Petrobras, Petronas, BP, Shell and Chevron showed interest; number of companies registered is seen as a positive sign
08/31/2022
Rodolfo Saboia — Foto: Leo Pinheiro/Valor
The auction of ultra-deep pre-salt areas, scheduled for December, is likely to draw competition for the assets, said Rodolfo Saboia, the director general of the National Petroleum Agency (ANP). The number of companies registered to participate in the contest and the speed with which they expressed interest are positive signs, according to him.
“Everything indicates that there will be a good dispute. The [oil barrel] prices are high, and the assets are good. As soon as the call for bids was ready, there were expressions of interest from the companies. We expected that because we trust the quality of what is being put up for auction,” Mr. Saboia told Valor during the Offshore Northern Seas (ONS), the largest energy event in Europe, in Stavanger, Norway.
The auction scheduled for December 16 will be the first to auction blocks under the production sharing regime through the permanent offer – an ANP auction that is called only after companies show interest in the areas. In all, 11 blocks will be auctioned. Petrobras, Petronas, BP, Shell, Chevron, CNODC, CNOOC and TotalEnergies are the companies registered to participate.
Despite the discussions regarding the transition to a low-carbon economy, the world will still need fossil fuels, Mr. Saboia said. “Without enough renewable sources to replace fossil fuels, we will continue with fossil fuels. We can’t compromise energy security, as 84% of global energy still comes from fossil sources,” he said.
Regarding the supply of fuels in Brazil, Mr. Saboia said that the current energy crisis in Europe, which suffers from sanctions on Russian exports, can have an impact on Brazil, but stressed that at the moment there are no signs of supply problems yet. “Imports are happening in a normal way. There is no reason at this moment to believe that there will be any shortage of these products,” he said.
Mr. Saboia recalled that ANP monitors the fuel market in the country, including demand, supply, stocks and new import contracts. “These purchases are made well in advance and are expected to arrive up to a month and a half ahead, so at the moment we have no expectation of shortage,” he said.
The reporter’s travel costs were covered by Norwegian Energy Partners and Innovation Norway.
Company became largest operator of medium-sized airports and grew fourfold in five years
08/31/2022
Wanderley Galhiego Jr. — Foto: Carol Carquejeiro/Valor
After a strong expansion cycle in recent years, Socicam is now entering a moment of internal reorganization and focusing on recently won contracts. The company, founded 50 years ago to manage bus terminals, has now become the largest operator of medium-sized airports in Brazil, with 26 terminals, 17 of which have been won since 2019.
“The company’s backlog of contracts has increased fourfold in five years,” said Wanderley Galhiego Jr., the company’s head of new business and innovation, in an interview with Valor. The company expects to reach the end of 2022 with a set of projects worth R$10.7 billion, considering the gross revenue of all contracts throughout the term of the concession.
The most recent of them is the block of airports in the North region, in Belém (Pará) and Macapá (Amapá), that the company won in the latest federal auction held about two weeks ago.
The victory in this bidding closes the current cycle of growth for Socicam, according to Mr. Galhiego. “Even with all the challenges of the pandemic, we were able to take advantage of the opportunities to grow. But now we turn inward and work. This is the time to deliver everything that is planned with quality,” he said.
Besides the North lot, in the past few years, Socicam has won a lot of 11 airports in São Paulo (led by São José do Rio Preto) and a lot of four airports in Mato Grosso. Together, those three contracts foresee investments of at least R$1.8 billion considering the values foreseen in the project studies, which will be carried out over about 30 years.
The airports’ division has already become the most important for the group, accounting for more than half of the revenues.
The development plan for the airports is individual, according to the features of each terminal, Mr. Galhiego says. The airports in Mato Grosso, for example, have a strong vein of business focused on agribusiness, but there is also potential for new tourism routes to the coast since the state is a relevant source of tourists.
However, beyond the individual opportunities, the network operation brings advantages, for example, in the dialogue with airlines and business partners, says the executive.
Socicam has also had an expansion in its land terminal segment in recent years. By 2021, the company has won two important public-private partnerships (PPPs): one to manage part of the bus terminals in the city of São Paulo and the second to operate terminals in the metropolitan region of Recife, Pernambuco. The company operates 102 terminals in total.
The group was founded in 1972 by the Freitas family, initially to manage the old Campinas Bus Station — which is the origin of the name of the company, where “Cam” stands for Campinas. The company became one of the main operators in the segment and is still responsible for the three bus terminals in the capital city of São Paulo.
Market resumes expansion and has already grown 40% in first half
08/31/2022
Aline Milani — Foto: Divulgação
The good performance of the Brazilian agribusiness, supported by record harvests and high international prices of commodities such as soy and corn, keeps producers capitalized and continues to stimulate the upgrade of agricultural machines and equipment, with expressive reflexes on the insurance market.
According to the federation of automotive vehicles distribution (Fenabrave), the sales in the segment — fostered mainly with funds from Moderfrota, the main credit line for investments in the Crop Plan — increased 32.9% in the first half of the year compared to the same period in 2021, to 31,600 units. It was the best result for the period since 2013. And the trend is upward.
According to Brazil’s statistic agency IBGE, the production of agricultural capital goods increased 14% in June over the same month in 2021. In the 12 months through June, the high was 11.5%. Last year’s figures seen poised to be exceeded. Last year, according to Abimaq, sales totaled 58,000 units, or R$ 38.3 billion.
Simultaneously, the insurance market for the equipment is also growing because they are expensive assets — harvesters, for example, cost millions. According to the Superintendence of Private Insurance (Susep), premiums in the area reached R$1.6 billion from January to June, with a nominal increase of 42.38%. After adjusting to inflation, the increase was 27.98%.
Although it is a significant amount, the insurance of improvements or equity (when the equipment is not used as collateral for a loan) and rural pledge (when the good is given as collateral), represent a fraction of vehicle insurance turnovers, whose premiums exceeded R$22 billion in the period.
With an eye on this gap, traditional companies and cooperatives have been trying to improve insurance for agricultural machinery in Brazil. Bradesco Seguros is one of them. The company wants to triple its penetration in the segment by the end of 2023, and to do so it is designing partnerships with cooperatives and startups, modernizing policies, and investing in training for its brokers.
Bradesco Seguros closed the first half of the year with more than 20,000 insured agricultural machines and equipment, 34% more than in the same period of 2021. Premiums rose 57%, to R$110 million. Coinciding with the agribusiness map, the Central-West and South regions account for about 70% of Bradesco’s sales in the segment. For 2022, the goal is to reach R$200 million in premiums, a 31% increase over 2021.
Saint Clair Pereira Lima, head of Bradesco Seguros, the growth figures show that the segment has never been so good, although it is still little understood by the farmers. “Most machinery insurance is taken out when the asset is financed. We want to show that insurance is the continuity of the business. If a harvester breaks down in a crucial period, the farm’s productivity is compromised”, he said.
According to the executive, the price does not impede for the producer to take out insurance. The average rate charged is around 1.2% of the value of the asset, compared to 4% in the case of vehicle insurance.
The numbers of Banco do Brasil Seguros, an institution historically closer to farmers, show that spontaneous insurance is incipient. The company issued R$31 million in premiums in the first half of the year, with 12,000 policies — up 60% year-over-year. Insurance linked to bank loans totaled R$660 million, with 480,000 policies and an increase of 30%.
“The market has changed, but the perception of risk for farmers is different. They see the need for agricultural insurance because they feel the effects of the drought, but the wear and tear of parts and the need for machinery maintenance is seen as an inherent risk,” said Aline Milani, BB’s rural insurance development manager.
She also observes that farmers, in general, are not used to insuring assets, unlike what happens in urban centers. “Large producers, instead of insuring, do fleet management. They take a harvester from one farm and sends it to another, as needed. This is common with cotton equipment, which is very expensive. Small and medium producers, on the other hand, sometimes have old machines, which are not serve by insurance companies,” she said.
Sávio Susin, Sicredi’s insurance head, points out that this is one of the major problems faced by the group, whose focus is on members of credit cooperatives. “It is not uncommon for machinery that is more than 10 years old to continue in use by members of the cooperatives, and these are outside the insurance market. And for medium-sized producers, the price is an obstacle,” he said.
For Mr. Susin, although the rate charged is not so high, the absolute value is, because agricultural equipment costs from tens of thousands of reais to a few million. “With more technology on board every day, there are machines that cost more than R$3 million or R$4 million. That is, 1% of these values is a lot of money for smaller producers.”
Sicredi serves about 26,000 producers and financed R$8.2 billion in machinery in 2021/22, in more than 38,500 operations. Of this total, only 31% included direct insurance. In the others, the producers sought other agents.
The equipment claims are much more related to damage or accidents, such as overturning, than to theft. And, in the market’s perception, thefts need to gain more weight in this bill. “We have been insisting that the producer takes out agricultural insurance and equipment insurance so as not to lose assets, but it hasn’t been that simple. We always think that nothing will happen to us, right?” said Alcir José Goldoni, CEO of Credicoamo, which operates as a rural credit cooperative of Coamo, the largest agricultural cooperative in the country.
“And it’s not enough to insure the machines. You have to protect the shed where they are stored, the power equipment, everything. It is asset preservation. If a cyclone comes, everything is lost,” he said. Credicoamo has more than 10,000 machine policies, the majority of products that are still being paid for.
Projections indicate that economy’s performance in first half will drive year’s result
08/30/2022
The good performance of the Brazilian economy in the first half of the year may account almost alone for GDP growth in the full year 2022. The dynamism bolstered especially by the services sector, however, is not expected to remain in the second half, when the lagged effects of monetary tightening are likely to start appearing more consistently. Meanwhile, uncertainty grows due to the elections and factors such as the momentum of economic reopening lose effect.
The median of 75 estimates collected by Valor points to a GDP expansion of 0.9% in the second quarter compared with the previous quarter. This way, the average point for the year-end result, based on 80 estimates, reached 2.1%, compared to 1.4% at the end of May. Of these, only 16 are below 2%.
Last quarter showed widespread growth, with services, industry, and farming standing out, said Lucas Maynard, an economist at Santander. In services, he points out the reopening of the economy, the increase in disposable income as the labor market improved, and the effects of fiscal stimuli, such as the early payment of the 13th salary (a mandatory year-end bonus for formally employed workers) and the authorization to withdraw money from Workers’ Severance Fund (FGTS) accounts.
The higher income also favors the consumption of industrial goods, a sector that has benefited from the improvement in global logistical hurdles caused by the mismatch between supply and demand. Inventory data, says Mr. Maynard, suggest a gradual normalization of the production chains. Industry, in particular, had a better performance in the first half of this year, unlike the second half of 2021, when it was affected by lower income and the preference for services in the consumption mix.
Santander projects growth of 1.1% for the second quarter of 2022 and expects GDP growth of 1.9% for the year. The statistical carryover for the second half is 2.3%. That is, with zero growth in the second half, this would be the country’s GDP growth.
Fernando Honorato — Foto: Carol Carquejeiro/Valor
Besides the broader factors amid a set of government measures, a structural component played a role: the surprising dynamism of the labor market recently, said Fernando Honorato Barbosa, the chief economist at Bradesco. “I see two reasons for the good moment of employment. On the one hand, the overhaul of labor laws brought more flexibility in hiring and firing and reduced costs for businesses. On the other hand, the relative price of wages compared to investments shows that today it is more beneficial to hire.”
“If we take, for example, FGV’s level of capacity utilization indicator Nuci, we see that it is above 80%, which should drive investments. But businesses have preferred to hire, and this has not only to do with the overhaul. Salaries are close to the levels seen in 2012,” he said. In July, the industry’s Nuci hit 82.3%, the highest since March 2014.
If the first and second quarters surprised to the upside, the following period is surrounded by uncertainties. This is because the effects of the Central Bank’s monetary tightening are expected to become more intense, while the push given by the post-Covid reopening ends and the uncertainties regarding the elections slows investments. Not coincidentally, the median of the 67 projections suggest a 0.2% GDP growth in the third quarter.
What complicates the reading is that, in the opposite direction of these factors, there are issues such as the higher cash transfers through the social program Auxílio Brasil, of R$600 as of August, tax exemptions, and the deceleration of inflation, which is likely to give an additional boost to activity. On the external front, the tightening of global monetary conditions that was taking shape at the end of the first half of the year was also attenuated — at least for the time being — by a slightly more dovish stance by the Federal Reserve, the U.S. central bank. Because of this, some economists believe in a bullish bias for the numbers for the period.
4Intelligence’s current estimate is for a 1% contraction in GDP in the third quarter, but the figures do not account for possible cross effects from Auxílio Brasil, said analyst Wellington Nobrega. “With falling inflation, a heated labor market, and the government’s countercyclical policies, household consumption may do better than projected today.”
Fernando Rocha, the chief economist at the asset management JGP, also disagrees with the thesis of a “sudden blackout” in the second half of the year. In his calculations, the GDP grew 0.6% in the second quarter, seasonally adjusted. Considering the result of the first quarter, this generates a statistical effect of 1.9% for the second half, he said.
In his view, the deceleration will be more gradual than imagined. Job generation has been strong, surprising month after month, and this increases the total wage bill and props up demand for services, he said. Mr. Rocha expects GDP growth of 0.4% in each one of the next quarters. Thus, JGP’s official projection for 2022 is 2.2%, but the rate could reach 2.5%.
Another factor that could support activity in the third and fourth quarters is local government investment, which saw a boost earlier this year, said Stephan Kautz, the chief economist at EQI Asset. “Spending by municipalities was very strong. It could generate a statistical effect for the second half of the year and make Gross Fixed Capital Formation surprise this year.” That said, the asset management company expects that this set of factors will not be enough to offset downside factors. Considering negative data and reports that are already emerging in retail and construction, the company projects a 0.1% expansion in the third quarter.
Looking ahead to 2023, estimates have also deteriorated. The median of the 78 projections showed a 0.4% expansion, compared with 0.7% in the previous survey.
In addition to the contractionary effect of monetary policy, which will reach its maximum effect in early 2023, the uncertainty about the economic policy of the next administration is weighing on estimates, said Mr. Honorato, with Bradesco. In his opinion, question marks about what lies ahead will not be solved with the election results.
“We still don’t have details about this new arrangement, and I believe that the uncertainty will remain until the first half of 2023. The new administration could build an enormous market confidence, so that the exchange rate appreciates, inflation falls faster and so does the [policy interest rate] Selic. It might not,” said Mr. Honorato, who sees zero growth in 2023. “The point is that, with fixed interest rates at 7.5% and long rates at 6%, it is undeniable that uncertainty is there and will affect the economy.”
Santander estimates a 0.6% contraction, but with an upward bias. Among the factors playing against next year’s GDP growth are the exhaustion of the effects of the reopening of the economy and the still unfavorable situation abroad, Mr. Maynard said.
EQI is more optimistic, with a forecast of a 0.9% GDP growth. “We believe that agriculture will again have a good year in 2023, growing close to 3.5%. The high interest rates are less relevant for the segment, which has directed credit. Besides this, the global slowdown affects more metallic commodities. The agricultural ones are better isolated,” he said. “Agribusiness has a smaller relative participation in the economy, but it generates positive, indirect effects as well.”
Tax benefit ends officially on December 31, but President Bolsonaro has already signaled he would seek its extension
08/30/2022
Jair Bolsonaro — Foto: Cristiano Mariz/Agência O Globo
The fuel tax relief, a trump card of President Jair Bolsonaro’s (PL) in the election campaign, is expected to be maintained next year. The tax benefit ends officially on December 31, but the president has already signaled that he would seek its extension.
The 2023 budget bill, which will be sent to Congress by Wednesday, provides for tax breaks of R$50 billion due to the fuel tax relief, officials say, including R$18 billion for diesel alone.
Another important campaign promise, however, will not be included in the budget bill. According to the budget blueprint, Auxílio Brasil, the social program created to replace Bolsa Família, will only distribute R$400 a month, compared with R$600 now. A legal provision – that currently does not exist – is needed to keep the current value next year, as promised by President Bolsonaro, who is running for re-election, and some of his opponents, including former President Luiz Inácio Lula da Silva (Workers’ Party, PT) and Senator Simone Tebet (Brazilian Democratic Movement, MDB).
Mr. Bolsonaro will include the forecast of paying R$600 in 2023 in the message that accompanies the budget bill to Congress. The idea faced some resistance from officials because it is not a usual step. However, it was the way found to reinforce the promise. In the debate held by a pool of news outlets led by TV network Band, Mr. Lula da Silva criticized him for failing to include the higher Auxílio Brasil cash transfers in the 2023 budget bill.
In campaign advertising, the president has said that the aid will be paid in line with “fiscal responsibility” principles. Behind the scenes, Economy Minister Paulo Guedes has advocated that the source of funding for the additional expense of R$50 billion to R$60 billion should be the collection of individual income tax on dividends. Government estimates suggest that the collection would be similar to that.
This taxation is part of a bill in Congress, which has already been passed by the Chamber of Deputies but faced resistance from senators. During the debate on Sunday, Mr. Bolsonaro said he would seek the means to raise and finance the aid in dialogue with Congress after the elections.
The adjustment of the income tax rates, a promise of Mr. Bolsonaro’s 2018 campaign, is not expected to be included in the budget bill, sources say. One reason is the requirement of an alternative source of revenue.
The budget bill is likely to include R$10.5 billion to adjust the salaries of civil servants next year.
Although the federal accounts tend to end the year in the black, the budget bill is likely to project a R$65 billion deficit.
As Valor reported last week, R$430 billion would be needed to foot all the promises speculated that require spending and tax breaks next year. Officials specializing in the budget, both from the Executive and the Legislative branches, expect the 2023 budget bill to be modified after the elections, in October.
Out-of-court agreements gain ground as businesses focus on changing their debt profiles
08/30/2022
Cemig’s building — Foto: Divulgação
Companies are intensifying talks with financial consultants and law firms specializing in restructuring to renegotiate their debts with creditors, sources say. With the increase in the cost of capital due to the high interest rates and limited supply of funds in the market, negotiations for out-of-court agreements are gaining ground with a focus on changing the debt profile of these companies. One negotiation involves Pif Paf, a well-known food brand in Brazil, which has analyzed going public in 2021, but currently faces a difficult financial situation.
Companies from sectors as diverse as food, textile, civil construction, energy, retail, and services are seeking mediation with creditors. The negotiations gained more strength especially after the second quarter, with the pandemic under control, but in a scenario of escalating interest rates, exchange rate still at high levels and increased financial expenses.
“The crisis scenario generated at the beginning of the pandemic mitigated the problem for many companies, with creditors willing to renegotiate longer terms. But this scenario has been changing in recent months, with the environment of higher interest rates, inflation, and possible recession,” said Luiz Galeazzi, with the financial restructuring company Galeazzi Associados.
According to Eduardo Wanderley, a partner with the restructuring and insolvency team of BMA Advogados, many creditors gave “a break” of one to two years in collections. “This is because at that time, if you tried to offer the debt security in the market, there wouldn’t even be a buyer. And there was a scenario of banks with more liquidity, with the measures taken by the Central Bank in 2020. We even thought that renegotiations would see a boom, but it didn’t work out that way,” he said. “There are signs that the market may be entering at this moment. We feel was that this would come back between this year and the next, especially.”
“Last week we were approached by a large service company in search for restructuring. Those who failed to do so before are suffering now. Those who restructured their debts and now need to go back to the market to roll over [debt] face very expensive credit. And this will create a more difficult scenario,” he said.
Eduardo Gallardo, a lawyer with professional services firm Alvarez & Marsal, says inquiries from companies seeking restructuring have increased. “With escalating interest rates, inflation and the risk of recession ahead, the bill starts to arrive and affects companies that can’t increase revenue.”
Fish producer GeneSeas, controlled by private-equity fund Aqua Capital, is in intense talks with creditors to avoid filing for protection from creditors, sources say. From January to June, the company’s revenue reached R$210 million, while the debt in the same period totals R$220 million. At this moment, the group is negotiating with creditors, a stage that expires at the end of September.
Power companies Cemig and Santo Antonio are also in talks with banks to change their debt profiles, sources familiar with the matter say. Both companies have invested to expand in recent years, but their complex shareholder structures involving several shareholders delay negotiations.
As for meatpacker Pif Paf, the company’s lawyers informed the courts in July that the group had opened mediation with creditors. Last month, the company, with R$2.7 billion in sales in 2020, filed an injunction to prevent the blockage of R$30 million from its accounts by China Construction Bank. The group says that access to those funds is key and, “as the injunction is granted and depending on the success with the Chinese bank and any other creditors, [Pif Paf] may, after 60 working days, and if necessary, file for judicial recovery,” says the request.
In a note, the group said that it made acquisitions through loans, in a structured way, but due to the current economic scenario of “sudden and accentuated rise in interest rates,” it hired G5 Partners “to develop a strategic plan focused on reducing the debt and thus ensure the maintenance of the company’s financial health.” The company also said it “maintains a constructive and transparent relationship” with the banks.
On the subject of judicial reorganization, cited in the injunction, the company said there is no ongoing process or intention to do so.
Ronaldo Vasconcelos, a partner at VH Advogados law firm and a professor at Mackenzie, sees an increase since March in collective out-of-court settlements, those closed through mediations with companies and creditors. “We saw [this movement] very clearly in the real estate industry, and, to a certain extent, in textiles,” he said. “In the construction sector, it even looks contradictory to see construction works in capital cities like São Paulo. That happens because these guys are building now based on past, low interest rates, and some of them renegotiated the terms in 2020. But now they must foot this indebtedness without getting new lines in more reasonable conditions.”
Law firm Moraes Jr. Advogados saw an increase from six months ago and is currently negotiating mediations with creditors of two meatpackers from Minas Gerais and Pernambuco, as well as food makers. “We are trying to reach an agreement, but it is very difficult because when you approach creditors for a negotiation, the creditor often asks to block stocks or something along these lines, which complicates the talks,” said lawyer Odair de Moraes Júnior.
According to him, the meat industry has revenues in dollars, which is a “natural hedge.” Yet, meatpackers made high investments to meet an export demand that did not materialize at the expected pace.
Another case involving his law firm is that of Pantera Alimentos, an Itu-based food company that owns five brands. The company had been seeking new lines since 2019 before it managed to close credits with banks and credit rights funds in the following year. Despite that, the leverage ratio grew fast, and the company now faces a R$97 million debt pile. “We started a mediation, but there was no agreement, so we had to file for protection from creditors,” he said.
“We expect this to grow in the second half of the year because election years translate into a worse economic scenario, and the Selic [Brazil’s key interest rate] will still be high in 2023. Also, a snowball has formed in many businesses, and it must be solved.”
This happens in parallel with the need for companies to put certain assets up for sale in an attempt to reduce their leverage ratios. “These are negotiations less for matters of opportunity and more because of collections,” said Thiago Giantomassi, head of banking and finance at law firm Demarest Advogados.
According to the law firm, the search of advisers in restructurings exceeds the numbers for 2020 and 2021, but is lower than that seen in the 2015 recession. “The difference to 2020 is that questions were more theoretical back then. Now companies include more practical background aspects, and they think they will not be able to solve the situation without mediation,” said Guilherme Bechara, a partner with Demarest.
Diogo Berger, head of debt restructuring at Santander, said that the current scenario is similar to the period 2014 and 2016 in terms of rising interest rates. At that time, default was more widespread. However, he now sees a benign scenario for companies, especially the large ones, as they raised funds in the capital markets. “The past crisis was very severe, with banks creating internal structures to serve these companies.”
Mr. Berger said banks’ teams grew. “Since then, the financial system has a way to work preemptively on the most complicated cases and they are able to better organize disputes [between creditors], who want to receive first.”
GeneSeas said in a note that it “faces a challenging situation, common to the entire animal protein market, amid a complex macroeconomic scenario impacted by a large increase in interest rates, high energy and commodity prices and increased likelihood of a global recession.”
Also according to the company’s note, “GeneSeas has been working on a friendly renegotiation plan with its entire production chain, through a process focused on cost reduction and the implementation of management measures that promote operational efficiency and help strengthen cash flow. The company’s goal is to maintain its operating capacity, offering quality products to customers and seeking to preserve as many jobs as possible.” Aqua Capital declined to comment.
Global crisis and local factors reduced investor appetite, survey by PwC and ABFintechs shows
08/29/2022
At a time of scarce IPOs and fewer, smaller checks from venture-capital funds, 80% of fintechs are seeking capital or intend to do so in the next 12 months, according to data by Fintech Deep Dive 2022, a survey held by PwC in partnership with the Brazilian Association of Fintechs (ABFintechs). The study found that 69% of fintechs finance their activities with their own funds.
“The crisis has reduced investors’ appetite for risk. Currently, there is little availability of venture capital to finance startup innovation due to some investments being frozen because of elections in Brazil and uncertainties related to prices and interest rates around the world, which were aggravated with the invasion of Ukraine by Russia in early 2022,” the study says. A 56% share of the 156 fintechs heard say they have never participated in an investment round.
Among the fintechs that managed to raise funds in the last year, 49% raised between R$1 million and R$10 million. Among those seeking funds, 60% intend to receive between R$1 million and R$30 million.
Diego Perez, head of ABFintechs, said that the interviews were conducted in March and April, but with data referring to 2021. In other words, they do not yet capture the effects of the war in Ukraine and monetary tightening in the United States. Investments in fintechs are expected to drop even further this year. “I don’t understand the movement of previous years as a bubble, but perhaps more adverse scenarios, such as the pandemic and geopolitical tensions, have been underestimated or even ignored,” he said.
According to him, the current moment is one of the more selective investors, but with the capacity to make investments. “These investments are being held back at the moment, but there is always recovery after a storm. Investments are expected to decrease this year, but they are not going to disappear. They are waiting for the right moment to come.”
Luís Ruivo, a partner and financial services consulting leader at PwC in Brazil, said that the segment has consolidated in recent years. The boom of new companies seen five years ago is in the past, but those fintechs that managed to stand alone often did so supported by a large customer base, but still without cutting a profit. “They all have in common the pioneering spirit of entering underserved markets using the right recipe. Today, however, the spaces are occupied even by fintechs, and the challenge is to grow and generate profitability against a backdrop of scarce investment capital.”
Currently, 31% of fintechs invoice up to R$350,000 per year. In the previous edition, 38% said they had no revenue. Those with revenues over R$10 million total 16%. Although 65% expect to double their revenues this year, only 35% were able to break even. Breaking companies down by segments, 21% operate in credit, 16% in means of payment, 13% as digital banks, 8% in financial management, and 8% in investment management.
According to Mr. Perez, with ABFintechs, many startups began with payment means because of the regulatory opening promoted by the Central Bank in 2013. In 2018, credit fintechs were created, and now this segment is starting to mature. “In the macro scenario, we are at a time when there is high demand for credit and many micro and small businesses, which are not served by banks, are starting to turn to alternative sources, such as digital lenders,” he said.
In addition to credit supply, one area that fintechs are strongly turning to is open banking. A 43% share says they develop solutions for both open banking and Pix (Central Bank’s instant-payment system); 15% do so only for Pix; 13% do so only for open banking, and 28% are serving neither. “Most fintechs say they are already reaping or about to reap benefits from their investments in solutions related to open banking and Pix. After the mass adoption of Pix by Brazilians, companies still see opportunities to explore the new payment method to diversify their product and service offerings and draw customers. Likewise, open banking has not yet fully shown its potential to transform the market,” the study says.
Among the greatest difficulties cited by fintechs are drawing qualified human resources (56%), obtaining investment for the business (51%), achieving scale (41%), having brand recognition (38%), and generating revenues (29%). For the head of ABFintechs, there tends to be an improvement in the first item, either by the crisis in the cryptocurrency segment and the wave of layoffs it has been causing or by the devaluation of the euro against the dollar, which makes European IT professionals cheaper to hire – which will possibly reduce the pressure of U.S. companies on human resources in Latin America.
“Live commerce” is aimed at drawing advertisers and increasing revenues in the second half of the year, when major events such as the FIFA World Cup take place
08/28/2022
Fiamma Zarife — Foto: Silvia Zamboni/Valor
Twitter, one of the most popular social media among Brazilians, began testing the live-stream shopping model in the country. The so-called “live commerce” is one pillar to attract advertisers and increase revenue in this second half of the year, when major events such as the FIFA World Cup in Qatar, Black Friday, and year-end holidays take place.
“We are sharing a lot with brands the increase in conversations about the World Cup on the platform because it will definitely be one of the biggest events within Twitter this year,” Fiamma Zarife, Twitter’s country manager for Brazil, told Valor.
Twitter launched live-streamed product sales last year in the United States. “We had a simultaneous audience of 2 million people in a Walmart live commerce,” the executive said.
Although Twitter is not a short video-centric platform like TikTok, Kwai, and Instagram, Ms. Zarife says that video content generates conversations on the platform and accounts for 50% of the audience, currently. “We have a symbiotic relationship with TV in content like reality shows, soap operas, and soccer, which are passions of Brazilians,” she said.
But she also considers that the economic situation is complex. “Today we have a difficult macroeconomic scenario for the whole world, not only in Brazil, which leads companies to be more cautious and assertive with marketing investments,” she said. “We know that media investment is a reflection of the economy, but we take a very positive look at how Twitter can join these major events with an influential audience, which is much more opinionated.” In the political field, in particular, Twitter is considered an important social media and is used by politicians and their followers.
This year’s Brazilian elections, with the first round of voting scheduled for October 2, are stirring up the social networks. But it is during the soccer World Cup and Black Friday that Twitter and its competitors see more opportunities to make money with video advertising, live sales, and content produced by influencers.
Meta, the parent company of WhatsApp, Instagram, and Facebook, had the largest share (26%) among digital networks in advertising investments between January and the end of July, according to Nielsen, followed by Google’s YouTube, with 22%.
Meta’s strategy to draw advertisers – the company says there are 200 million worldwide – is to turn advertising into a natural part of users’ navigation. “We combine our business solutions with the way people use our products naturally. That’s why we have invested in so many ways to create a personalized, seamless user journey from the moment people meet a brand to the moment they buy a product,” said Conrado Leister, Meta’s managing head for Brazil.
Video ads, especially long-form ads, are a major bet. “Video is a big part of why people like our apps — there are a lot of opportunities tied to this format on our platforms,” says Mr. Leister.
Globally, more than 2 billion people watch ad-eligible videos each month on Meta’s platforms, and 70% of video ad views on Facebook ads are seen in full.
Meta’s managing head in Brazil says that “short videos are a success. But long videos generate greater audience adherence to ads on the company’s networks.”
Videos also guarantee longer permanence of users in social networks and, consequently, greater exposure to advertising.
“With the increase in consumer dwell time on social media and more information collected about their interests, social media becomes a good channel to generate both brand creation and short-term sales,” said Sabrina Balhes, Nielsen’s measurement leader in Brazil.
Kwai, a social video network known as Kuaishou in China, saw a 200% jump in the dwell time of Brazilian users on the platform last year. Currently, more than 45.4 million monthly active Brazilian users of Kwai spend on average 60 minutes a day on the platform.
Soccer is one key topic among the platform’s content to draw audiences and advertisers. In September last year, Kwai signed a two-year sponsorship deal with the Brazilian Football Confederation (CBF), which provides exclusivity in the production of short videos for the platform on the official profiles of the men’s and women’s national teams, including backstage and training sessions.
For the World Cup, the company has begun to plan special content and filters. “We will make a strong correlation with content about the event,” said Mariana Sensini, Kwai’s country managing director in Brazil. “Our research shows that users want entertainment.”
The social-media website also seeks to foster content created by social media influencers. Between March 2021 and April this year, Kwai invested R$250 million to pay 20,000 content partners in Brazil.
On Black Friday, Kwai bets on live-streamed sales. This model was launched in October in Brazil with retailer Casas Bahia.
This year, advertisers are likely to combine campaigns for the World Cup, Black Friday, and year-end holidays, said Ms. Balhes, with Nielsen. The idea is that “instead of creating a specific advertising campaign for each event, advertisers will work with umbrella campaigns that encompass the year-end sales,” she said.
Consumer confidence in social media is a key point for advertisers to direct their campaigns to this audience. According to a Nielsen study conducted in September 2021, 64% of Brazilians say they trust ads on social media. In another survey, from June, 39% said they have already bought some products promoted by social media influencers.
For the social media Pinterest, the World Cup brings the opportunity to capture the desires of Brazilians who seek decoration, fashion, and style references around the event. “With a lot of competition among social media for soccer, we decided to act on the cultural side of the World Cup,” said André Loureiro, Pinterest’s managing director for Latin America.
The social-media website is also preparing the launch of a public data tool about the behavior of its users, like Google Trends, which should go live before Black Friday, providing more elements for advertising campaigns on the platform.
“Combining the seasonality of Black Friday with the World Cup, at the same moment of the year, we have a great expectation of return in the fourth quarter,” Mr. Loureiro said.
Auction is seen as materializing only after port privatization, which depends on presidential election
08/29/2022
BTP is one of the port’s container terminals — Foto: Ana Paula Paiva/Valor
The federal administration gave up on auctioning this year a new “super terminal” at the Port of Santos, which is expected to expand container handling capacity by up to 40%. Depending on the election results in October, the new terminal – also known as STS10 – will be put on the block only after the privatization of Santos Port Authority (SPA). The studies for that are expected to reach this week the Federal Court of Accounts (TCU), a public spending watchdog not related to Brazil’s Judiciary system.
The change in plans was caused by problems in the studies made by the state-owned company Empresa de Planejamento e Logística (EPL), which will have to be updated, and to competition issues, sources say.
The volume of investments initially calculated in the study, around R$2.2 billion, would have to be updated by 50% because of inflation and the higher prices of the main inputs.
Competition is another concern. Three smaller terminals currently handle vehicles and other break bulk cargoes, such as wind turbine blades and transformers, in the area where STS10 would be built. It is still unclear how cargo flow would be accommodated after the containers arrive.
The studies will be updated because of that, which puts the auction back at an earlier stage than today’s port privatization process. “The end of an administration is not the best moment for such decisions,” said an official that follows the case closely.
The outcome will also depend heavily on the election. If President Jair Bolsonaro is reelected, the privatization of the Port of Santos is likely to be concluded in the first half of 2023, and the “super terminal” would have to be auctioned by the port’s new private-sector owners.
The Ministry of Infrastructure planned to auction the terminal before privatizing the port, but the second option turned out to be the more feasible one. “It was very much reliant on the pace of one project and another. As the STS10 ended up being delayed, they made this decision,” a source within the government said.
In this new scenario, privatization may include some additional requirements, such as maintaining an area in STS10 to handle vehicles and wind power equipment.
If former President Luiz Inácio Lula da Silva wins the election, the original plan is likely to remain in place. Advisors to the Workers’ Party (PT) have already said Mr. Lula da Silva does not intend to privatize the port. In this case, the container “super terminal” would be auctioned by the government, accordingly to the current model.
Designed to revamp the port and encourage competition, the new terminal has the potential to attract R$1 billion in fixed concession payments. If the concession takes place even after Santos is privatized, the government would have to increase the fixed concession payment to offset the loss of such an asset.
STS10 will have a similar capacity to that of Brasil Terminal Portuário (BTP) and Santos Brasil terminals, which today are competing fiercely for leadership in container handling.
According to the current design of the auction, BTP could not make a bid. However, the company’s controlling shareholders – Maersk’s APM Terminals and MSC’s TIL – would be able to participate separately.
According to preliminary studies, the new terminal will have a static capacity for up to 47,500 TEUs (20-foot equivalent units of containers) at the end of the contract, in a total area of 463,800 square meters.
To offer a glimpse of what the investment foresaw in the implementation of the super terminal means, the government has called the bidding for STS08 and STS08A, two terminals for fuels, “the largest port concession ever.” Both terminals will be auctioned in November and will receive a combined capital expenditure of R$950 million.
Facial recognition system allows customers to pay in stores without using an electronic device or a card
08/26/2022
Eladio Isoppo — Foto: Nilani Goettems/Valor
When making a purchase, consumers want to avoid queues or time-consuming bureaucracy. To solve this, startup Payface brought to the market a new means of payment that simplifies operations in retail.
The solution uses facial biometrics technology and connects the entire ecosystem of payment methods, including credit cards, private label credit cards, wallets, acquirers and sub-acquirers. Users are not required to use any device or card. Payments are approved through face recognition – it takes a simple glance at the device installed at the cashier.
Payface’s first client was São Paulo-based supermarket St Marche, which saw broad acceptance since the innovation was put in place three months ago. “We are in 500 points of sale in six states,” said Eládio Isoppo, the fintech’s CEO and co-founder. The list of clients include supermarkets Zona Sul (Rio de Janeiro), D’ Ville (Uberlândia, Minas Gerais), Frade (Ilhabela, São Paulo), and Muffato (Paraná). The solution is also in use in Santa Catarina and Bahia.
Customers like it because operations are instantaneous and do not require point-of-sale terminals, cards, or intermediaries. “The consumer can go for a walk and stop at the supermarket to shop, without having to present any document, card, or cell phone,” Mr. Isoppo said. Payface’s next move is to expand to pharmacy chains and smaller stores. To do so, it is seeking partnerships with issuing and acquiring banks to reach small and medium retailers.
The security of the new payment method is in the technology behind the solution, Mr. Isoppo said. Payface holds a PCI Compliance certificate, which attests that the company follows the necessary security rules in processing card data. The consumer’s registration on the Payface platform gathers data such as the tax ID, payment method, and facial biometrics, and is integrated with the software installed in the retail chain. The insertion of the means of payment uses tokenization (the process of replacing real data with equivalent data, with the same format and protected by cryptography).
The development of technologies to reduce reliance on passwords and improve the experience by eliminating friction in data validation has advanced. The process, called passwordless authentication, is also being adopted by the financial system.
A survey by consultancy Netbr, conducted with the support of its global partner Ping Identity, showed that 77% of the lenders already execute – or are about to do so – some kind of passwordless electronic operation. “We are talking about the same standards used by big techs, now being adopted by the financial industry,” said André Facciolli, CEO of Netbr. According to him, four of the six largest Brazilian banks use the technology in authentication and authorization processes.
Another advance was the use of benefits for employees, such as food and meal vouchers. Bee Vale’s application, with multiple wallets, allows contactless payments by mobile phones. Daniel Oliveira, CEO of paySmart, a fintech that processes payments for companies and has Bee Vale as a client, said that the near field communication (NFC) technology is present in most cell phones and is an option for electronic payments.
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