Retailers prepare attacks against foreign online marketplaces

Why Some Retailers Are Thriving Amid Disruption

There is a movement organized by the main Brazilian retailers that is likely to lead to a series of actions against online marketplaces that, in their view, sell counterfeit items and or without the proper collection of taxes. The focus is on foreign companies that bring products from Asia, through cross-border online commerce, or across platform borders, Valor has learned. Those companies rebut criticism and already have lines of defense to react to this move.

The meetings on the issue have been led by the Retail Development Institute (IDV), which represents 75 retailers, such as Americanas, Casas Bahia, Magazine Luiza, Renner and Riachuelo. Last week, there was a virtual meeting with at least 50 associates to address the tax impact of evasion and discuss aspects in which “judicial and administrative proposals” against the platforms are viable, according to IDV material presented at the meeting.

Sources say that there is a long-standing discomfort of the chains with the operation of groups such as Aliexpress and Alibaba (based in China), Shopee (part of Singapore’s Sea Group), Wish and Shein (based in the U.S.), Mercado Libre (based in Argentina), and OLX Brasil, with 50% of the business in the hands of South African Naspers. The decision to harden the tone came from the growth of the activity of these companies in the country, say sources.

The material, prepared with the support of McKinsey consultancy and Mattos Filho law firm — and obtained by Valor — mentions, as main areas of action, competition, tax, criminal, consumer relations and the Civil Rights Framework for the Internet.

Regarding the competition aspect, the IDV is considering filing, in the coming weeks, representation at antitrust regulator CADE, alleging violation of the economic order by foreign platforms. This topic is controversial and former CADE advisers are divided on the hypothesis of success in the strategy.

A meeting with the National Council for Combating Piracy (CNCP), of the National Consumer Secretariat (Senacon), linked to the Ministry of Justice, must still be requested this month. The idea is to present the institute’s study to the CNCP. “There have already been contacts with high levels of the government, informally, and with state leaders to see if there is room to work on changes in state legislation, on tax collection by marketplaces. We’ll start with CADE and then strike harder to change the law,” says the head of one chain.

“Only 5% of shipments were inspected by customs in 2020 and 7% of shipments are effectively stated. In other words, there is a flood of products that enter the country without any analysis, and this increased even more after the pandemic,” says a source close to IDV.

“As the purchase of up to $50 is exempt from import tax, informal shopkeepers or individuals buy from other informal stores, up to this limit of $49.99 per package to avoid inspection”, says the source. “Thousands of packages arrive up to this limit, further favored by the free shipping offer offered by these platforms”.

A proposal being analyzed by the retail chains is the issuance of tax receipts, by the Individual Micro-Entrepreneurs (MEIs), in the sale to individuals. This is only mandatory when selling to companies. But a change would have to involve the general law on micro and small companies.

Another path for IDV is to work with state lawmakers to pass a law that assigns to marketplaces joint liability for tax disputes of their sellers regarding the payment of sales tax ICMS. Some states already make them responsible through specific legislation, but the idea is rejected by platforms outside Brazil because they consider they are only intermediaries in the sale.

The text being discussed still mentions acting on the change in article 19 of the Civil Rights Framework for the Internet, which deals with freedom of expression. According to the article, an internet provider can only be held civilly liable for damages resulting from content from shopkeepers if, after a court order, it fails to take action.

For the IDV, the text is being used in a distorted way to exempt the online marketplaces from responsibility, and the platforms, in turn, say that it is about freedom of expression (of publishing content).

As it is an election year, retail chains linked to the IDV told Valor that they do not believe there is room to put the entire agenda on the table of the federal and state governments today, so the path followed now would be to toughen the demand for greater customs controls, and in greater pressure on states and on regulatory agencies, such as telecom regulator Anatel, which can fine companies. A source close to the Ministry of Justice says that these inspections have grown since the pandemic, as well as the approximation between some websites and agencies, in the search for greater cooperation.

The IDV document calculates a tax evasion of R$19 billion to R$20 billion in the sale of international retailers in 2020 — 80% to 90% of them are from Asia. In the Brazilian chains, this evasion ranges from R$4 billion to R$ 5 billion. There were 47 million orders from Brazilians to international stores, brokered by online marketplaces in 2020, says the document. It is as if one in five Brazilians had placed an order in the year.

For the foreign platforms, the issue is commercial. “They [Brazilians] are saying that because they are losing sales and, in a more difficult consumer environment, they do not have access to the competitive sellers base that others have. Because there are sellers that sell cheap items and within the law, as they have a lower cost structure abroad than in Brazil,” says the head of market relations at a Chinese website. “We are bringing to Brazilians thousands of stores that work correctly. Are there illegal products that pass through controls? Yes, but there is work to improve that.”.

Goldman Sachs estimated, in a recent report, that Shopee is expected to reach a 20% share of the Brazilian online market by 2025. Other analyst reports have highlighted Mercado Libre as the biggest competitor today for Magalu, Americanas and Via.

A point highlighted by three lawyers heard by Valor, focused on antitrust legislation, is the possible legal strategy of Brazilian retail chains. “If they claim unfair competition, this is a subject covered by the 1996 Intellectual Property Law, that is, it is something in the civil or even criminal sphere, and not in CADE,” says a former counselor at the antitrust watchdog.

“You can say that it is a violation of the economic order within a broader idea, as defined in article 36 of the law that structures the Brazilian competition defense system. And claim that tax evasion generates an asymmetry of competitive conditions and market imbalance. But CADE has already made clear, on several occasions, that it does not assess tax matters, even though it is necessary to analyze violations of the economic order,” says a lawyer with 23 years of experience in the area. Sought by Valor, CADE did not return requests for comment.

Local retailers and foreign platforms have had a series of differences for years, which became explicit in 2019, when the sector discussed a self-regulation guide, with Senacon’s direct intermediation. In this debate, foreign companies objected to holding platforms responsible for advertising counterfeit products, claiming freedom of expression. Shopee, Aliexpress, OLX, Wish, Shein did not adhere to the guide. Mercado Livre joined in 2021

In the end, the guide assigns responsibility for enforcing property rights only to the companies that own the products and brands. The IDV was in favor of co-responsibility, and the divergence resulted in tense meetings between the parties in 2019. On February 23 there will be a meeting at the CNCP, and the idea is to tell companies that those who do not act according to the guide’s recommendations or meet suggestions will have to leave it.

Sought by Valor, Mercado Libre says it supports actions to inhibit the entry of pirate and counterfeit products, and that invested $100 million in machine learning technology, which helps in the analysis of data and identification of wrongdoings. It also states that only 5% of the sellers in its base are not formal companies. “We’ve formalized 135,000 new small entrepreneurs since the pandemic, and that’s more [than the total number of member stores] in the IDV. So we generate income and jobs,” says Ricardo Lagreca, head of the legal department of Mercado Libre in Brazil.

According to him, the group has digitalized the control structure to identify “as much as possible” sellers and products. “About 95% of the write-offs we make are already automated.” Mercado Libre has been reinforcing, behind the scenes, sources say, that it cannot be compared to platforms without a local distribution structure and that do not generate employment or tax payments. And they don’t see themselves as a foreign operation.

According to Mr. Lagreca, R$1.2 billion in taxes were collected by the group in 2020, and this year it will be “almost twice as much”. The platform had R$48 billion in transacted value in Brazil. The company said last year that from January 2020 to July 2021 an internal brand protection program allowed the deletion of about 30 million irregular ads — there are 360 million ads in the database.

Shopee says it has “proactive screening measures” to identify violations and “provides procedures” for brand owners to request removal of infringing listings. It says that “it is committed to helping small and medium-sized companies grow and prosper online”. Shopee states that more than 85% of its sales are from local sellers, and that selling counterfeit or intellectual property infringing items is prohibited and requires sellers to follow local laws. “Our team in Brazil serves more than 1 million registered local sellers,” it said in a statement.

Shein says it “operates and will continue to operate in compliance with all local laws within its business operations.” Wish did not return requests for comment. OLX states it helps in the development of the country and provides a space to users “always respecting the terms and conditions of use”, with direct negotiation between seller and buyer. According to the company, there are free advertisements and its revenue comes from optional spaces to highlight the offers.

OLX also informs “it welcomes initiatives that promote a healthy environment of competition and any measure that helps in the fight against illicit practices,” and understands that there are always improvements that can be implemented in the sector and in the legislative environment. It acknowledges that the “IDV plays an important role in the discussion of improvement measures and says it is available for a conversation with the institute”.

Sought by Valor, IDV confirms that there is an internal study on the subject, but does not comment on actions in progress.

Source: Valor International

https://valorinternational.globo.com

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ArcelorMittal Brasil announces investments package of R$7.6bn

ArcelorMittal vê lucro apesar das dificuldades de vendas - FabrikTec Conceito de Força em trituração de resíduos gerais

ArcelorMittal, the global steel giant commanded by the Indian businessman Lakshmi Mittal and his son Aditya Mittal (CEO of the company), has decided to bet high on the Brazilian market. In 12 months, the group, based in Luxembourg and headquartered in London, has approved investments of R$7.6 billion (almost $1.5 billion) in four projects to expand supply in the country.

The last of them was announced on Thursday, with investments of R$1.3 billion ($250 million), for expansion and adding value to products from the Barra Mansa mill, in Rio de Janeiro state. This facility was acquired from Votorantim group in 2018 and is strategic for being in the middle of the largest steel consumer market in the country – the Rio-São Paulo corridor – and availability of ferrous scrap, the raw material of the plant.

“Our investment is the largest announced from a steel company in the country and this shows our confidence in Brazil and the market growth in the coming years,” said Jefferson De Paula, president of ArcelorMittal Brasil and CEO of the group for LATAM Long Steels and Brazil Mining, in an interview with Valor. The investment package covers the flat and long steel and iron mining segments, in operations located in SC, MG, and RJ.

“It will not stop there,” said Mr. De Paula, who has been in charge of AMB since the beginning of November. He justifies this confidence with the expected demand from various sectors – civil construction, infrastructure, sanitation, renewable energy (wind and solar), oil and gas, and agricultural implements, machinery, and trucks, all goods in great demand by agribusiness.

After an atypical growth in 2021 – more than 20% compared to the previous year –, the apparent consumption of steel in Brazil should return in 2022 to normal levels, from 3% to 5%, said the CEO. For him, it will consolidate in an average increase of 4% per year as of 2023. Last year, the company saw its sales rise more than 24%. In total, it sold 11.7 million tonnes, being 7 million of flat steel and 4.7 million of long steel.

“With these investments, which will be made over three years [from mid-2021 to mid-2024], we seek to consolidate our position as a leader in the Brazilian market in the long steel segment”, adds Mr. De Paula. Around 80% is for servicing local customers and 20% for exports. The company is the largest steel producer in the country, ahead of Gerdau, CSN, Usiminas, and Simec.

According to the executive, ArcelorMittal Brasil was responsible last year for 21% of the operational result (by EBITDA criteria) of the group’s total, with $4.15 billion. “With these investments, just in long steel, we will add 1.5 million tones (1 million in the Monlevade-MG mill and 500,000 in Barra Mansa),” says Mr. De Paula. As for flat steel, the Vega mill (in São Francisco do Sul, state of Santa Catarina) will produce more than 700 thousand tonnes of rolled material for application in the automotive, white line, and civil construction sectors.

In the Barra Mansa plant, the investment will contemplate a new rolling mill for bars, of many sizes, of 400,000 tones, the expansion of the capacity of the current one, from 300,000 to 380,000 tonnes, improvements in the manufacturing processes to offer material of high added value, especially for the automotive and oil markets. In addition, the company will start producing medium profiles, a product with strong demand in metallic construction. For example, warehouses and silos.

“We are a world leader in medium profile manufacturing and now we are entering here,” said Mr. De Paula. With the investment, the mill “will be very modern in terms of long steel technology, operating with two steel units (melt shop). And its capacity for rolled products will be increased by 500,000 tonnes, reaching 800,000 tonnes. The project is to be concluded in the first quarter of 2024, generating 200 direct jobs, 120 indirect jobs, and 1,200 on the construction site.

The estimate is that the expansion, with its new line of long products, will add EBITDA of $70 million per year when the mill is fully operational.

ArcelorMittal, the global steel giant commanded by the Indian businessman Lakshmi Mittal and his son Aditya Mittal (CEO of the company), has decided to bet high on the Brazilian market. In 12 months, the group, based in Luxembourg and headquartered in London, has approved investments of R$7.6 billion (almost $1.5 billion) in four projects to expand supply in the country.

The last of them was announced on Thursday, with investments of R$1.3 billion ($250 million), for expansion and adding value to products from the Barra Mansa mill, in Rio de Janeiro state. This facility was acquired from Votorantim group in 2018 and is strategic for being in the middle of the largest steel consumer market in the country – the Rio-São Paulo corridor – and availability of ferrous scrap, the raw material of the plant.

“Our investment is the largest announced from a steel company in the country and this shows our confidence in Brazil and the market growth in the coming years,” said Jefferson De Paula, president of ArcelorMittal Brasil and CEO of the group for LATAM Long Steels and Brazil Mining, in an interview with Valor. The investment package covers the flat and long steel and iron mining segments, in operations located in SC, MG, and RJ.

“It will not stop there,” said Mr. De Paula, who has been in charge of AMB since the beginning of November. He justifies this confidence with the expected demand from various sectors – civil construction, infrastructure, sanitation, renewable energy (wind and solar), oil and gas, and agricultural implements, machinery, and trucks, all goods in great demand by agribusiness.

After an atypical growth in 2021 – more than 20% compared to the previous year –, the apparent consumption of steel in Brazil should return in 2022 to normal levels, from 3% to 5%, said the CEO. For him, it will consolidate in an average increase of 4% per year as of 2023. Last year, the company saw its sales rise more than 24%. In total, it sold 11.7 million tonnes, being 7 million of flat steel and 4.7 million of long steel.

“With these investments, which will be made over three years [from mid-2021 to mid-2024], we seek to consolidate our position as a leader in the Brazilian market in the long steel segment”, adds Mr. De Paula. Around 80% is for servicing local customers and 20% for exports. The company is the largest steel producer in the country, ahead of Gerdau, CSN, Usiminas, and Simec.

According to the executive, ArcelorMittal Brasil was responsible last year for 21% of the operational result (by EBITDA criteria) of the group’s total, with $4.15 billion. “With these investments, just in long steel, we will add 1.5 million tones (1 million in the Monlevade-MG mill and 500,000 in Barra Mansa),” says Mr. De Paula. As for flat steel, the Vega mill (in São Francisco do Sul, state of Santa Catarina) will produce more than 700 thousand tonnes of rolled material for application in the automotive, white line, and civil construction sectors.

In the Barra Mansa plant, the investment will contemplate a new rolling mill for bars, of many sizes, of 400,000 tones, the expansion of the capacity of the current one, from 300,000 to 380,000 tonnes, improvements in the manufacturing processes to offer material of high added value, especially for the automotive and oil markets. In addition, the company will start producing medium profiles, a product with strong demand in metallic construction. For example, warehouses and silos.

“We are a world leader in medium profile manufacturing and now we are entering here,” said Mr. De Paula. With the investment, the mill “will be very modern in terms of long steel technology, operating with two steel units (melt shop). And its capacity for rolled products will be increased by 500,000 tonnes, reaching 800,000 tonnes. The project is to be concluded in the first quarter of 2024, generating 200 direct jobs, 120 indirect jobs, and 1,200 on the construction site.

The estimate is that the expansion, with its new line of long products, will add EBITDA of $70 million per year when the mill is fully operational.

Source: Valor International

https://valorinternational.globo.com

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External capital increase totals $4.2 bn in a weak start to the year

What is external financing | Capital.com

Brazilian companies raised only $4.2 billion abroad in the first weeks of 2022 through the issuance of debt securities. Seven operations went to market. This is the worst begining to the start of the year since 2020, when $6.9 billion were raised in ten offers. Last year, there were 13 bond offerings on the international market, resulting in a total volume of S$7.5 billion in new debt.

The first funding season of 2022 is over this week, with the end of the deadline for companies to present to investors the financial statements for the third quarter of 2021 to access the market.

This drop is a direct consequence of the rise in long-term interest rates in the United States, given the prospect that the Federal Reserve will start raising interest rates from March. The more volatile market makes investors more selective and limits their willingness to be exposed to emerging countries, such as Brazil, which also represent greater risk for political and fiscal reasons. Investment banks estimated that 15 companies planned to raise funds abroad at the beginning of the year. Less than half, therefore, completed the operation.

Now, according to Rodrigo Fittipaldi, head of the Debts Capital Market area at Credit Suisse, there are at least six operations in the pipeline for the next window, which opens at the end of March – right after the 2021 earnings season. These are well-rated companies, including some newcomers.

However, the environment should remain unstable, which means that operations will require caution and patience on the part of companies. “You can’t be anxious. We won´t go back to the dynamic of 12, 18 months. I don’t tell anyone to stop going to the market, but to adjust the strategy, since shorter-term operations have less execution risk,” she says.

Mr. Fittipaldi explains that the market’s complexity comes from the fact that there are many uncertainties about how far the interest rate hike will go in developed economies, especially in the United States, and what impact this could have. Furthermore, the world economy still faces chain supply problems, and it is not clear when this will be back to normal. There is also the worsening geopolitical risks with the Ukraine issue.

Although the local market has been going through a positive period, with the stock market rising and currency appreciation, Mr. Fittipaldi believes that the uncertainty about the direction of the election, especially with regard to the fiscal debate, also exacerbates this situation. “This improvement in the stock market was a short-term move,” he says. “There is nothing resolved on the political issue. The election will bring more concern about the fiscal issue because there will be no convergence on issues dear to the market.”

For André Cury, head of Citi’s Commercial Bank, the business environment has become, in fact, more complex and less risk-averse. However, there are companies waiting for an opportunity to access the market, following the strategy they have already implemented of diversifying sources of funds. “Increasingly, we have seen more professional companies in this sense, diversifying their pockets, that is, raising funds on several fronts,” he says.

This means that, for some companies, it is strategic to maintain operations in order to have a yield curve abroad – that is, to have issues in several maturities, forming a benchmark for rates.

The companies that raised external funds at the beginning of the year were Banco do Brasil, Globo, Açu Petróleo, Bradesco, JBS, CSN and Coruripe. With the exception of JBS, which raised $1.5 billion through two bonds offerings, one with a seven-year term and the other with a 30-year term, the other operations were between US$ 300 million and US$ 500 million and had a term of five years old.

A common point for all companies is that demand this season has been more modest than at other times. Therefore, the volume raised in all operations was close to the minimum planned by the companies, a strategy aimed at avoiding additional pressure from the yield paid for the paper. And this dynamic is likely to continue throughout this year.

“Investors didn’t jump right in, they made smaller offers and put up a price barrier,” says Mr. Fittipaldi, from Credit. He explains investors began to demand a higher rate of return in relation to the price negotiated in the secondary market, which, in market jargon, is called a concession. “During strong market moments, the concession is close to zero, or even slightly negative. Now the investor demands a bigger concession,” he explains.

Market volatility began to grow in September last year, when the idea of monetary policy normalization by the Fed and other central banks around the world gained traction. Since then, the average yield on 10-year bonds from major Brazilian issuers has risen about 100 basis points on the secondary market, according to Mr. Fittippaldi. In the same period, the interest on the 10-year T-note, the benchmark for setting prices in this market, rose from 1.30% to 1.90%. In other words, the spread over Treasury rose almost 50 points.

The instability of the markets was exacerbated at the beginning of the year by two events, according to Caio de Luca Simões, head of the DCM area at Bank of America. First, by the minutes of the Federal Open Market Committee (FOMC) of the Federal Reserve, signaling to the market that there may be five interest rate hikes this year starting from the March meeting (the market talks about seven); and the result of the payroll for January, showing the creation of 467,000 new jobs, much higher than expected. As a result, notes Mr. Simões, the interest on the 10-year T-note jumped from 1.51% at the beginning of the year to 1.92%.

The issuer therefore needs to monitor the evolution of interest rates to decide whether or not to access the market. “January was marked by the need to keep a close eye on the U.S. interest rate, we provide updates on how the market is doing every day,” says Mr. Simões. And that should be the dynamic going forward. “There will be new operations, but with a higher premium.”

A survey by Bank of America with global investors showed that, in January, rising interest rates in the U.S. came to be considered the biggest risk for Latin American countries, even above local political issues, seen as the biggest source of concern for the region in December. For Mr. Simões, throughout the year, it is likely that the issue of election will have greater weight. “I believe that we will continue in the same vein, with a careful eye on the U.S. interest rates, but the election tends to have more influence from now on.”

Source: Valor International

https://valorinternational.globo.com

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Galeão, Santos Dumont airports to be auctioned together in 2023

Como ir do Galeão ao Aeroporto Santos Dumont. | S2RIO

The airports of Galeão and Santos Dumont, in Rio de Janeiro, will be auctioned to a single concessionaire in 2023, informed Thursday the Minister of Infrastructure, Tarcísio de Freitas. The announcement was made after the decision of RioGaleão, operator of Tom Jobim International Airport, to return the terminal concession to the federal government. The concessionaire released a note confirming that it submitted a request to the federal authorities for a re-bidding of the airport concession, as provided for in law 13.448, of June 5th, 2017.

The reason for the request, Valor found out, was the refusal of the National Civil Aviation Agency (Anac) regarding the request for the economic-financial rebalancing of the concession contract. The information was anticipated Thursday by “Capital” column of O Globo newspaper.

RioGaleão asked for a “complete” contract rebalancing, citing all the effects of the pandemic. The 25 years Galeão’s concession began in 2014 and extends until 2039. The operation is controlled by Singapore’s Changi, with 51%, and Infraero has the remaining 49%.

Changi took control of Galeão in 2017, when Odebrecht, implicated in Lava-Jato, left the venture. Initially, the Singaporeans had a minority stake in the control block led by the contractor at Galeão.

According to sources close to the discussions, Anac has been rebalancing the contracts annually, which, in RioGaleão’s view, does not provide stability to maintain the long-term operation. The return of the concession began to be analyzed after the negative of the technical area of Anac, in October 2021, about the rebalancing requested by the company.

At that moment, it became evident that RioGaleão would have to choose between litigation, which is costly and time-consuming, and a safer path from the legal point of view, which involves the request for a re-bidding. It is expected that the process of returning the concession will take two to three years to be concluded. RioGaleão will continue to be responsible for the operation until the re-bidding takes place, sources said.

The understanding of technicians is that RioGaleão cannot participate in the re-bidding process for the airport.

After the concessionaire released a statement confirming the request for re-bidding, Mr. Freitas called a press conference in Brasília, in which he stated that the preparation of studies to bid Santos Dumont airport separately “no longer makes sense”. “Devolution is an instrument applied to poorly modeled concessions, with contract problems. With the devolution, it no longer makes sense to conduct studies of Santos Dumont separately,” he said.

The minister said that for the second half of 2023, the eighth round of airport concessions will be structured, which should encompass Galeão and Santos Dumont. “This resolves a series of issues that were being raised by the productive sector in Rio,” said the minister. According to him, the bid for Galeão will follow the path of the airports of São Gonçalo do Amarante (state of Rio Grande do Norte) and Viracopos (São Paulo). He also said that RioGaleão will be reimbursed for unamortized investments.

Since taking over the airport in 2014, RioGaleão has invested R$2.6 billion in expansion works. These funds are part of a settlement of accounts that will need to be made between the concessionaire and the federal government since the concession was for 25 years, but only eight years have passed, an insufficient period to amortize all the investments made in the airport.

In 2023, RioGaleão has to pay R$1 billion to the federal government as fixed concession fees. In 2017, the company brought forward two and a half years of fixed concession payments to the federal government and rescheduled another two and a half years.

On Twitter, Rio´s governor, Cláudio Castro, said that with the decision of RioGaleão, the state and Brazil have the opportunity to make a re-bidding of Galeão in line with the Santos Dumont concession. He said that the workgroup that deals with the issue at the Ministry of Infrastructure will build the “best model” to ensure that Changi’s decision is an instrument for the recovery of Rio’s airport system.

The state government and the city hall had been opposing the concession model designed by the federal government for Santos Dumont, on the grounds that it emptied the Galeão.

Source: Valor International

https://valorinternational.globo.com

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Credit, debit, prepaid cards grew 33.1% last year

Credit card association expects a surge in transactions for 2022 — Foto: Pixabay
Credit card association expects a surge in transactions for 2022 — Foto: Pixabay

The volume transacted with credit, debit and prepaid cards totaled R$2.65 trillion in 2021, an increase of 33.1% over the previous year, according to figures released Thursday by the Brazilian Association of Credit Card and Services Companies (Abecs). This year, the forecast is that the industry will advance 21%, a smaller growth but still robust when considering the macroeconomic scenario.

Of the total transacted last year, R$1.6 trillion refer to credit cards, up 36.6% over 2020. Debit totaled R$916.3 billion, an increase of 20.2%, and prepaid services, R$117.1 billion, a growth of 158.5%. There were 31.1 billion transactions in the year, 33.4% more than in 2020.

In the fourth quarter alone, card payments totaled R$796.5 billion, an increase of 30.7% year over year. According to the association, the sector has been sustaining the level of growth, stimulated by the digitalization of the economy and the recovery of consumption of goods and, mainly, services.

Payment-by-approximation was a highlight in the 2021 earnings reports. This payment method transacted R$198.9 billion, an amount 384.6% higher than in the previous year. Of this total, R$111.1 billion was spent using credit cards, an annual growth even higher of 489.1%. According to Abecs, one in four face-to-face transactions with credit cards is already done by approximation. And the expectation is that this level will continue to rise, reaching 50% by the end of the year.

In addition, remote purchases by card totaled R$569.7 billion, up 30.8% over 2020. Of the total, R$550.1 billion were credit operations, a modality in which there was an increase of 41.7%. Debit transactions totaled R$13.5 billion, a fall of 69.3%. According to the president of Abecs, Pedro Coutinho, this decline can be explained by factors such as the lower purchasing power of families and the effect of the Pix on the modality.

“With the advance of digital transformation, online purchases are gaining even more relevance, and the card is responsible for enabling a huge market of sales and services through e-commerce and applications. Currently, non-face-to-face payments represent 35% of all spending with credit cards,” says Abecs in a statement.

The sector believes in robust growth of the card industry, in the double digits, until 2025, said Coutinho. In 2022, Abecs says that the credit concessions on cards will remain at high levels, favored by low default rates and the economic recovery itself.

For the executive, the credit card delinquency rate will grow this year, but is not expected to reach the levels of the past, around 8%. Today, it is close to 5% “due to better assessment of credit and risk management,” he says. “The industry today has a very good capacity for granting credit.”

The slowdown in growth in 2022 is likely to come in the wake of many challenges, such as inflation, increases in the basic interest rate, which may impact credit concessions and retail sales, the low level of economic growth, and the electoral scenario. Despite this, the outlook for the sector is positive, adds Coutinho.

Among the factors that benefit the card industry, the association cites the consolidation of the habit of Brazilians “to make a relevant part of their transactions in a non-presential way” and the expectation of persistent growth of the payment by proximity throughout the year. There is also the recovery of services and household consumption.

Abecs sees a 20.5% increase in the values transacted via credit card this year, to R$3.2 trillion. It also projects an increase of 11.5% in debit and 100% in prepaid.

Source: Valor International

https://valorinternational.globo.com

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Demand for photovoltaic modules doubled in 2021

The Brazilian solar energy market is responsible for 5.6% of the entire global demand for photovoltaic modules in 2021. This was one of the conclusions of a survey conducted by consultancy Greener with 3,767 companies in the sector between December 2021 and January 2022, to which Valor had exclusive access.

One of the reasons why Brazil is one of the main consumers of equipment on the planet is due to the segment’s boom last year. The necessary volume of photovoltaic modules to supply the Brazilian market surpassed 9.7 gigawatts (GW), a growth of more than 100% in relation to 2020.

Greener CFO and coordinator of the study, Marcio Takata, assesses that Brazil has had a strong expansion in recent years since in 2017 the Brazilian share in relation to the global market represented only 0.9%.

“Between 2019 and 2020, Brazil had a limited growth in demand for equipment. But in 2021, the country resumed growth and the volume of equipment doubled in comparison with the previous year and represented 5.6% of global demand.”

The executive lists some factors that help understand the importance of Brazil in this context, such as the rise in energy tariffs, the competitive market, and the entry into effect of Law 14,300/22, which establishes the legal framework for self-generation of energy – which is likely to attract investments of around R$35 billion to Brazil.

“With the acceleration in the volume of modules in the last quarter and the entry of equipment in Brazil, we notice a greater market appetite for 2022. Another important indicator is the regulatory change, which for some business models means an acceleration of investments,” predicts Mr. Takata.

Due to the international dynamics, last year the price of equipment had an 8% increase pulled by the cost of freight, due to the lack of containers, ports bottleneck, and pandemic isolation measures. The rise in commodity prices, high demand for components, and exchange rates have culminated in worldwide equipment supply problems.

Given the challenging scenario, Mr. Takata says that some projects were delayed or adjusted to suit the market dynamics and rising prices. However, he points out that the service chain and the volume of companies operating in the segment brought a lot of competitiveness in the Brazilian market, which absorbed part of the rise in prices.

“Even pressured by costs, the segment continues to be competitive. We had a rise in energy tariffs throughout 2021 and in 2022 we will still have the reflexes of the water crisis and the pandemic. This brings a new dynamic and the investment in solar energy continues to be attractive to the consumer,” he analyzes.

The distributed solar generation is present in a little more than 1% of the consumer units in Brazil, according to data from the National Agency for Electrical Energy (Aneel), and is used mostly in homes and businesses as an aid in reducing the electricity bill (900,000 consumer units against 86 million consumer units).

The rise in Brazil’s benchmark interest rate Selic is reflected in the cost of financing, yet solar financing has expanded, supporting 57% of sales made in 2021, being a fundamental means of leverage for the expansion of access to photovoltaic generation.

Despite all the obstacles that entrepreneurs will face, the survey found that 92% of integrators are optimistic about the volume of business in 2022 – a 6% increase in positive expectations compared to 2020.

Source: Valor International

https://valorinternational.globo.com

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Embraer’s Eve starts certification in civil aviation agency

Embraer's Eve's flying car to be certified for flying in 2025 — Foto: Divulgação
Embraer’s Eve’s flying car to be certified for flying in 2025 — Foto: Divulgação

On its way to being listed on the New York Stock Exchange (NYSE), Eve, Embraer’s urban air mobility company, started the process to obtain a type certificate for its electric vertical take-off and landing vehicle (eVTOL), or “flying car”, with the National Agency of Civil Aviation (ANAC).

This certification will confirm that the new aircraft model, which will be produced on a large scale, meets the legal criteria for airworthiness. Eve expects to certify its eVTOL in 2025 and put it into commercial operation in 2026.

According to the Brazilian aircraft manufacturer, with the initiative, Eve formalized with the regulatory body the commitment “to demonstrate compliance with international technical standards and mandatory airworthiness requirements for certification”.

The eVTOL will follow the process of obtaining the type certificate in the “normal category”. “Eve, with the support of ANAC, will continue the interactions with the main foreign aeronautical authorities, soon formalizing the type certificate validation process in accordance with its global business strategy”, it informed.

In a statement, ANAC´s Airworthiness superintendent, Roberto Honorato, stated that this is a relevant step. “The process aims to achieve the best security standards, in order to allow eVTOL access to the global market,” he said, adding that there is still a lot to be done from a regulatory point of view in relation to the new technology and to the urban air mobility ecosystem.

According to Eve’s head of technology, Luiz Felipe R. Valentini, the formalization of the certification process continues the discussions already underway with ANAC.

“In addition to demonstrating Eve’s commitment to the development of the project, it allows institutions to evolve together in defining the requirements and means of compliance applicable to certification,” he explained.

Eve’s “flying car” aims to offer comfortable transport, with low noise and zero carbon emissions. Initially, it will be manned and will have capacity for four passengers. With 17 announced partnerships and 1,735 aircraft on the order backlog, valued at $5.2 billion, Eve projects revenue of $4.5 billion in 2030 and a market share of 15%.

The merger between Eve, a startup that was incubated at EmbraerX and launched as an independent company in October 2020, with Zanite Acquisition, was announced in December. The transaction values Eve at $2.4 billion and is expected to be closed in the second quarter. Zanite is already listed on Nyse.

Source: Valor International

https://valorinternational.globo.com

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Antitrust watchdog approves Oi Móvel sale to trio of giant telecoms

Brazil's antitrust regulator CADE — Foto: Valor
Brazil’s antitrust regulator CADE — Foto: Valor

During a tense session that lasted almost four hours on Wednesday, the Administrative Council for Economic Defense (CADE) approved the sale of Oi Móvel to Telefônica (owner of Vivo), TIM and Claro, joined in alliance. The approval for the operation is followed by severe measures to preserve competition, such as the obligation of telecoms to sell half of the base transceiver stations (ERBs, or antennas) they will receive from Oi.

Telefonica’s CEO Christian Gebara told Valor that Oi Móvel remains an attractive business, despite the imposition of stronger-than-expected remedies. “The remedies presented by Anatel and CADE´s General Superintendence were already strong enough and adequate for the operation,” said Mr. Gebara.

The transaction was approved with the determination that “remedies” are applied before the deal is completed. This is part of an Agreement on Merger Control (ACC) negotiated between the antitrust agency and the buyers.

For Oi, the sale of the asset will generate the resources necessary for the execution of the company’s new strategic plan, said the president of Oi, Rodrigo Abreu, in a statement. The mobile services unit was sold in a judicial auction in December 2020 for R$16.5 billion.

Among the various aspects cited by Oi as important with this transaction, is the feasibility of reducing its debt, “being the main source of cash to pay bankruptcy and extra-bankruptcy creditors, among which are BNDES, Anatel, the Banco do Brasil and Caixa Econômica Federal, in addition to enabling the maintenance of the other activities of the company’s recovery process.” Net debt stood at R$29.9 billion in the third quarter of 2021.

The endorsement of the deal shows that in the struggle between the trio of teles on one side, and on the other, several regional and incoming operators, such as Algar Telecom and Copel/Sercomtel, the giants won by force. Controlled by the Bordeaux fund, led by businessman Nelson Tanure, Copel gave up the fight, said CEO Wendell Oliveira.

The owner of Vivo will pay an estimated amount of R$5.5 billion for its share in the business. According to the CEO, Telefônica has more than enough cash to sustain the operation.

Mr. Gebara said at the moment he does not have information on the impact of the revenue from the assets of Oi Móvel for Telefônica, since the revenue from the company’s customers will only be accounted for in its group after the closing of the deal.

Telefônica will also receive around 10 million customers, most of them in the Northeast region, where it has a lower market share and excess capacity, and in the state of Paraná.

About how much this asset will add to Vivo’s revenue, the executive preferred not to anticipate. He said there are many issues still to be resolved upon closing the deal.

“Oi’s customers will be well received,” said Mr. Gebara, adding that they will be able to count on Vivo’s entire product portfolio. They will even be able to browse the internet at a frequency of 700 megahertz, for 4G, and on 5G — Oi does not have any of them.

“It is the end of a long regulatory and competitive approval process, which allows for an important rearrangement of the sector, with more services and competition for the consumer,” said the executive about the approval of the antitrust body.

According to calculations made by a source that follows the sale of the asset, the division between the telcos is done, but may be updated. From the value of the deal, TIM will pay 44.3%, Vivo (33.7%) and Claro (22%).

Of the number of Oi’s clients, TIM will keep 14.5 million (40%); Vivo, 10.5 million (29%) and Claro, 11.6 million (31%).

Of the infrastructure part, TIM will have 7,500 ERBs (50%), Vivo 2,700 (18%) and Claro 4,700 (31%).

TIM will receive 54% of the spectrum (49 MHz) and Vivo, 46% (43 MHz). Claro, which already reached the limit established by Anatel when bought Nextel, won’t take anything in this operation.

Oi’s common shares and preferred closed in fall in B3.

Source: Valor International

https://valorinternational.globo.com

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Brazil resists to enhanced trade partnership with the UK

Brazil already sells products such as meat to the UK, but wishes to extend range — Foto: Anna Carolina Negri/Valor

The United Kingdom made a proposal for an Enhanced Trade Partnership (ETP) to Brazil, but the Foreign Affairs Ministry, known as Itamaraty, and the Ministry of Economy were disappointed with its terms and resist taking these negotiations forward. For the Jair Bolsonaro administration, the offer is unbalanced and contemplates the interests of London, but ignores the main demands on the Brazilian side to increase exports to the British market.

As diplomatic sources explained to Valor, Brasília was interested in opening negotiations for a free trade agreement, but the United Kingdom gave several reasons to reject the possibility. There would be a lack of people in the technical area to remake a network of post-Brexit trade agreements and uncertainties about the Mercosur’s dispositions. This year, for example, marks the 40th anniversary of the Falklands War — a sensitive topic in Argentine politics. In Brazil, the presidential elections reinforce doubts about the future of the customs union.

On the other hand, the British expressed their intention of an Enhanced Commercial Partnership, where it would be possible to negotiate what they called “low-hanging fruits”. London initially considered an announcement about the launch of negotiations on 31 January.

The divergence over the partnership’s coverage radius, however, made this attempt unfeasible. The Itamaraty considered the British proposal unacceptable. The economic team also made criticisms, but is still trying to find some ways that allow it to evolve.

In addition to the simplification of customs procedures, which is an initiative that both sides approve, other points presented by the United Kingdom were: greater access to financial services and higher education, government procurement (opening in public tenders) and “life sciences” (term little used in commercial jargon, which was understood in Brasília as the entire area of medicines and the protection of patents related to these products).

The Brazilian government’s major complaint is about London’s refusal to include sanitary and phytosanitary measures at the table of discussions. The UK imports around 70% of the food it consumes. About half of that comes from its former partners in the European Union.

Even with Brexit, these countries continue to have a zero rate to export to the British market. However, many producers in the EU had already become so unaccustomed to customs procedures – because of the common market – that they prefer not to mess with all the bureaucracy of foreign trade and end up not exporting.

This was seen as an opportunity, in theory, for greater participation of Brazilian food in the country. Brazil already sells products such as meat, fruits and nuts, juices, and roasted coffee to the local market. However, producers face restrictive quotas to export chicken meat to the UK. There is no access for pork, fish and dairy products.

What irritates the Brazilian government most are the barriers for meat. The British inherited rules from the EU, which was interpreted in Brasilia as something reasonable at first, given the complexity of designing new rules. Years after the Brexit, however, the Itamaraty and the Ministry of Economy believe that there was already time to reformulate sanitary measures.

One of the complaints concerns the so-called pre-listing system, by which a slaughterhouse receives immediate approval to export without the need for prior individual inspections, unit by unit. The EU had a pre-listing system with Brazil, but it was suspended in 2017, as a reflection of Operation Weak Meat.

The Europeans kept the prior inspections, but the UK no longer has the obligation to follow EU rules and the Brazilian government argues that that episode is over. It also protests against the existence of a control by sampling of all batches of meat that arrive in the country.

In the evaluation of authorities in Brasilia, if there is an expanded trade partnership with unbalanced results and privileging issues of interest to the United Kingdom, the British will completely lose their appetite for negotiating a free trade agreement in the future. There are also complaints that, while refusing to discuss agriculture with Brazil, London has concluded a treaty with Australia and New Zealand – two major food producers – that covers these points.

For a British government source, the criticism is unfair because those sanitary and phytosanitary measures are regulated by an independent agency and cannot be negotiated in this way. The source also mentions that India had an ETP-type partnership with UK and then started negotiating free trade.

“We have a window to move forward in the coming months and Brazil should not look at this as a zero-sum game. It is just a start,” says this source.

Source: Valor International

https://valorinternational.globo.com

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Asset managers increase criticism of the Bolsonaro administration

Asset Management: o que é e como utilizar nos ativos

The Jair Bolsonaro administration reached its last year resorting to “cheap electoral populism”, “totally irresponsible” and reminiscent of the “worst practices of the PT [Workers Party] government”. This is the assessment of the monthly letter to clients of Verde Asset Management, headed by Luis Stuhlberger. In the report entitled “Economic Flat Earth Theory”, chief economist Daniel Leichsenring states that, in virtually all areas of activity, “what was seen was a disaster.”

He cites the “deliberate attitude of postponing the immunization and insistently acted against it”. In the economic sphere, he says, “we saw a Ministry of Economy working on a forced march to destroy the spending cap, in partnership with the president” and other allies. The economist recalls the “meteor” of the so-called “precatórios” (court-ordered payments, postponed by a new law to avoid breaking the spending cap), the “complete destruction” of the credibility of the cap and the Fiscal Responsibility Law (LRF), amended to accommodate spending on electoral funds and congressional earmarks, “under the lame excuse of serving the poorest with the [new cash-transfer program] Auxílio Brasil”.

From 2021 to 2022, there could be “some scope to imagine that the worst was behind us,” says the economist. “Great mistake. In an effort to try to reverse the absolute unpopularity of his government, behold, the president reveals an infallible plan: to reduce taxation on fuel and electricity.”

In his assessment, the idea of eliminating fuel taxes “is a complete madness” and “can’t resist a minute of considerations about its quality”. Mr. Leichsenring also notes that the idea is based on the “shocking justification” that there is excess revenue. Verde estimates a nominal deficit close to R$730 billion in 2022, and could reach R$800 billion, at least, with the exemption. Debt would rise to 85% in 2022 from 80.3% of GDP in 2021. “Of course, given this dynamic, the interest rate will end up snowballing,” he stated.

With the return of high interest rates and foreigner investors to the Brazilian stock market, the market’s natural reaction, however, is not taking place, according to Mr. Leichsenring. He says he hopes that people will realize that the path traced by the government “will be as disastrous for the economy as the one implemented in the PT government.” For him, there is still time “to find a viable political alternative for Brazil”.

The Verde Asset team’s explicit disappointment is increasingly finding resonance among asset managers. As they take care of third-party money, political developments in the macroeconomic scenario are followed up with diligence, as they are part of the fiduciary duty of these professionals and worth a result in the quota.

The perception is that Mr. Leishsenrig translated a feeling that is becoming increasingly widespread in the asset management segment. “Today, a new Bolsonaro government means the continuity of this fiscal mess and with a chance of getting worse because the government is clinging to power,” says the CEO of a specialized asset management. Economy Minister Paulo Guedes, who took over a ministry with superpowers in 2019, is today evaluated as good at rhetoric, but bad at work, always blaming a third party, continues the manager. “He gave himself totally, showed that he is there for power”.

Although the cards of the electoral game are not all on the table because the candidacies have not been defined, there are those who believe that a “remake” of the Bolsonaro government would mean the depreciation of the so-called “Brazil kit”– with devaluation of shares, the real and high interest rates. term, a thermometer for country risk – more than any other candidate that proves to be capable of being elected.

The approach of former president Lula da Silva to the ex-governor of São Paulo Geraldo Alckmin, if materialized, would make impossible the ascension of a third name, so desired by the market, but would bring a more central hue to the left wing of the Workers Party. The flow of foreign capital into Brazilian stocks in the first month of the year is a sign that foreign investors are more willing to see Mr. Lula da Silva return than to face a second Bolsonaro term, as Rogério Xavier, founding partner of SPX, said in a recent presentation.

In Brazil, investors are usually net bought in local assets because the government is the big issuer of fixed income, and companies, of stocks, says Sylvio Castro, founding partner of Grimper. At the beginning of Mr. Bolsonaro’s term, there was a perception that the overhaul agenda initiated by the team of former president Michel Temer would continue and that it would be a fiscalist government, he says.

He sees the inflow of foreign capital at the beginning of the year as a punctual rebalancing of investors’ portfolios, but believes that this flow tends to lose pace, returning to the menu of low GDP, high interest rates and strengthening of the dollar prices, with companies and families paying the bill.

Source: Valor International

https://valorinternational.globo.com

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