Analysis: Central Bank have not intervened in exchange rate since May

This offers glimpse of monetary authority’s view over factors that pressure rate

07/07/2022

Policymakers have yet to unveil their view about recent currency swings — Foto: Pexels

Policymakers have yet to unveil their view about recent currency swings — Foto: Pexels

Despite the substantial increase in the foreign exchange rate, the Brazilian Central Bank has refrained from intervening in the market by selling hard currency from its reserves since early May. Brokers told Valor that this is the right strategy, since the recent pressure is linked to global factors and a move to reprice fiscal risks.

The exchange rate has been up 14.2% since May 31, when it closed at R$4.72 to the dollar. The rate closed at R$5.39 to the dollar on Tuesday.

The rate moved without the Central Bank making any extraordinary offering of dollars in the spot or futures markets, besides the typical rollover of maturing currency swap contracts.

Some brokers believe that the Central Bank’s failure to intervene in the market offers a glimpse of the monetary authority’s view over the factors that pressure the foreign exchange rate: this view must adjust to a fiscal risk seen as higher after the federal government and Congress maneuvered to pass measures allowing vote-getting spending and the U.S. Federal Reserve raised interest rates, which impacts the global economy.

According to the official narrative, the Central Bank intervenes in the exchange rate when the market is dysfunctional – for example when there is low liquidity and problems in price formation. But, if history is any guide, the monetary authority intervenes as well to cushion currency volatility – in other words, to minimize currency swings not justified by the fundamentals.

The policymakers have yet to unveil their view about recent currency swings. However, many market players will see it as a natural move if the Central Bank acknowledges that the exchange rate will be impacted by the worsening of the fiscal risk. In addition, the real is now losing ground against the dollar as other currencies did, like the euro, which reached its weakest level in two decades.

If this really is the Central Bank’s view, there will mean a substantial change in relation to what the monetary authority had been saying since three months ago, when more upbeat perspectives for the real prevailed. In early April, when the exchange rate was testing the floor of R$4.6 to the dollar, Central Bank President Roberto Campos Neto even said that the market’s inflation expectations were not fully reflecting the stronger real.

One year ago, the Central Bank’s Monetary Policy Committee (Copom) hopes that a potentially stronger real would help it disinflate the economy. The monetary authority unveiled, in a section of the inflation report for June 2021, that it saw chances of commodity prices falling in reais. Since then, the information is seen as a positive factor in the balance of risks for inflation.

In early April, many economic analysts said that the exchange rate was unlikely to decline in the second half of the year because of the monetary tightening in the United States and the risks linked to the presidential election, to be held in October in Brazil. Later in the same month, the risks of a stronger deceleration in China weighed on the real as well.

When the real was gaining ground, some analysts questioned at some point if the Central Bank should intervene and buy dollars to slow down an appreciation that many people considered temporary. Mr. Campos Neto signed then the opposite, that the Central Bank was ready to act if monetary tightening in the United States caused dysfunctionality in the markets.

The exchange rate is now nearly 10% higher than the level of R$4.9 to the dollar used by the Copom in the inflation projection models in its last policy meeting, in June. But, as far as monetary policy is concerned, the data set, including the likely impact of recent declining prices of commodities in inflation, is what matters.

But some economic analysts have argued that the decline in commodity prices reaches inflation through other channels. One is heightened fiscal risk since a good part of the federal government’s populist fiscal measures is propped up by higher revenues brought by high prices of commodities.

*By Alex Ribeiro — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Demand for professionals drives up salaries in agribusiness

Payment for positions in purchase and supply of fertilizers increased up to 60% amid the Russia-Ukraine war

07/07/2022

The war between Russia and Ukraine has boosted the demand of Brazilian agribusiness companies for professionals who work in the supply area. Under the fear of lack of inputs, the remuneration of those who work directly in the purchase and supply of fertilizers, for example, increased up to 60% in some regions of the country, according to a survey by Fesa Group, a company of executive recruitment and selection.

The movement is already helping to reverse the drop in hiring that occurred at the beginning of the Covid-19 pandemic. The most recent data show an increase in the demand for professionals for this type of position. Companies that operate in the Central-West and North regions are the ones that most seek these professionals for job positions. They are family groups, chemical, fertilizer, and input industries, and distributors, for example.

The demand for professionals for the positions of purchasing or supply manager and coordinator, the strongest, according to the survey, doubled compared to last year. The salaries also went up, between 30% and 40%, on average.

“When it is a position in a remote region or a country town, the increase can reach up to 60%,” says Anderson Schemberg, partner at Fesa, which operates in Minas Gerais, the Central-West and North of Brazil. According to him, there is an expansion in the agricultural regions of Matopiba (bordering the states of Maranhão, Tocantins, Piauí, and Bahia) and in areas of states like Pará, Acre, and Amapá.

Agribusiness companies have also increased their search for specialists, market intelligence coordinators, and professionals in the commercial area. “It is important to remember that these are leadership, managerial, and executive positions. With this analysis, we can assume that operational positions in these areas are also in greater demand,” he added.

Mr. Schemberg believes demand will remain strong at least until 2023. “From the second half of 2021 on there was a boom in demand for professionals in the market to reorganize staff. And there is a lack of specialized labor, from specialized mechanics to personnel for management positions,” he observed.

At Amaggi, the largest domestic capital company in the grain trading and processing segment, the growth of the sector, even with the pandemic, kept the pace of job openings high, unlike what happened in other segments of the economy. From 2020 to May this year, the company hired 1,700 people for permanent positions and more than 4,000 for temporary contracts in practically all units and areas of activity.

Nereu Bavaresco, Amaggi’s chief people officer, said that the challenges have grown since the beginning of the crisis, whether because of restrictions on the circulation of people, the “blackout” in the availability of qualified professionals, or the new requirements for different occupations.

Fesa Group points to the lack of professionals who speak English as one of the gaps in the selection processes. “These are positions that demand a global interface, so the language is a necessity,” explains Anderson Schemberg.

The lack of training led Amaggi to invest in its own initiatives to develop people to fill positions that already exist and also vacancies still to be opened. One of these initiatives is the Amaggi University, which, besides the benefits, salaries, and growth opportunities it has offered, is one more differential of the company to attract professionals to the segment.

“Average pay has risen approximately 15% during this period, and companies are realizing that their fixed labor cost has grown quickly. This is one of the reasons the industry has been investing heavily in state-of-the-art technology. Companies want to reduce their fixed costs and become more competitive, or in some cases, they are simply investing to survive in the global market,” says Mr. Bavaresco.

The salary is one of the attractions for positions in the Central-West and North regions, often occupied by people from the Southeast and South regions. “These professionals have been attracted by the good remuneration and the possibility of improving their quality of life and reducing their expenses,” said Mr. Schemberg. Fesa is currently working on 168 executive selection projects. Of these, 25, or 14% of the total, are vacancies for positions with more demand. “When compared with the same period last year, when we had 19 positions, the growth is 31.5%,” he says.

For multinational company Syngenta, the complexity of the labor market is also an opportunity to create a more collaborative environment with pay equity between men and women. In the recruitment for the different positions in the corporate area, such as human resources, information technology, finance, and communication, the company gives much importance to the background and practical experience. For business positions, such as the commercial, production, sustainability, research, and development sectors, the focus is on more targeted academic training. Agronomists, chemists, biologists, and engineers are among the professionals the company most seeks for these positions.

In 2019, Syngenta made a partnership in Brazil with a leading human resources consultancy specializing in finding the right professional for strategic or highly complex positions. “It is not simple to bring diversity from the market to management roles, for example, but we are focused on the evolution of this,” said the company in a statement.

*By Rafael Walendorff — Brasília

Source: Valor International

https://valorinternational.globo.com/
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Stellantis puts procurement team into action

One of the goals is to develop hybrid cars and develop local sourcing of parts

07/07/2022

Antonio Filosa — Foto: Alexandre Campbell / Valor

Antonio Filosa — Foto: Alexandre Campbell / Valor

Stellantis’s procurement team in Brazil has had a lot of work lately. The automaker corporation that unites Fiat, Chrysler, Peugeot and Citroën needs to advance in negotiations with suppliers to meet two priorities defined by the company’s CEO in Latin America, Antonio Filosa. One part of the conversation involves development projects for the production of hybrid cars in Brazil. The other seeks to increase the local sourcing of parts, especially electronic components, to reduce dependence on foreign countries, especially in Asia.

Mr. Filosa, one of the greatest advocates of Brazil using its knowledge of ethanol to produce hybrid cars, does not reveal dates. But he said that the process of developing new versions of the so-called powertrain of the brand’s cars will begin in Betim (Minas Gerais state), where the company currently has an important production center for combustion engines.

According to Mr. Filosa, Stellantis has engineering and product development teams around the world that are currently working to find solutions to reach the company’s goal of reducing CO2 emissions by 50% by 2030. The Brazilian team was assigned the mission of developing the ethanol hybrid. “We are the only ones in the world capable of developing this technology,” he says.

Stellantis’s position clashes with that of General Motors, which, according to Santiago Chamorro, CEO for South America, in an interview with Valor this week, said he intends to offer in the Brazilian market only 100% electric cars, which depend on charging at charge points. The hybrid, on the other hand, has two engines – a combustion one that helps charge the other, electric – and, therefore, dispenses the batteries charging in electric power sources.

“We will offer the customer whatever he wants, including 100% electric cars. But we will have, locally, the electrification with ethanol, a clean solution since the sugar cane plantation. This is Brazil’s chance to electrify its vehicles without damaging the industry,” Mr. Filosa said. For now, all 100% electric cars are imported.

Stellantis’ goal is to reach 2030 with electric cars in 100% of sales in Europe, 50% in the United States, and 20% in Brazil.

For Mr. Filosa, ethanol “is a very Brazilian answer,” on the transportation side, to the decarbonization process. The rest, he says, is possible through reforestation. “These are simple solutions. We already have ethanol for cars and reforesting a country where it rains a lot is easy. Here is not Dubai,” he affirms.

Stellantis’s second move in negotiations with suppliers has two more fronts. In one of them, it seeks to reduce dependence on imported parts. In recent times, the automotive industry has had to face supply problems due to several factors, ranging from the strong recovery in global demand that followed the peak of the pandemic, to the war in Ukraine, followed later by the lockdowns in China.

Without naming, Mr. Filosa says that a new Asian supplier has already started to manufacture in Manaus components for the navigation and entertainment system of the cars produced by the automaker in the country.

Along the same lines as the expansion of domestic production, Stellantis’s management seeks to attract more suppliers to its plants, especially the one in Goiana, Pernambuco, which currently has 30 suppliers in the surrounding area. By 2025, the company that a year and a half ago became a super-automaker, with the global merger of several brands, has become the leader of the Brazilian market, with 33.6% of sales of cars and light commercial vehicles in the first half of the year. In Brazil alone, the company has three industrial complexes and an engine plant.

“Brazil needs to industrialize more and more to guarantee work and income. If today 65% of the market is in the Southeast and South regions, it is not because consumers in the North and Northeast don’t want or don’t need cars. It is because of the lack of income,” the executive said. For him, industrial decentralization also helps to improve the country’s social indicators, such as education and security.

About the restrictions on the foreign exchange market in Argentina, where Stellantis has two vehicle plants, Mr. Filosa, who was once Fiat’s CEO in Argentina, says the company is analyzing the situation “to understand the impacts.” “We don’t expect, of course, that there will be zero impact,” he says.

Regarding the Brazilian market, the executive says that the pressure of inflation and the high-interest rates worry. But this, he highlights, does not show up in sales yet because the lack of components is a major problem. “For now, the crisis is of supply.” Therefore, for him, the market this year tends not to present growth compared to 2021.

*By Marli Olmos — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Maersk, MSC battle port operators in court

Terminal operators accuse shipping giants of abusive practices

07/07/2022

The conflict came to the fore in recent months, with the auction of a large container terminal at the Port of Santos — Foto: Ana Paula Paiva/Valor

The conflict came to the fore in recent months, with the auction of a large container terminal at the Port of Santos — Foto: Ana Paula Paiva/Valor

The dispute between Brazilian port operators and global shipping giants Maersk and MSC is expected to escalate in the coming weeks. Groups in the sector are preparing a lawsuit that questions the operation of these groups in port terminals in the country.

The companies see abusive practices by shipowners, which could allow them to take over Brazil’s container market. The shipowners push back, saying that there is no evidence of anticompetitive behavior, and that it makes no sense to penalize the companies for being leaders and wanting to invest in their own businesses.

The conflict came to the fore in recent months, with the auction of a large container terminal at the Port of Santos, the STS 10. Companies in the industry want to prevent Maersk and MSC from participating in the bidding. However, the dispute is already beyond this particular project.

The Brazilian Association of Port Terminals (ABTP), which brings together 72 companies, is preparing a lawsuit to question the companies’ actions. “We want to denounce the closing of the market underway because of the dominance of those economic groups,” said Jesualdo Silva, the association’s head.

The association — which has been approaching Brazil’s antitrust regulator CADE, the public spending watchdog TCU and the National Water Transportation Agency (Antaq) — is still analyzing in which sphere it will start the offensive, which may happen in the second half of July.

Maersk and MSC are the two largest container shipping companies in the world. With this, they run a large part of the ships that carry out imports and exports. In addition, they also operate port terminals, which receive the cargo from the vessels, through their subsidiaries — Maersk’s APM Terminals and MSC’s TIL.

Today, APM has two terminals in Santa Catarina (Itajaí and Itapoá) and one in Ceará (Pecém), while TIL operates in Santa Catarina (Navegantes) and Rio de Janeiro (Multi Rio). The two companies are also partners in Santos, in Brasil Terminal Portuário.

ABTP says that the shipping companies, when choosing where to dock the ships, give priority to their terminals to the detriment of other independent ones. “The groups force the cargo to go to their terminals, through anticompetitive and abusive practices, such as the omission or reduction of calls at other ports, or by offering discounts on freight for those who use their terminals,” Mr. Silva said.

The companies push back. In a note, Maersk said that the choice of terminals considers “the combination between competitive prices and operational efficiency.” The company added that in the Port of Santos, for instance, most of the group’s cargoes are handled by an independent operator, not by its own terminal.

Patrício Junior, chief investment officer at MSC’s TIL, denies that shipping groups benefit from their own assets and says that there is intense competition in the market, including between Maersk and MSC. In addition, he says that the shipping companies have partnerships with other shipowners, which would not allow the prioritization of APM and TIL terminals.

A source in the market, who spoke on condition of anonymity, says that the accusation is not based on facts, and says that today, in Santos, there are more stopover cancellations in the TIL and APM terminals than in the independent ones.

ABTP is also targeting port projects being planned (concessions and Private Use Terminals). In this sense, another projected likely to be the target of criticism by the association is the terminal that Maersk intends to build in Suape, Pernambuco. The company has already made an offer to Estaleiro Atlântico Sul (EAS) to buy a plot of land in the port.

The shipping companies also stressed the importance of investments in ports to reduce logistics costs in Brazil. “Those who question us today are the same ones who, 10 years ago, said that BTP [APM-TIL terminal in Santos] would destroy the market, which has not proven to be true. They [the critics] don’t want new terminals so to keep the control of capacity,” said Mr. Júnior, with TIL.

He also says that if today Maersk and MSC have a great weight in the shipping market it is because, in the past years – when shipowners endured a heavy crisis and had to live with tight margins – the groups believed that the market would improve and made investments to grow. “Only those who believed in the business survived. Now, companies cannot be penalized for investing in their own core business. Companies cannot be punished for being good at what they do and having a leading position,” Mr. Júnior said.

In a statement, Maersk advocated the need to expand capacity in Santos and said that “the current capacity does not allow the port to reach its full potential.” In addition, the company said that the expansion will allow the arrival of larger ships in Brazil, which will reduce logistics costs.

In recent weeks, the CADE has already made its first statements on the matter. In an investigation underway at the agency, triggered by the discussions around the STS 10 auction, the technical team rejected a preventive measure requesting a ban on Maersk and MSC from bidding for the terminal. The antitrust watchdog denied it saying that it is not its competence to impose restrictions before the bidding.

However, the agency’s report pointed out that the victory of one of the groups would present competition risks, with potentially “substantial market concentration, of approximately 80-90%” in Santos.

For the industry, CADE’s position in the technical note was a sign that the questionings may prosper in the agency. In the view of Mr. Júnior, with TIL, the denial of the preventive measure was positive. He said that companies cannot be judged by an expectation of behavior that has not materialized in practice.

Antaq said that CADE’s note “will bring greater technical support to the agency’s conclusions as to the need or otherwise for clauses in the call for tender and in the contract ruling out commercial practices or arrangements harmful to competition.” At this moment, the agency is analyzing the contributions received in the auction’s public consultation. In relation to the questionings beyond Santos, the agency says that verticalization is a global trend in the sector, and that its competitive impacts will be analyzed by the agency based on concrete cases.

*By Taís Hirata — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Edenred joins POS terminal market in Brazil

French company owns Ticket, one pioneer in replacing paper meal vouchers with cards in the country

07/06/2022

Cristiane Nogueira and Emmanuel Guinet — Foto: Divulgação

Cristiane Nogueira and Emmanuel Guinet — Foto: Divulgação

French company Edenred knows well the Brazilian card market and its users. It owns Ticket, one pioneer in replacing paper meal vouchers with cards, which has been operating in the country since the 1970s, and in other corporate benefits developed in the meantime. But, until now, their cards were used through third-party point-of-sale terminals. Now Punto wants to change this.

A year ago, the company started a card-acquiring pilot in Brazil, which is of considerable size – there are 6,000 stores using the POS terminal, which is now, officially, an Edenred business.

“For some years, the group has been thinking about complementary businesses to what it already has to improve our ecosystem of products and services with sellers,” Emmanuel Guinet, general manager of Punto Latam, told Pipeline, Valor’s business website. “We bought a company in Mexico years ago, but it took time to show the relevance of being acquirers and issuers.”

In Mexico, the POS terminals are in all the gas stations that take Edenred’s fuel cards. In Brazil, the proposal is similar. Punto wants to be the POS terminal for 500,000 businesses that take its cards in the country, including restaurants, markets, workshops and gas stations. The terminal also takes Visa, Master and Elo cards.

Edenred has picked Cristiane Nogueira to run the business as the general director of Punto Brasil. The executive was previously chief product officer at SafraPay and chief business and commercial officer at Getnet. In a market that became known for “the POS terminal war” due to the pressure to undercut rivals, Edenred defined one thing: Punto will not compete based on the final price.

“We are not joining the card-acquiring market to wage a price war, but with the proposal to be the best offer for a single terminal and an option for shopkeepers,” Ms. Nogueira said. According to Mr. Guinet, Punto wants to be competitive, but it does not mean that it will be the cheapest one. The company declined to unveil its fees.

In a difficult moment for card acquirers like Stone and PagSeguro, the executive argues that the market is still growing. Last year, card transactions increased 33% in Brazil and totaled R$2.65 trillion, according to the Brazilian Association of Credit Card Companies (Abecs). In the first quarter, the increase was 36%.

In the pilot project, the company tested its technology and how practical the POS terminal was, with adjustments according to customer demand – such as a larger screen and key tones. “We invested in technology, in the connectivity of the terminal, to have a fast system that does not cause queues in the stores. It runs on Android, which enables the use of several other solutions like Pix, QR code, wallet,” Mr. Nogueira said, citing the possibility of payments in cryptocurrencies in the future. Pix is Central Bank’s instant-payment system launched in late 2020.

Factoring of receivables for businesses started with the pilot project, with credit lines with financial partners. Edenred operates in 45 countries, but card acquiring services are only in Mexico and Brazil for now. Here, it also operates the Ticket Log, Repom and Edenred Pay brands.

*By Maria Luíza Filgueiras — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Infrastructure companies propose floor for public investments

Trade group will present document to presidential candidates

07/06/2022

Infrastructure companies advocate the creation of a floor for public investments, a reindustrialization policy and an integrated development agenda for the country. The proposals were put together by the Brazilian Association of Infrastructure and Basic Industry (Abdib) in a document that will be presented to presidential candidates. Brazil will hold elections in October.

“Since 2016, we have seen important advances in regulation, privatization and governance. But this was not accompanied by public investments, which today are at an unacceptable level,” said Venilton Tadini, head of the association. “We are not against the spending cap, but we are in favor of a floor for investments and a limit for current expenses,” he said.

In its proposals, Abdib emphasizes the privatization agenda, but reinforces the need to resume public works. “There are limits to private-sector participation. The concessions program itself has shown signs of fatigue. Today the interest rate scenario is different from recent years, and costs have increased,” Mr. Tadini said.

For Mr. Tadini, it is necessary to believe in the perspective of quality public investments, unlike what was seen in the past – for example, with the Growth Acceleration Program (PAC), which boosted public investments but ended up generating a series of abandoned projects across the country.

“Abandoned construction works are the result of poorly structured projects. Today we see an advance in governance, the control bodies have learned a lot and there has been an evolution in structuring,” he said.

The view is that, even in the short term, it would already be possible to unlock relevant amounts of investments in infrastructure with quality. “The country is at such a low level that the necessary works are very basic, like road resurfacing, maintenance of structures, simple projects that federal agencies are able to do without problems. Now, for larger structuring projects, new public-private partnerships, it would be another case, it is something that would require planning.”

The transportation and logistics sector is the one with the largest investment deficit in Brazilian infrastructure, according to the document prepared by Abdib. In 2021, the gap reached R$166 billion. In total, R$30.1 billion were invested in the segment, equivalent to 0.35% of GDP. The association says that this level must rise to R$196.2 billion per year (2.26% of GDP) for the country to reduce its bottlenecks in the next decade.

Mr. Tadini also highlights the investment gap in the basic sanitation segment, which reached R$22 billion last year. Although it is a smaller deficit in terms of volume, it has a very high social and environmental impact. “It’s a humanitarian issue,” he said.

Altogether, Abdib argues that the country should invest, per year, 4.3% of its GDP in infrastructure over 10 years.

In its letter of proposals, Abdib also tries to point out ways to guarantee the fiscal space necessary for the expansion of public investments, besides concessions. The association advocates a broad plan for reforms, which could be presented within the first 100 days of the government.

The agenda includes three points: tax and administrative overhauls and a change in the fiscal regime defined by the spending cap rule, to guarantee the drop in current expenses and the increase of investments in infrastructure.

Furthermore, Abdib proposes a reindustrialization policy for the country, with incentives focused on strategic segments.

“There is a lack of dialogue between the infrastructure and industry programs. This causes the country to miss huge opportunities. If there had been dialogue with the industry during the privatization of the telecommunications sector, today we could have global giants capable of exporting technology. Today we see the same situation with basic sanitation; there is no dialogue between the investment policy and the development of national industry,” Mr. Tadini says.

*By Taís Hirata — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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BB DTVM seeks to modernize management

Brazil’s largest asset manager is being structured to sophisticate products

07/06/2022

Aroldo Medeiros — Foto: Silvia Zamboni/Valor

Aroldo Medeiros — Foto: Silvia Zamboni/Valor

BB DTVM, Banco do Brasil’s asset manager and the largest such company in the country with R$1.5 trillion under management, has always been known for its size, but also for being slower in the process of product sophistication. However, a set of measures is being taken under the management of Aroldo Medeiros, CEO of the asset management firm since December 2020, in the sense of modernization, with the aim of putting BB DTVM at the same level of other large management companies considered to be cutting edge.

“The phase in that the retail investor liked DI [interbank deposit] funds and passive fixed-income funds is over. The small investor is more informed every day and wants different products, and we are following this movement, with new products and an active management,” Mr. Medeiros told Valor Investe. He has been with Banco do Brasil for 38 years and, a year and a half ago, took over as BB DTVM’s CEO, replacing Carlos André, currently the CEO of Santander’s asset manager.

One of the fronts of this modernization drive is the various partnerships being made, both in the management and distribution of funds, as well as in the attraction of clients. In the distribution area, the company is currently selling its funds on 16 investment platforms and has recently closed an agreement with four independent financial advisers with client portfolios specialized in pension funds.

There are also partnerships with international asset managers, with whom BB DTVM has mirror funds, and, according to Mr. Medeiros, new agreements with foreign asset managers are expected to be announced soon. “We want to offer the best to our clients, here in Brazil or abroad, whether they are managed by us or by third parties,” Mr. Medeiros said.

As for management itself, BB DTVM is structuring new areas exactly in order to be able to analyze and, therefore, place increasingly sophisticated assets into the portfolios.

The asset manager has set up an active fixed-income analysis and operations desk with the aim of buying securities that offer returns well above the interbank benchmark rate CDI. And, more recently, it has structured an analysis desk for riskier and more volatile securities (known in the market as high alpha) and another for quantitative analysis, which uses mathematical and statistical models to monitor market behavior and thus identify investment opportunities. Mr. Medeiros says that other important fields for active management and more complex assets are being designed and are expected to be ready soon.

The growing demand from investors for more complex products justifies BB DTVM’s focus on the support structure for analysis and selection of assets that go beyond the basics, both in fixed and variable income.

Mr. Medeiros recalls that the fall of benchmark interest rate Selic to the floor of 2% per year led a good part of the clients to migrate to hedge funds, corporate debt funds, ESG funds, infrastructure funds, cryptocurrency funds, and Fiagro (Investment Funds in Agroindustrial Productive Chains), among others.

However, with the current rise in the Selic rate, which is now 13.25% per year, BB DTVM, as well as assets managers of other large banks, has seen a wave of redemptions of its retail funds. In the year to May, redemptions in BB DTVM’s retail funds totaled R$12 billion, according to Morningstar data.

According to Mr. Medeiros, in general, this money that has been leaving the funds is going to products essentially offered by banks, such as certificates of bank deposit (CDBs), certificate of real-estate receivables (CRIs) and agribusiness receivables certificates (CRAs). He says, however, that these redemptions are very small compared to the stock in retail portfolios now, and that the greater trend of going to more sophisticated products has not been broken.

“The most complex products continue to receive new funds and, at the slightest sign that monetary tightening has come to an end, these investments will once again become relevant, just as they were until the Central Bank had to act with the Selic to tame inflation,” says the executive. “Investors today are much more mature, and the search for more structured assets is here to stay, even with this short-term setback, with the rise in interest rates,” he added.

*By Daniele Camba — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Vibra Energia buys 50% of ZEG Biogás

Contract provides R$129.5m payment to shareholders and direct injection of R$30m

07/05/2022

Vibra Energia intends to achieve the commercialization of its first million cubic meters of biomethane in three years, reaching the mark of 2 million m³/day in the next five years, with the acquisition of 50% of ZEG Biogas. This volume corresponds to 20% of the potential for biomethane production – obtained by purifying biogas – from vinasse, a residue from ethanol production. The expansion of supply aims to meet an avid demand for green products.

The other 50% stake will remain with FFL and ZEG. With the contract signed on Friday, Vibra will disburse R$129.5 million to ZEG Biogas shareholders and will inject R$30 million directly into the company’s cash flow, in addition to the commitment to invest R$412 million for the development of new projects that are in the pipeline, according to the eventual capital needs.

The two companies intend to develop at least seven ZEG Biogas projects, one of them about to start commercial operation in the coming months, in São José dos Campos (São Paulo) – and which already has 100% of its biomethane sold. Four other projects are being negotiated with sugar and alcohol groups, using vinasse, and two other plants are under negotiations with landfill companies.

Marcelo Bragança — Foto: Marcelo Bragança

Marcelo Bragança — Foto: Marcelo Bragança

According to Marcelo Bragança, Vibra’s deputy chief operations officer, the companies are already talking to clients who are waiting for these new projects. The implementation deadlines can range from 12 to 24 months, depending on the origin of the product (whether from landfills or agribusiness waste). In addition to vinasse, there are already evaluations for projects that use the waste from the production of orange juice and palm residues.

“It is an infrastructure project that demands capex, time, and patience,” said Mr. Bragança. “We have our feet on the ground, but we think we are going to move very fast,” added Daniel Rossi, board member at ZEG Biogas. Resources to get the projects up and running, whether own capital or capital market capital, are not a bottleneck, say the executives.

Besides logistical and operational challenges, the biggest one, says Mr. Rossi, with ZEG Biogas, is knowledge about the product, which still requires demystification – something expected as the plants start commercial operation. The executive foresees a biomethane contracting boom by next year, which will ensure the development capacity of the projects.

“The biggest bottleneck today is to produce enough quantity to meet the demand,” said Mr. Rossi, explaining that the development of the supply is a tripartite negotiation. It involves the company that develops the biogas, the one that holds the residue, and the purchasing market.

Mr. Bragança, with Vibra, doesn’t rule out negotiating volumes directly with gas distributors, amid the current moment of market opening, considering them as potential customers, especially because some of them are already promoting public calls for an injection of biomethane into the network.

The acquisition of half the control of ZEG Biogas came at a very favorable time, according to the executives, since the demand is increasingly high for products linked to decarbonization and the ESG agenda, along with the granting of incentives recently by the government in order to accelerate the formation of a market.

Added to this scenario is the current high prices of fossil fuels and natural gas, which benefits new business with biofuel, since the contracts are tied to Brazil’s benchmark inflation index IPCA.

“We can not only provide predictability of the delivery of the molecule, but also the guarantee that [in the case of] any shock in the world energy market, the client will not be impacted in the same proportion,” said Mr. Bragança.

The approximation started in May last year, when the two companies signed a letter of understanding to study the biogas and biomethane market, evolving into a cooperation agreement in August and to talks, at the end of 2021, for the acquisition of the equity stake.

The partnership, according to the companies, may enable the more than 300 ethanol plants that supply Vibra to access an environmentally friendly solution for vinasse.

The synergy, they point out, involves the production capacity and commercialization of biomethane of ZEG Biogas to Vibra’s network with more than 18,000 corporate clients (B2B) that seek, for example, the replacement of LPG or diesel oil, besides a network with 8,300 gas stations.

*By Fábio Couto — Rio de Janeiro

Source: Valor International

https://valorinternational.globo.com/
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WEG to invest in Brazil’s largest wind turbine

Production of new 7MW equipment expected to start by 2025

07/05/2022

New wind turbines will initially be made at a manufacturing facility in Jaraguá do Sul — Foto: Divulgação/WEG

New wind turbines will initially be made at a manufacturing facility in Jaraguá do Sul — Foto: Divulgação/WEG

WEG, the Santa Catarina-based machinery and equipment maker, will invest in the production of Brazil’s largest wind turbine. The 7-megawatt equipment, whose rotor has a diameter of 172 meters, will be tailored to serve other markets as well.

The company is investing in the development, engineering, testing and validation of the technology, and will invest in assets to make and install this equipment as needed.

The manufacturing of the new wind turbines will initially take place in Brazil, at the manufacturing facility in Jaraguá do Sul (Santa Catarina), where the company already produces wind turbines and has a wind operations center to control, monitor and analyze equipment in operation across the country.

The prototype of the new wind turbine is expected to go into operation in early 2024, with the start of serial production in the following year.

Unlike the 4.2 MW platform currently manufactured by WEG, which stands out for its focus on the specific wind and weather conditions in Brazil, the new wind turbine has characteristics adapted to serve other markets as well.

Today the company holds 10% of the domestic market and competes in the segment with Vestas, GE, Siemens Gamesa, Nordex Acciona and Wobben. João Paulo Gualberto da Silva, WEG’s energy managing director, explains that the company intends to grow in the wind power generation business and the initial strategy is to reallocate the funds currently invested in the manufacture of the 4.2 MW wind turbine to this new model.

“We will need to make some adjustments and, possibly, expansions. However, the priority is to make the most of the existing manufacturing structure. We will continue to take advantage of our capacity to produce many components internally, such as generators, motors, electronics, and even paints, thus obtaining important cost and quality advantages,” the executive told Valor.

As with all the platforms developed, WEG says it takes into consideration the weather conditions in Brazil, but intends to market this equipment in other geographies, taking advantage of the regions where the company already has a commercial and manufacturing presence.

“We have had success with our 2.1 MW platform, which totals 650 MW in operation, exceeding availability commitments, as well as with our current 4.2 MW platform, of which we have already commercialized over 1,000 MW.”

*By Robson Rodrigues — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Brazil can produce fully electric cars, GM says

Santiago Chamorro rejects hybrid car idea, says country’s turn will come when cost falls

07/05/2022

Santiago Chamorro — Foto: Ana Paula Paiva/Valor

Santiago Chamorro — Foto: Ana Paula Paiva/Valor

Some automakers are preparing to produce hybrid cars in Brazil. This group understands that the vehicle with two engines (one combustion and one electric) is the best way for Brazil to join the global transition to electrification. And to also save its large industrial park, since fully electric cars, which require plug-in charging, are not yet manufactured in the country due to the high cost of this technology. This is not, however, what the management of General Motors thinks. For Santiago Chamorro, GM’s CEO for South America, Brazil does not need an intermediate phase and can, when the technology is more accessible, have an electric car industry of its own.

Mr. Chamorro says he is convinced, from what global studies show, that the fully electric car is superior to the hybrid one in terms of environmental gain. “The other technologies become transient, temporary,” he said.

Fully electric vehicles still represent a very small portion of vehicle sales in Brazil. And they are all imported. The share of this type of car represented 0.1% of sales in 2021 and 0.3% until May this year. Although still small, the share of hybrids in sales was larger – 1.6% and 2%, respectively.

“Volumes are still low; but everything starts this way,” Mr. Chamorro said. The executive points to the premium category, with more expensive models and where sales of fully electric cars are concentrated today, as the gateway to transformation. Consumers in this range, the “early adopters,” as they are called in the United States, are willing to pay for technology that allows driving to be “more fun” and quieter, among other things, the executive said.

“But in the future, cars will be electric in all segments where we have a presence,” he said. When will this be? He replies, with good humor, that this is a topic “for a future conversation.” GM also does not breaks down its electrification schedule per region to achieve the global goal of being carbon neutral by 2040. In Brazil alone, the company has three vehicle plants and one engine plant.

“We produce where we sell,” Mr. Chamorro said, highlighting the vocation of Brazil, ninth largest producer of vehicles in the world and seventh largest market, besides other countries with car assembling in the region, such as Colombia and Ecuador.

With the electric car, the processes will change. “There will be a manufacturing transformation; our employees will have other skills and use other tools,” he said. “The transition will not be immediate, and by then we will have combustion cars with less polluting engines.”

To those who ask him if the electric car technology is not too expensive to be produced in the region, Mr. Chamorro replies with some facts. Besides Brazil being a source of renewable energies in expansion, such as solar and wind power, he recalled that South America offers mineral reserves, such as cobalt and nickel, which favor the development of the vehicles of the future.

Furthermore, he says, the cost of the technology tends to fall. GM has developed a modular platform, with battery packs that can be assembled in various formats for use in different types of vehicles. The flexibility of this platform, called Ultium, allows to meet the needs of those who seek a more affordable car and also of those who want a more luxurious one, with battery packs for longer or shorter range.

Recently, GM and Honda signed a global agreement that will use new generations of this platform to develop economical cars. The companies expect that, in the next generations of electric cars, the cost will be the same of a combustion car.

Mr. Chamorro points out that in the urban environment, the owner of a car used for day-to-day routine travels on average 45 kilometers a day. One charge a week, in this case, would be enough. And for those who think that no farmer is interested in an electric pickup truck, Mr. Chamorro says that today farmers invest in solar and wind power sources. “Many report difficulties in getting to a gas station,” he said.

For Mr. Chamorro, there is no reason to be afraid of the electric car. “If we asked anyone a century ago if they would like to exchange their horse for an automobile, surely many would say they would rather have a second horse. Big changes involve strong emotions.”

Mr. Chamorro points to the expansion of private investment in public charging stations. For him, this market will continue to attract investors as the demand for electric cars grows.

GM plans to invest $35 billion to launch 30 new electric vehicles by 2025. Three of them will come to the Brazilian market. The three models – Bolt EUV, Blazer EV, and Equinoix EV – were presented a few weeks ago on Youtube by Mr. Chamorro. The audience, he says, has already hit 6 million people. “The consumer is curious,” he said.

Mr. Chamorro does not directly criticize competitors that show interest in hybrid cars and defend the use of ethanol in these engines. But he indicates that the subject generates dissent in the sector. “While other companies see this as a small matter, we see it as a central issue,” he says in relation to fully electric cars.

GM’s direct competitors, such as Volkswagen and Stellantis, intend to go this way. Toyota already produces this type of vehicle, and two Chinese brands – CAOA Chery and Great Wall – have already announced they will produce ethanol hybrids in Brazil.

The electric car is, however, only a part of the vehicle transformation process. Mr. Chamorro talks about GM’s autonomous car tests in San Francisco and says that taking the driver out of the wheel will be one of the ways to put an end to traffic accidents.

Connectivity is another part of the transformation. Mr. Chamorro envisions the expansion of the car’s communication with people’s lives. GM is already collecting picturesque moments with its Onstar, a subscription-based communication service for navigation and emergencies. This service has helped, for example, in the rescue of stolen vehicles.

But one of the cases that moved Mr. Chamorro happened in the U.S. The emergency service was called by the mother of a woman about to give birth inside the vehicle. Trained for this too, the operators assisted in bringing the baby into the world. “There is a wave of possibilities coming,” says Mr. Chamorro.

*By Marli Olmos — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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