardly ever used by companies because the fines that are also provided for in the contracts used to be enough to cover the losses.
“Commodities, nevertheless, have doubled in price and the fine, even if high, no longer covers the difference between what was contracted and what is currently practiced in the market,” says attorney Fernando Bilotti Ferreira, with law firm Santos Neto.
He refers to contracts that were closed in 2020 and had delivery scheduled for 2021. According to the lawyer, the fines vary between 10% and 30% of the contracted value. The washout clause, on the other hand, covers all the losses, which can even be above the total value of the contract.
The increase in commodity prices was impacted last year by the strong international demand and the high exchange rate. It rose 45.23% in relation to 2020, according to the Brazil Commodities Index (IC-Br), released by the Central Bank.
“It started with soy, then corn, cotton and coffee. In September 2020, each coffee bag was traded for about R$600 — currently it is at almost R$1,500,” adds Mr. Ferreira.
One of the lawyer’s client — a company that won in court the right to compensation — bought 1,200 tonnes of corn grain that was not delivered on the agreed date. The agreed value was R$612,000 and the established fine in case of non-compliance was set at R$134,000.
The losses for having to acquire again the same amount of corn in the market, at the current price, however, totaled R$1.088 million. The fine, in this case, would cover a little more than 10%.
The decision that secured the payment of the fine and the reparation, together, was made by Judge Carlos Dias Mota, at the Court of Justice of São Paulo (TJSP). He considered the conditions provided for in the contract and the fact that the parties — producer and company — were aware of the risk of fluctuations in the market price of grain.
“It is reasonable to consider that the losses and damages do not correspond only to the price of the product adjusted when the contracts were signed, but also to the losses resulting from the need to purchase the undelivered volume of corn from a third party,” he says in the decision.
Most of the requests that have been made to Justice have this format: they include the fine and the payment of compensation for losses and damages — which corresponds to the difference between the contracted price and the market price at the time when the product should have been delivered.
The producers, on the other hand, have been alleging contractual imbalance. They consider the accumulation of fines and compensation to be abusive and say that the contracts, in this format, benefit only the creditors.
They also argue that the washout clause could not be used automatically. The companies, in the farmers’ view, should demonstrate, through documentation, that the broken contract was linked to a subsequent deal also agreed based on the old price.
But they have not been able to convince judges and appeals court judges. The jurisprudence has been consolidating in favor of the companies. There are even decisions from the TJSP validating these charges.
Lawyers say that these decisions of the TJSP give security to future purchase contracts — which are important for the entire chain. The trading company is not the final recipient of the product. It buys and sells, usually to the foreign market.
“The trading is important for financing the producer and for exports,” says José Afonso Leirião Filho, a partner at law firm VBSO Advogados.
He says that the producer has the obligation to deliver the product and that when this does not happen, the trading company resorts to a court, first, to search for the grains. “Only when they don’t find them, the washout takes place and changes the course of the case to collect the values. It makes sense for the courts to validate this clause. The idea is precisely to rebalance the chain,” he says.
The generation investment arm of the J&F group expects to reach 1.26 GW of installed capacity by 2025
07/11/2022
With the plan to transition from an infrastructure company to a service company in the power sector, Âmbar Energia, a subsidiary of the J&F conglomerate, has an ambitious goal to invest R$6.5 billion in solar generation in Brazil by 2025 and reach 1.26 gigawatts (GW) of installed capacity.
In distributed generation alone, R$1.3 billion of the projects in the pipeline will be invested to reach 260 MW. The kick-off will be on July 14 with the inauguration of the first 5 MW solar farm, in São Paulo, to serve Swift’s stores and other clients. By the end of the year, 20 solar farms are expected to be ready, totaling 100 MW in operation.
The sector is in a “race for the sun” this year to be free of the charge the distribution grid usage fee (TUSD) until 2045. The projects that request connection to the grid until the end of the year will continue to be exempt from the TUSD for 23 years, so the challenge for Âmbar is to validate the amount of projects that it has until the end of the year to be able to take advantage of the benefit.
Marcelo Zanatta — Foto: Carol Carquejeiro/Valor
The bulk of the investments will be channeled to the free power market. To reach 1 GW, the company will have to disburse R$5.2 billion. Âmbar’s CEO Marcelo Zanatta says that the company’s trading arm was born recently and already has about 2,000 customers.
In addition, the controlling group has a large portfolio of customers and suppliers that can receive customized energy services according to size and need. “Just as Friboi offers a protein solution, we can offer a power solution,” says the executive.
Mr. Zanatta explains that the solar farms will be distributed in several states, depending on the opening of new Swift stores. In the free power market, the projects are large and the idea is to take advantage of land where there is more insolation, and the company already has spaces in Mato Grosso, in the north of Minas Gerais and in the Northeast region, with projected investments of R$5,2 billion by 2025, the executive says.
The company is quite ramified: there are two transmission companies with 460 km of lines, two gas-fired thermoelectric plants (UTE Cuiabá, 529 MW, and UTE Uruguaiana, 640 MW), 645 km of gas pipeline connecting Bolivia to Cuiabá, and energy trading. It is still too soon to know whether the company will also be able to become relevant in services, but the strategy is outlined.
According to Âmbar’s calculations, with the creation of the solar farms, 12,000 tonnes of CO2 equivalent emissions are avoided per month, proportional to the monthly planting of 4 million trees. If everything goes right on this horizon, J&F’s energy arm is expected to more than double its installed capacity, jumping to almost 2.5 GW from the current 1.2 GW of power.
Besides the challenge of deploying a huge scale of power in a short time, there is the pressure of the production chains. The company says it is taking advantage of the capillarity of the multinational and has five strategic suppliers in Asia. The equipment price increase of 10% to 15% in the last 12 months is a point of attention, but Mr. Zanatta says he believes the prices can slow down by 2025.
Another line of business is generation from natural gas. The investments underway in 2022 add up to more than R$1.2 billion and include improvements in the thermal plants and the construction of four more plants, which together give 344 MW of power. The investment is the result of the 2021 emergency auction in which the company acquired the four plants.
In the bidding, Âmbar proposed the transfer of the obligations of the thermal plants contracted to the UTE Cuiabá thermal plant, but there is an impasse in the Brazilian Electricity Regulatory Agency (Aneel) whether to accept the proposal or not.
Devices went into production at Sony’s former TV factory in the country
11/07/2022
Giovanni Cardoso — Foto: Ana Paula Paiva/Valor
Sony’s brand Aiwa, which became popular in Brazil for its stereos in the 1990s and 2000s, is back in the country with a new line of TVs and audio equipment manufactured by Grupo MK, owner of the Mondial brand. The devices went into production at Sony’s former TV factory, which was bought by the group in December 2020.
Since taking over the 27,000-square-meter facility, MK has invested R$70 million in updating the plant, licensing the Aiwa brand, and developing products, in addition to transferring part of Mondial’s electronics production from a leased plant in the region to the new industrial unit.
With a factory already prepared to make televisions, the group started producing five models of connected televisions (smart TVs), with screens ranging from 32 to 55 inches, which will hit the stores in August. In November, the month of the FIFA World Cup and Black Friday, the company will launch two more TVs with 65-inch and 75-inch screens. Some models will feature Google’s Android TV system, which also come in Sony TVs. Others will have a system called Speed Smart.
“The initial investment in the production of the TVs is R$164 million just in components such as integrated circuits and screens imported from China, Korea, the United States and Japan,” said Giovanni Cardoso, founder and president of Grupo MK.
Aiwa TVs hit the market to compete in the premium segment with more expensive products from brands like Samsung and LG. “The goal is to have a 5% share in the segment by the end of the year,” Mr. Cardoso said. In 2023, he estimates that the company will reach 18% share in the segment.
The plant has a production capacity of 1.8 million TV sets per year, and 85% of the assembly stage is executed locally. Initially, according to the executive, the annual production will be of 500,000 TV sets, but this figure may increase according to market demand.
In September, the group will expand the offer of Aiwa headphones imported from China. In November, the audio line will grow to include automotive and portable stereos with powerful boombox speakers produced in Manaus.
Founded in 1951, Aiwa was the first company to manufacture a cassette tape recorder, in 1964, and had its control acquired by Sony in 1969. In the 1990s, it became world-renowned for its stereos with CD player, radio, two cassette tape slots and amplifier. In 2008, Sony discontinued the brand and sold it nine years later to Towada Audio, a third-party electronics manufacturer.
Grupo MK will also hire 1,000 employees by the end of the year to speed up production of both the newcomer Aiwa and the Mondial and Xzone lines of gaming accessories. “There will be 370 new employees in Manaus, where we already employ 220 people coming from Sony, and 630 in Bahia,” the executive said. The industrial unit in Conceição do Jacuípe, Bahia, produces Mondial-branded appliances and cooktops.
The return of Aiwa in a quarter that is usually weaker in retail sales, according to the executive, is more related to the schedule of modernization and product development in Manaus. “Coincidentally, we had time to hit the market in a World Cup year, when people tend to change their TV sets for models with slightly larger screens,” Mr. Cardoso said.
The founder of the group, created in 2000, says he is not concerned about the impact of the economic scenario of inflation and high interest rates on the company’s results. “We have products for all audiences,” he said.
This year, the group expects to gross R$4.5 billion, up 18.4% year-over year – revenues reached R$3.8 billion in 2021. “The goal is to reach R$6 billion in revenues in 2023,” he said.
The top ten Brazilian products in bilateral exchanges account for 91% of sales
11/07/2022
Brazil was the seventh-largest seller to China in 2021, a position that contributed to assuring a record surplus in the Brazilian trade balance last year. Among the ten countries that sold the most products last year to the world’s second-largest economy, however, Brazil was the one that had the most concentrated agenda. Only ten products were responsible for 91.4% of the total value that Brazil exported to China last year.
China’s increasing share in Brazilian exports, concentrated on just a few items, is only paralleled by large oil exporters such as Angola, Qatar, and Oman (which sell very few products to China), and exposes the performance of Brazilian exports not only to the ongoing volatility of commodity prices but also to the expected slowdown in the Asian country, experts say. The International Monetary Fund (IMF) projects a 4.4% growth in China’s GDP in 2022 after an 8.1% increase in 2021.
With a dynamic similar to that of Brazil, although with a lower concentration in the export list, is Australia, the fifth country that sold the most to China last year, with the “top ten” products accounting for 88.2% of the amounts exported. Russia, tenth in the ranking of the biggest exporters, has a concentration of 75%. Taiwan is the first supplier to the Chinese, with the top ten products reaching 71.2% of their exports.
The situation of these countries contrasts with that of South Korea, Japan, and the United States, which follow in this order Taiwan among China’s largest suppliers. The three countries have a much lower concentration of the ten most sold products: 51.5%, 20.5%, and 37%, respectively, according to Chinese government data.
Among the 50 largest GDPs on the planet, only Nigeria (the 31st largest global economy) and Iraq (47th) have sales to China that are more concentrated in ten products than the exports from Brazil, which is expected to be the tenth-largest in the world this year. In both cases, oil is the main product to China. Iraq is the third-largest supplier of the commodity to the Asian country, and it represented 99.3% of its sales last year.
Even as the seventh-largest supplier to China last year, Brazil was the leader in sales to the Asian country in only 48 products. The champion in this ranking was Japan, with 1,444 items, followed by Germany, with 856 products, and the United States, with 796.
Figures available on Brazil’s side also show a concentration of the export agenda. Last year the Chinese absorbed 31.3% of Brazil’s total exports, a share nine percentage points higher than in 2017, according to data from the Economy Ministry.
The share of the ten largest products in the value shipped remained high, advancing to 91.4% of exports to China in 2021 from 89% in 2017. Even within the “top ten,” there is great concentration. The three leading products – iron ore, soybeans, and oil – accounted for 80% of what Brazil sold to China last year.
The concentrated structure of exports favored Brazil last year when iron ore prices hit historic highs. In 2021 the Chinese bought $87.9 billion in Brazilian products, 29.7% more than in the previous year. The performance contributed to a record Brazilian trade surplus of $61.4 billion.
“As the concentrated agenda has guaranteed surpluses, there is an accommodation, with no effort to diversify,” says José Augusto de Castro, president of the Brazilian Foreign Trade Association (AEB).
The problem, he points out, is that this also subjects exports to price volatility and the performance of the Chinese economy. For him, the vocation for exporting commodities must be taken advantage of, but also with a parallel policy that stimulates exports of manufactured goods.
Although prices are still contributing positively, Brazilian exports are already starting to feel some effects of commodity price adjustments in 2022. In June, highlights Mr. Castro, the major effect in this direction came from iron ore. According to data from the Secretariat of Foreign Trade (Secex), the commodity’s export revenue fell 40.5% in June year-on-year. There was a drop of 4.3% in the quantity shipped and the average prices of the item dropped 37.8% in the same comparison.
This probably contributed, says Mr. Castro, to the 11.7% drop in the value of exports to China in June compared to the same month in 2021. With the performance, the Asian country absorbed 29.1% of the values exported by Brazil in June this year, nine percentage points less than the 38.1% share it held in June 2021. The figures include Hong Kong and Macau – in Chinese foreign trade data, the two locations are counted separately.
In the year to June, China’s share in Brazilian exports fell to 29.1% from 35.3% in the same period of 2021. The average price of total iron ore exported by Brazil in the period fell 25.4% in the first half of this year compared to the same period of 2021, contributing strongly to a 31.5% drop in export revenue. The was also a drop in quantity, but at a lower rate, by 8.2%.
“As there are only a few products and they are very representative in the list of shipments, a shock in one of them ends up having a very big contribution to the relations in the aggregate list,” explains Livio Ribeiro, partner at BRCG and researcher at Fundação Getulio Vargas’s Brazilian Institute of Economics (Ibre-FGV).
“China is currently going through a particularly delicate moment,” Mr. Ribeiro says. Beijing has been trying to reactivate more aggregate demand, he explains, through stimulus focused on investments in infrastructure. But it is not known, he says, if this will be enough because consumer confidence has collapsed with the new Covid-19 outbreaks.
Given this picture, BRCG’s estimate for Chinese GDP growth in 2022 is 3.8%. “To reach 4% will take a lot of struggle. For 4.5%, a monumental effort,” Mr. Ribeiro evaluates.
Fabio Silveira, a managing partner at MacroSector, projects growth between 3.5% and 4% for the Chinese economy this year. “China’s growth is expected to go from an annual average of close to 5.5% in the last three years to an average between 3% and 3.5% in the next three years. A drop with great impact because we are talking about the second-largest economy in the world.” In this scenario, according to Mr. Ribeiro, the agricultural products exported by Brazil, such as soybeans and beef, are the ones that can be most affected in the short term.
According to him, demand for iron ore volumes is expected to suffer relatively less due to China’s attempt to maintain more accelerated investments. As for oil, he says, the Chinese option to buy more from Russia may displace other markets, which may affect Brazil.
In 2021, China absorbed 70.4% of all soy exported by Brazil in value. In iron ore, the share was 69.7%, and in petroleum, 46.6%. The Chinese also bought 56.2% of all Brazilian boneless frozen beef shipped last year. In 2021, Brazil was the largest supplier of soybeans and frozen boneless beef to China, the second-largest supplier of iron ore, and the seventh-largest of oil.
For Mr. Silveira, even with the global slowdown and that of China, with effects on the prices of important commodities in the export agenda, the Brazilian trade balance is likely to close 2022 with a relatively robust surplus, between $45 billion and $50 billion. The warning sign, however, comes on for next year, when the trade balance may become flatter and no longer contribute so favorably to the foreign sector.
Monetary authority is excessively optimistic compared with projections of private-sector analysts
07/08/2022
Central Bank’s building in Brasília — Foto: Jorge William/Agência O Globo
A survey carried out by the Central Bank with economic analysts before the last policy meeting, in June, and released Thursday morning puts at stake the inflation scenario outlined by the monetary authority, which is excessively optimistic compared with the projections of private-sector analysts.
In the June meeting, the Central Bank’s Monetary Policy Committee (Copom) projected a 4% inflation rate for 2023, the year that until then was the main target for monetary tightening. But the survey carried out days before the meeting shows that few market analysts think this is possible.
The median inflation projection for 2023 collected in the survey with 99 segments of the financial market, was 4.7%, as already unveiled by the Copom in its minutes. But now the survey reveals how the view of analysts is distributed around this median.
The first quartile of projections, that is, the group of most optimistic analysts, pointed to an inflation rate of 4.33%. In other words, less than a quarter of the analysts thought it was possible for inflation to stay below 4.33%. The highest quartile pointed to inflation of 5.1%.
In the June meeting, the Copom concluded that the balance of risks surrounding to inflation was symmetrical. That is, the upside risks to inflation, in relation to what was projected, were balanced with the downside risks.
This is a very different view from that expressed by financial market analysts: 76% identified predominant upside risks in their inflation projections for 2023, while 19% considered the risks balanced.
The divergence between the Central Bank’s and the financial market’s inflation projections, as well as the distinct views on the balance of risks, have repercussions on the credibility of the monetary policy strategy outlined by the Copom.
In practice, Copom is stating, based on its projections, that it will be possible to reach the inflation targets in 2023 without many additional hikes in the key interest rate, which in June was raised to 13.25% per year from 12.75% per year. The policymakers indicated a new hike for August, to 13.5% or 13.75%, and the maintenance of higher interest rates for longer.
The market’s consensus scenario for the economic slack is also more conservative than the Copom’s. The committee projects economic growth this year of 1.7%, higher than the 1.5% then expected in the median of market projections. Even so, the Copom thinks that economic slack will be higher at the end of this year, at 1.8%, compared with 1.5% expected by the market. The greater the slack, technically measured by the output gap, the greater the disinflationary force.
Since the slack estimated by the Central Bank and the market are very similar for the first quarter of this year, at 1.1% and 1%, respectively, the Copom is possibly estimating a higher potential GDP than the market – that is, the Central Bank would have a slightly more optimistic view than the market about how much the economy could grow without pressuring inflation.
Historically, the inflation scenario outlined by the Central Bank was not very different from that estimated by the financial market, but in the last year this divergence has widened. The monetary authority has been systematically projecting lower inflation than the market.
Normally, the inflation projected by the Central Bank diverges less than 0.3 percentage points from that of the market, for the relevant horizon of monetary policy. Last March, this divergence rose to 0.6 points and, as of May, to 0.7 points.
Project received $625m investment, can produce 120,000 tonnes per year
07/08/2022
Nexa, a mining company of zinc and other metals controlled by Votorantim, started this week the operations of a new mine, Aripuanã, in the namesake city, in Mato Grosso. This is one of the largest zinc projects in installation in the world and received investments of $625 million.
In a statement, the company said full production is planned for the second quarter of 2023. Nominal capacity is 120,000 tonnes of zinc equivalent per year, from the processing of 2.2 million tonnes of raw ore.
The new mine is expected to reach commercial production by the fourth quarter of 2022. It is expected to produce between 14,000 and 23,000 tonnes of zinc, 1,600 to 2,300 tonnes of copper, 5,000 to 7,700 tonnes of lead, and 300 to 500 ounces of silver this year. The volumes are subject to the inherent risks of a mine start-up.
The Aripuanã project consists of three main mineralized zones in the region, with an estimated average annual production of 70,000 tonnes of zinc, 24,000 tonnes of lead, 4,000 tonnes of copper, 1,800 ounces of silver and 14,500 ounces of gold. The lifespan of the mine is expected to be 11 years, considering currently estimated mineral reserves.
“Aripuanã is Nexa’s largest investment project in Brazil, which contributes to the social and economic development of the region,” Nexa’s CEO Ignacio Rosado said in the note. “It is also one of the few zinc projects in the world and we are confident that it will be a low-cost mine with a long operating life.”
According to the executive, this is the third major mine in Nexa’s asset portfolio, which strengthens its unique position to meet the growing demand for zinc worldwide. Mr. Rosado took over as CEO of Nexa on January 1st, 2022.
The venture – with underground extraction – is one of the most sustainable mineral projects in the country, says Nexa. According to the company, it has almost 100% water recirculation and the use of dry stacking and cemented paste filling for tailings.
Nexa, which was previously Votorantim Mineração and currently has more than 60% of its capital in the hands of group, has been operating for more than 60 years in the mining and metallurgy segments. The company has operations in Brazil and Peru, headquarters in São Paulo and an office in Luxembourg. Since 2017, its shares have been traded on the New York Stock Exchange. Nexa reported net revenues of $2.6 billion in 2021.
Higher interest rates, inflation and pandemic aftermath have impact, but group maintains interest in Brazil
07/08/2022
Maurici Lucena — Foto: Ana Paula Paiva/Valor
Aena, the Spanish airport operator, is still interested in investing in Brazil and is studying to compete in the seventh round of concessions, scheduled for August, said the group’s CEO, Maurici Lucena.
Despite confidence in the country’s growth, market conditions today are more difficult than in 2019, when the company made its first move in Brazil by winning a block of six airports in the Northeast region.
Besides the pandemic aftermath, the scenario of higher interest rates and inflation will impact the pricing of assets, said the executive, in conversation with Valor.
“We are looking with great interest at the seventh round. There are attractive assets. Today we live in a more complex moment than in the past. Monetary and financial conditions have hardened and will harden even more. This evidently affects the valuation of assets and the financing capacity of airport managers. But it is a cyclical aspect, within a 30-year contract,” he said.
Mr. Lucena is on his first visit to the country since Aena took over the six airports in the Northeast, won at an auction in 2019. The operation of the Recife airport, the main one in the block, officially began in March 2020 – exactly the month in which the pandemic arrived most intensely in Brazil.
“We had bad luck at this beginning, which was absolutely unpredictable. The reasonable thing is that this effect will be diluted throughout the 30 years of the concession,” the executive says. Despite still suffering from the impacts of the pandemic, the assets operated by the company in Brazil had a recovery in 2021 above the national average and above the recovery seen in European countries.
By October 2023, Aena’s prospect is to conclude investments of R$1.4 billion in the six airports in the Northeast region. By 2027, this figure is expected to reach R$2.2 billion – without considering maintenance expenses.
Mr. Lucena points out that the investment in Brazil is the first international move the Spanish group executed alone. “In other cases, in the UK, in Colombia, in Mexico, we always went with other partners. Here we entered alone. This shows how much we like Brazil. And we did it [the entry into the country in 2019] with the idea of being just the first step in Brazil. It’s not a sure thing that we will get new assets. Everything will depend on the conditions, but that was our idea,” he said.
Aena is controlled by the Spanish government, which owns 51% of the company’s shares. The remaining 49% are traded on the stock exchange. Altogether, the group operates 46 airports in Spain, including Madrid and Barcelona, and has a stake in 23 international airports (including the six in Brazil).
In the first quarter of this year, the group as a whole carried 43.4 million passengers, a 281.6% advance over 2021 and a 71.9% recovery from the pre-pandemic, 2019 level. For the quarter, Aena reported an Ebitda of €72.6 million, compared to a negative Ebitda of €121.5 million in the same period in 2021. However, the group still posted a net loss of €96.4 million in the quarter.
Mr. Lucena avoids giving details about the group’s plans for the upcoming auctions. Regarding the seventh round, for example, he prefers not to inform which of the three blocks offered is on the radar. In the market, the perception is that Aena has a strong interest in the lot that includes Congonhas (São Paulo), considered the star of the competition and that it may also bid for a block of two airports in the North of the country, where there could be synergies with the current portfolio.
Besides the seventh round of auctions, Mr. Lucena signals that the group will study all the next opportunities that are coming up: the new auction of Viracopos, in Campinas (São Paulo state), of São Gonçalo do Amarante, in Natal (Rio Grande do Norte), and the last round of concessions (which will include Santos Dumont and Galeão, in Rio de Janeiro). “All of them are interesting. When the time is right, after the seventh round, we will look at them case by case,” he says.
Contrary to expectations, Brazil’s terms of trade fall even with rising prices abroad
07/08/2022
The expected boost that the rise in commodity prices would give to the Brazilian trade balance in 2022 did not materialize, nor does it show signs that it may happen throughout the rest of the year. Although the prices of products exported by Brazil have grown steadily, the movement happened along with a jump in proportion in the prices of products the country imports.
As a result, the terms of trade, or the ratio between the prices of goods sold abroad and those bought from abroad, fell 9.1% in the first five months of this year compared to the same period last year. Compared to the most recent peak, in June 2021, there was a drop of 13.5%.
In the first months of the year, the combination of a still favorable environment abroad and the war between Russia and Ukraine led the government and investors to adopt an optimistic attitude in relation to Brazilian external accounts, particularly in relation to the trade balance. This optimism rested not exactly on an advance in the volume of products sold, or a depreciation of the exchange rate, but mainly on the improvement of the terms of trade, a scenario similar to that experienced during the commodities boom of 2010.
“A few months ago, the discourse of the government and of most of the market was that there would be a big explosion in the terms of trade, combined with a greater growth in export volumes than in imports. Putting the two together, we would have a gigantic balance. It is visible that the picture today has changed a lot, but many still have a rather benign view,” says Livio Ribeiro, partner at BRCG and associate researcher at the Fundação Getulio Vargas’s Brazilian Institute of Economics (Ibre-FGV).
In June, the trade balance recorded a surplus of $8.8 billion, down 15.4% compared to the same month in 2021. In the year to date, the balance is at $34.5 billion, down 8.2% over the same period last year, reported the Secretariat of Foreign Trade (Secex).
After the data, the Ministry of Economy cut its projection for the trade surplus to $81.5 billion from $111.6 billion. The opposite movement was made by the Central Bank, which raised the balance for 2022 to $86 billion from $83 billion in its latest Quarterly Inflation Report (RTI), released last week.
Paula Magalhaes — Foto: Claudio Belli/Valor
One characteristic that differentiates the current commodities boom from other recent moments is precisely the behavior of the price of imports, says Paula Magalhães, chief economist at AC Pastore. “It never happened that import prices went up like that, in general they are more stable. So people always had in mind that moments of rising commodity prices necessarily meant an improvement in the terms of trade,” she says.
According to calculations from the Foundation of Foreign Trade Study Center (Funcex), the price of goods exported by Brazil grew 21.3% in May, compared to the same period in 2021. The price of imported goods, on the other hand, advanced 34.9% in the period.
Looking ahead, the outlook is not good either. First because the surprise activity in Brazil – which may still be boosted by further fiscal stimulus – also means a greater appetite for imports than previously expected. Secondly, because the turnaround in monetary policy by major central banks is likely to put a brake on the global economy.
“Due to the acceleration of import prices, the sharp deterioration in the terms of trade, the [upward] revision of the national economic activity scenario and [downward] revision of the global one, we project a trade surplus in 2022 of $62 billion,” says Funcex’s economist Daiane Santos.
Lawsuits seek to reach hidden assets of partners of indebted companies
07/08/2022
The pandemic has generated a record volume of lawsuits against indebted companies for concealment of assets. A survey by the Martinelli Advogados law firm shows that, in the Court of Justice of São Paulo (TJSP), 6,731 trials were handed down last year dealing with redirection of collections to partners or third parties, after allegation of fraud. The volume represents a 33% growth compared to 2019 and is double that recorded in the previous year.
This situation, according to experts, occurs mainly in times of crisis. With the increase in defaults, companies in difficulty decide to take irregular measures in an attempt to shield their assets from possible collections. Creditors are then forced to scrutinize the lives of companies and their partners to try and locate assets.
Columbano Feijó — Foto: Divulgação/Omar Paixão
Since the economic crisis of 2008, companies with debts began to adopt more frequently practices to protect their assets, according to lawyer Columbano Feijó, a partner at Falcon, Gail, Feijó e Sluiuzas Advogados. “The pandemic caused this practice to increase again, since some activities were paralyzed, defaults increased exponentially, and many companies in difficulty took irregular measures,” he said.
Today, more than 6.1 million companies are delinquent, according to a survey by Serasa Experian, in May. Of the total, 52.7% are in the service sector. Next come commerce (38.1%), industry (7.9%) and the primary sector (0.9%).
The largest portion of businesses in the red is in São Paulo and are small in size. The delinquency among entrepreneurs, says the chief economist of Serasa Experian, Luiz Rabi, is still likely to continue as long as the economy remains unstable.
According to economist and lawyer Alessandro Azzoni, many companies have closed their doors or are in debt and cannot honor their liabilities. Mainly, he adds, bars and restaurants, which suffered a lot with the sanitary restrictions. “Nobody expected this situation to last for more than two years. And many that were already in debt became insolvent,” he said.
Those companies have now been the target of lawsuits. And when creditors are unable to locate the assets of these debtors, they resort to a provision that allows them to reach third-party assets and hold a partner or administrator responsible for the debt, in case of fraud.
These are cases in which debtors try to hide their assets through irregular asset shielding, many times using straw men. However, getting a favorable decision, in these cases, is not simple, according to Mr. Azzoni. “It’s necessary to prove that there was fraud, that during the execution the company sold its assets or transferred them to third parties in order not to pay its debt,” he said.
According to lawyer Luís Cascaldi, with Martinelli Advogados, who coordinated the research on the Court of Justice site, the higher number of cases reflects the economic crisis generated by the pandemic. These numbers may still be under-reported, because many are kept under the secrecy of justice, so that other creditors do not know about the search and locate the assets first.
To assist in the search for assets, he says that the law firm has used partnerships and adopted technology tools to make dossiers to creditors, of what could be asked for in these cases and if there are chances of recovering those amounts. In these cases, social media have been important, according to Mr. Cascaldi. “In one of the cases we found out that the debtor owned a horse farm, which was in the name of a third party, through a posted photo,” he said.
The possibility of reaching third-party assets in case of fraud is foreseen in article 50 of the Civil Code. The way this procedure should be conducted by the judge is also provided for in articles 133 to 137 of the Code of Civil Procedure (CPC).
When it comes to large economic groups, the actions of concealment of assets become more sophisticated, according to Mr. Feijó, such as the creation of companies with the sole purpose of emptying and hiding assets. In one of the cases in which he acts for a large construction company, he tries to recover more than R$3 million owed by an engineering company for unpaid labor lawsuits, which the construction company had to pay because it was co-responsible.
In the lawsuit, the lawyer says that he has obtained evidence that the debtor acted as a provider of labor services for building construction and is part of a fraudulent group, which includes the creation of more than 20 companies, with the purpose of emptying and hiding assets. He has already obtained an injunction in the São Paulo State Court of Justice to seize the amounts in the companies’ bank accounts until there is a ruling in the arbitration court.
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