Camil buys PepsiCo cookies to speed up growth

Food company also takes a 10-year long licensing of Toddy brand

08/24/2022

Luciano Quartiero — Foto: Divulgação

Luciano Quartiero — Foto: Divulgação

Food company Camil announced Tuesday the purchase of the Mabel brand of cookies and the 10-year-long licensing of the Toddy brand. The business, which had been bought by PepsiCo in 2011 for R$800 million, was now sold to Camil for less than R$200 million, sources told Pipeline, Valor’s business website.

The acquisition still depends on approval by the antitrust regulator CADE. Camil CEO Luciano Quartiero said the deal may add about R$1 billion per year to the company’s revenues in the medium term.

In the fiscal year 2021, which ended in February, Camil’s revenue reached R$10.26 billion, with a growth of 20.8% compared to 2020. Net income increased 3.5% in comparison, to R$478.7 million, and operating income, measured by EBITDA, rose 2.9%, to R$809.8 million.

According to information from the companies, the Toddy line of cookies is the second-largest in sales in Brazil, with a top-of-mind awareness above 98%. Besides Toddy cookies, the acquisition includes the brands Doce Vida, Mirabel, Elbi’s, and Pavesino.

Also included in the deal are the industrial plants in Aparecida de Goiânia (Goiás) and Itaporanga D’Ajuda (Sergipe), with around 800 employees in total. According to Mr. Quartiero, the two units have idle capacity, which strengthens the growth potential of the operation — which also involves other assets that produce Toddy cookies.

“We will be able to double Mabel’s sales volume without new investments”, Mr. Quartiero told Valor. According to him, the acquisition was carried out with the company’s own cash. At the end of the second quarter of the current fiscal year, in May, cash reserves totaled R$1.3 billion.

The executive emphasized that the purchase has great synergy with the company’s operations. “Cookies are a large value-added category that can be sold to our customers with all the others we work with. This is a huge force to accelerate our growth,” he said.

Since July 2021, Camil has made five acquisitions, in line with the CEO’s previously announced strategy. The first was Dajahu, in the Ecuadorian rice market. In August last year, the company bought Santa Amália and entered the pasta area. In September, there was the incorporation of the Seleto coffee brand, and the announcement of an investment in the company Café Bom Dia, with the relaunch of the União brand, also in the coffee market. In December, Camil announced the acquisition of Silcom, in Uruguay, a healthy products company. Considering these five deals, Camil invested R$848 million.

“Fifteen years ago, Camil was only a rice and beans company. Today, these products represent 35% of the company’s consolidated revenue,” said Mr. Quartiero. The CEO adds that new acquisitions are still on the radar, to reinforce the new “multiple company” profile in the food area.

The acquisitions and growth have not yet been reflected in stocks. With little liquidity, they continue to show little oscillation, although its net debt is also considered relatively low — R$2.1 billion at the end of the second quarter (leverage of 2.4 times).

Therefore, in March the board approved a buyback program for up to 10 million shares within 18 months. This left Camil with 360 million common shares outstanding.

*By Fernanda Pressinott — São Paulo

Source: Valor International

https://valorinternational.globo.com/
/by

Analysis: Falling inflation expectations are off Central Bank’s horizon

Drop has not yet been able to positively contaminate projections for longer-term inflation

08/23/2022

Central Bank’s building in Brasília — Foto: Jorge William/Agência O Globo

Central Bank’s building in Brasília — Foto: Jorge William/Agência O Globo

Inflation expectations for this year and next have dropped substantially last week, but there was no benefit, for now, in the time horizon that really counts for the conduct of monetary policy.

The market’s inflation forecast for 2023 declined to 5.33% from 5.38% last week. At this percentage, it exceeds both the center of the inflation target range pursued by the Central Bank (3.25%) and the top of the range (5%). But the drop represents an important improvement.

It is very likely that such a decline was caused by a slowdown in current inflation. Central Bank President Roberto Campos Neto predicted, in a statement last week, that the more favorable inflation rates in the short term could have positive effects on longer-term inflation expectations.

In fact, the inflation projection for this year has been receding strongly after the government cut taxes to lower fuel and other prices, and the price of oil fell on the international market.

As a result, the market’s inflation projection for this year went to 6.82% from 7.02%. The economic analysts that renewed their projections in the past five days already forecast even lower inflation, at 6.69%.

But this lower inflation has not yet been able to positively contaminate the inflation projections for the longer term. The inflation rate expected by the market for the 12-month period ending in March 2024 is at 4.47%. It is more or less stable compared to the 4.48% a week earlier when considering the monthly inflation projections of the period.

The market projection is well above the informal target for the period, of 3.18%, calculated from the interpolation of the 2023 (3.25%) and 2024 (3%) goals. The Central Bank, however, estimates inflation at 3.5%. Last week, Mr. Campos Neto said that this spread between the official projection and that of the market could be explained by the fact that the monetary authority estimates a stronger impact of the interest rate hikes made since March 2021 to lower the price index.

The Central Bank decided to focus more on the March 2024 target because, according to its reasoning, the deadline is distant enough to not be contaminated by the temporary tax-cut measures put in place by the government. Some of these are to be reviewed in the first quarter of 2023.

The government, however, is beginning to discuss extending tax cuts in early 2023 as well. Since these measures are being taken in a fiscally unsustainable manner, without the support of permanent revenue gains, the benefits may have to be revised again – which should increase uncertainty about inflation projections for 2024.

Some analysts, however, believe that the slowdown in short-term inflation could have permanent positive effects on longer-term expectations. According to this reasoning, expectations are very much influenced by what happens to current inflation, although the theory says that it should only be determined by the underlying inflation trend.

Inflation expectations for 2024 were steady at 4.41% last week, after rising from 3.3% the week before. Leading indicators are dubious about what might happen in the coming weeks.

The average of expectations (sum of projections, divided by the number of projections) is at 4.47%, above the median of projections (projection with the most central value), which is the official indicator of expectations. This suggests that projections may rise.

The median of the projections of the 78 analysts that renewed their estimates in the last five days fell to 4.3% from 4.42% last week. It is thus lower than the 4.41% median of the 116 analysts that updated their projections in the past 30 days, which is the official measure of expectations.

By Alex Ribeiro — São Paulo

Source: Valor International

https://valorinternational.globo.com/
/by

Energisa enters two states with an eye on new businesses

Energy arm will start to operate in group’s concession area

08/23/2022

Roberta Godói — Foto: Silvia Zamboni/Valor

Roberta Godói — Foto: Silvia Zamboni/Valor

Energisa is growing in non-regulated activities with an innovative strategy. It is using (Re)energisa, its arm in the distributed generation, free market trading, and value added services segments, to offer in its concession area in the states of Mato Grosso and Mato Grosso do Sul solar subscription services and distributed generation (self-generation).

The strategy focuses on the opening of the energy market, energy transition, and empowering consumers. In this scenario of modernization of the power industry, the company is investing R$1.1 billion to take advantage of opportunities to drive businesses in new states. The amount represents 18% of the total invested by the group.

Roberta Godói, the company’s vice-president of energy solutions, told Valor that the legal framework of distributed generation, in January, created a sense of urgency in the development of new projects in this segment. The industry foresees a “race for the sun” this year, as consumers are expected to join now to use the grid free of charge by 2045.

“It was the trigger we needed to outline a plan. We have 91 megawatts of distributed generation, and we want to end the year with 230 MW,” she said. “We have already bought all the inputs for components to build all plants for 2022 and a little bit for 2023.”

The strategy required some working capital, but the group is flush and aims to lock in costs – the disruption of production chains has caused concern in the sector and made capital expenditure more expensive.

Until now, distributed generation projects were focused on power utility Cemig’s area in the state of Minas Gerais, one of the best regions for solar power generation in Brazil. The new business front in the Central-West region is not necessarily a market to be explored, since the company is active in the regulated market, but aims to keep customers who want to migrate to distributed generation within the group’s umbrella.

“We are going to the states where Energisa is already operating because these are markets that bring a lot of opportunities. These are thriving states where the agribusiness sector drives services, industry, and commerce. It is key for us to be in our areas.”

It may seem strange for the company to operate in its own concession area, since the connection of distributed generation systems to the grid harms the distributors’ market. However, the idea is to capture this client who wants to stop being a regulated consumer.

The utilities complain, since consumers migrate and they lose part of those who pay sectorial charges. In the case of (Re)energisa, it evaluates opportunities to maintain revenues, since the consumer is still a client, but in another business area. In this case, with the solar subscription service.

“If clients across Brazil are already starting to migrate to distributed generation, then let us be in our areas. If they are going to move on to solar power, we can keep them,” she said.

The company focuses on the solar generation because retail and small and medium-sized companies take advantage of the more modular systems compared to those of other sources, while construction works take less time. The executive came from the telecoms sector, where she followed the disruptive opening of the market to consumers.

Less than a year and a half ago, she left the telecoms sector for Energisa in one of the most promising fields of the power industry, one with aggressive targets. “With the plants in operation, we have now 2,200 customers. At the beginning of the year, there were 1,700. We want to end the year with 5,200.”

Although all the plants generate solar power, the company is studying biogas, since the concession area has a strong agribusiness vocation with residues from agribusiness.

There is more than 12.4 GW of installed power in the segment of self-generation, data from the Brazilian Electricity Regulatory Agency (Aneel) show.

*By Robson Rodrigues — São Paulo

Source: Valor International

https://valorinternational.globo.com/
/by

Amazon invests heavily to gain market share in Brazil

Company is far behind competitors but vows to grow

08/23/2022

A global trade giant — second only to Walmart, the world’s largest retailer — Amazon has invested over the last two years in Brazil to expand its market share. Since 2020, the company has increased the number of distribution centers in Brazil to 12 from one, with sizes between 30,000 and 50,000 square meters. Logistics, according to specialists, is gaining more importance in retail, in view of a consumer who wants to receive products in a shorter and shorter time.

Even with the expansion, the number of Amazon units is still smaller than that of competitors, which have up to 30 centers, as is the case of Via (owner of Casas Bahia and Ponto chains). Americanas S.A. (Lojas Americanas and B2W Digital) has 25 distribution centers, while Magazine Luiza totals 24 and Mercado Libre has 10.

Many retailers also bet on the so-called “cross-docking” model — a smaller warehouse for redirecting deliveries within the chain itself, like a warehouse — or even in the use of brick-and-mortar stores as small distribution hubs, not only for their own products but also for third-party sellers, case of Magazine Luiza.

Unlike the world market, where it is the vice-leader, Amazon’s performance in Brazil is still far behind that of its rivals, according to market estimates. The Brazilian Society of Retail and Consumption (SBVC) ranking of the largest online marketplaces shows Amazon in sixth place, with R$3.832 billion in goods sold in 2021. The figure does not include third-party sales. If these other sales are considered, the estimated number rises to R$10 billion, according to consulting firm Varese Retail.

Still, those numbers are much lower than the first four in the ranking: Mercado Libre (R$68 billion), Americanas S.A. (R$42.2 billion), Magazine Luiza (R$39.7 billion) and Via (R$26.4 billion).

Ricardo Pagani — Foto: Divulgação

Ricardo Pagani — Foto: Divulgação

The leader of Amazon’s operations in Brazil, Ricardo Pagani, does not reveal investment or revenue figures but says that “important investments” have been made and that the company is just at the beginning of its operations in Brazil. Although it arrived in 2012, initially selling only digital books and Kindle e-readers, the expansion of the offer of products and categories was gradual. The hard-copy books began to be sold in 2014, then came the items in partnership with third parties (sellers) and only in 2019 Amazon began to acquire products for resale and sell devices such as Alexa. Currently, there is a variety of 50 million products available to customers, in 30 categories.

“As in other markets, Amazon is in Brazil with a long-term vision. We are building an operation in a sustained way. These are important investments made now, initially with a return of investment horizon of five to 10 years,” he said. Mr. Pagani downplayed the competition for leadership in Brazil and reinforced that it is possible to evaluate the position of each competitor in different categories. In the case of books sold through the online channel, for example, Amazon is the leader.

The investments in distribution centers, according to the executive, were planned before Covid-19 hit in Brazil but were accelerated during the pandemic.

Five of the 12 centers are in the city of Cajamar, about 40 kilometers from São Paulo, two in Cabo de Santo Agostinho (Pernambuco), one in Nova Santa Rita (Rio Grande do Sul), one in São João de Meriti (Rio de Janeiro), one in Santa Maria (Federal District), one in Betim (Minas Gerais) and the other in Itaitinga (Ceará). Each one is named after the nearest airport.

Amazon intends to continue investing in new distribution centers. The idea is also to expand the number of delivery stations, which today are five: (three in São Paulo, besides Rio de Janeiro and Minas Gerais). The units are responsible for the so-called “last mile,” which is the final step for the consumer, and operate in certain situations.

Logistics, says the founder and director of 360Varejo, Luiz Claudio Dias de Melo, is the next big thing, and requires high investments. A sign of Amazon’s concern with deliveries, according to him, is the recent purchase of 10% of Total Express, a logistics and distribution company.

But Amazon arrived later in this retail offensive to expand distribution centers in Brazil, notes Mr. Melo, who says the company faces “a minefield.” While it dominates the U.S. market, in Brazil it faces competitors that are bigger and ahead in terms of logistic structure: “This movement that Amazon is doing is late. The market is very busy and mined. The investments of the large operators have been happening for years”, he said.

The assessment of the late arrival is shared by the partner and founder of the consultancy Varese Retail, Alberto Serrentino, who points out an aggressive escalation of the retailer founded by Jeff Bezos. “Amazon started later, it is structuring itself, but it has been climbing very aggressively, with heavy investments, with many fulfillment centers,” says Mr. Serrentino. He refers to centers that not only receive and ship goods, but also provide other services to third parties that use its platform. The distribution centers that Amazon is setting up in the country “will provide the infrastructure and the muscle to improve the level of service and the ability to provide logistics services to sellers, which is their stronghold in the United States.”

One of the ways for the company to expand the customer base in Brazil, says Mr. Serrentino, is the Prime program, which provides free delivery for a range of products, regardless of value, and Prime Video, which is the streaming service.

Asked to comment on Amazon’s growth in Brazil, Mercado Libre, Americanas, Magazine Luiza and Via did not immediately reply, but gave indicators about the delivery times, one of the parameters in the competition for consumers.

According to the head of Logistics at Via, Fernando Gasparini, more than 15% of the company’s deliveries are currently made on the same day of purchase and more than 40% of the products arrive within 24 hours. As for Americanas S.A., 61.2% of deliveries are made within 24 hours, and 40% are made in just three hours, according to data from the second quarter of the year.

Magazine Luiza says 80% of the orders for its own products (that is, not considering the sellers) are delivered within 48 hours, and a “significant” portion within 24 hours.

Amazon itself does not disclose those figures but reveals that, through Amazon Prime, free shipping within one day is in 100 cities, and two-day shipping is in more than 1,000 cities.

*By Lucianne Carneiro — São João do Meriti, Rio de Janeiro

Source: Valor International

https://valorinternational.globo.com/
/by

ICC plans to double revenue with livestock by using less antibiotics

Company specializes in yeast, a fungus that, if combined with other products, can strengthen the immunity of animals

08/22/2022

Glycon Santos — Foto: Divulgação

Glycon Santos — Foto: Divulgação

Brazilian company ICC sees the reduction of antibiotics in the animal diet as a trend that will open more space for natural products, such as yeast – its core product. The company holds 60% of the Brazilian market for this additive used in animal feed. ICC hopes that this change will take revenues to R$1 billion in 2026, double the amount grossed last year.

The use of antibiotics in animal nutrition must be reduced to prevent pathogens from developing resistance to drugs, CEO Glycon Santos told Valor. But to replace growth promoters, it will be necessary to combine natural products, such as yeast, which is a fungus produced in the manufacture of sugarcane ethanol – like ICC’s product –, bread, and beer.

“The challenge is very big because of the densification of the animals. We need additives that do the same function as these antibiotics in other ways. Our company alone has already done 320 scientific studies, in search of a formula for a healthier intestine,” he said.

ICC invested R$15 million in a new yeast factory that started operating earlier this month in Jundiaí, São Paulo. The company has another unit in Macatuba, in the same state. “The interior of São Paulo is the best place to invest because it has the largest sugarcane production in the country and is relatively close to the port of Santos, which is where we export from,” he said.

The new plant, of 15,400 square meters considering the warehouse, can reach a production of 140 tonnes per day in three shifts. The unit is fully automated to meet the demand with quality and speed, and has its own laboratory for raw material and finished product analysis.

Mr. Santos acknowledged that the last two years were quite challenging for ICC. According to him, the value to export a tonne by the main routes increased to $14,000 per tonne from $2,000 before the Covid-19 pandemic. In addition, the strong rise in grain prices is negative for the sale of additives, since the product is not mandatory for feed formulation and the industry tends to reduce investments to cope with the high cost of production.

Brazil reached 100,000 tonnes produced last year, Mr. Santos said, but the potential, given the size of ethanol production, is much higher, at 900,000 tonnes. Today, the product is used mainly in cattle, swine, and poultry nutrition, but tends to grow more in swine and fish farming.

From the gestation of sows to the weaning of piglets, farmers need all the help possible to keep the animals alive and healthy. Fish farming, on the other hand, tends to grow exponentially because it is still a developing activity. “The effect of yeast to decrease mortality will be very important,” Mr. Santos said.

To reach the goal of R$1 billion in revenues, the company will also invest in the creation of a line of phytotherapeutic products with essential oils. The product is also useful to control diseases in animals.

Furthermore, the company will reinforce its exports, which today demand 60% of the yeasts produced by ICC. China has great potential as it holds 25% of the global feed market, but the idea is to grow in all geographies, Mr. Santos said. Currently, there are 70 buying countries.

*By José Florentino — São Paulo

Source: Valor International

https://valorinternational.globo.com/
/by

Past inflation to prop up prices by February, Santander says

Contagion by past rate grows with official inflation at 10%, study shows

08/22/2022

Daniel Karp — Foto: Carol Carquejeiro/Valor

Daniel Karp — Foto: Carol Carquejeiro/Valor

Inertial inflation is expected to strengthen in the coming months and start losing momentum only by February, according to a study by economists Daniel Karp and Felipe Kotinda, with Santander. Inertial inflation is the phenomenon by which past inflation feeds future inflation.

The current discussion in Brazil on the subject began last year, when price indices started to rise rapidly after the most severe period of the pandemic. Considering 12-month inflation readings, the Extended Consumer Price Index (IPCA), Brazil’s official inflation index, has been above 10% since September 2021.

“A major part of the discussion [about inflation] is focused on how commodity prices, exchange rates, inflation expectations, and the output gap [a measure of economic slack] will drive the disinflation process,” the economists wrote.

“However, inertia plays an important role in inflation dynamics and is usually an overlooked driver,” they wrote. They also point out that in emerging countries inertia is “particularly” more important for price-setting policies than in developed countries.

Santander’s economists have created their own indicator to outline the scenario for inertial inflation. According to them, although it is used as a kind of proxy for inertial inflation in Brazil, services inflation does not include items that also have a high connection with the previous variation of prices, such as health insurance. Thus, services account for almost half of the lender’s indicator, but industrial goods, food at home, and regulated prices also enter the calculation.

According to Santander’s calculations, in July this year, the 12-month indices of services and inertial inflation were 8.88% and 9.51%, respectively.

The economists project that the trajectory of services prices will be around 9% until April next year. On the other hand, the inertial inflation indicator should “continue rising until a peak of 10.3% in February 2023.” “By the second quarter of 2023, we expect both will decelerate, both ending 2023 at around 6.3%.”

In the 12 months through July, the IPCA stood at 10.07%. Currently, to conduct the key interest rate Selic, the Central Bank must pursue the inflation targets for 2023 (3.25%) and, to a lesser extent, 2024 (3%). In both cases, there is a tolerance range of plus or minus 1.5 percentage points. But to “smoothens out the primary effects from tax changes” made by the federal government and Congress, the Monetary Policy Committee (Copom) has decided at the meeting earlier this month “to emphasize the projections for 12-month inflation in the first quarter of 2024.” For this period, the monetary authority projects a price trajectory of 3.5%.

In its latest minutes, the Copom said that “the components more sensitive to the economic cycle and monetary policy, with higher inflationary inertia, continue above the range compatible with meeting the inflation target.”

*By Estevão Taiar — Brasília

Source: Valor International

https://valorinternational.globo.com/
/by

Loan secured by federal aid faces resistance from banks, government

Economy Ministry sees risk of high default, vicious circle for borrowers

08/22/2022

Ronaldo Bento — Foto: José Cruz/Agência Brasil

Ronaldo Bento — Foto: José Cruz/Agência Brasil

The offer of payroll-deduction loans for beneficiaries of the cash-transfer program Auxílio Brasil, one bet of President Jair Bolsonaro (Liberal Party, PL) to draw low-income voters, is rejected by the country’s largest private-sector banks and faces resistance within the federal government as well. So far, even medium-sized lenders, which are more reliant on payroll-deduction loans, say they are unlikely to offer them.

In the past two weeks, banks such as Itaú Unibanco, Bradesco, and Santander have said that they will not offer the line because they consider that the target audience of Auxílio Brasil is a vulnerable one. There would be potential risks to the business and damage to their reputation. Sources say that public rejection by these lenders caused concern in the government, which now foresees that the measure will have a smaller scope. Still, there is no intention, for the time being, to postpone the launch of the credit, scheduled for early September.

Before the rejection of large banks, Citizenship Minister Ronaldo Bento advocated the measure and confirmed last week that the launch will not be delayed. He responded to critics by saying that the government’s goal is to “democratize access to formal credit” and that 17 lenders had been approved to work with this type of credit.

The ministry did not reply to several requests since Wednesday to provide this list of banks.

Not even among government officials is there a consensus on the measure. One source said that, after weighing the positive and negative aspects, the Economy Ministry preferred not to participate in the project. “We do not oppose it. We just don’t see great benefits,” the source said. The positive side is that “some people understand” that the measure can represent an exit door, through micro-entrepreneurship, for the program’s beneficiaries. “Someone can buy a popcorn cart and go into business,” he said.

However, the ministry considered that the high risk of default makes the rates too high, with chances of creating a vicious circle. “Families can get very indebted, and the Justice will evaluate, for example, that banks cannot collect the installments,” the source said, adding that something similar “already happens with retirees.” The Economy Ministry declined to comment.

Banks, which were not plaintiffs in the lawsuit, point out that there are many risks, including to their reputation because by offering such a line of credit, people could think that lenders are exploiting those living on the poverty line. There is also a legal risk, as borrowers may go to the courts to undo their contracts, claiming that they need the income for subsistence. Another risk is that of continuity, considering that, in theory, the Auxílio Brasil program will pay R$600 only by December.

Lenders fear the high credit risk, too. Besides not being able to prove other sources of income, beneficiaries of social programs are often underbanked, so banks do not have data on their payment history, for instance. “Credit risk is very high, which means that for the operation to be worthwhile for the bank, it would have to charge a huge interest rate. This is impractical. What if the person loses the benefit? It is very controversial,” a source in the industry says.

Under the new law, those included in the Auxílio Brasil program will be able to borrow up to 40% of the monthly benefit. This means that those who receive R$600 can pay installments of up to R$240 per month. The term is limited to 24 months and there is no limit to the interest rate charged. Valor Investe, Valor’s website for investors, reported last month that ads on the websites of some banks and social media offered loans of R$2,000 and R$2,500 with rates of 5.63% and 5.91% per month – nearly 100% interest per year.

“This is not the right product for a vulnerable audience, so the bank preferred not to offer it,” Itaú CEO Milton Maluhy Filho said in a conference call.

Bradesco CEO Octavio de Lazari Jr. went in the same vein. “It means a very high interest rate, and people will receive the aid for a defined period, so we think it is better not to offer it because we are talking about vulnerable people,” he said. Santander, another large private-sector bank operating in Brazil, said in a note that “it does not offer payroll-deduction loan for beneficiaries of Auxílio Brasil.”

Among the smaller banks, Pan and Agi are also expected to join. State-owned banks Caixa Econômica Federal and Banco do Brasil are expected to offer the line of credit, but are still studying it technically and evaluating risks.

“We are doing an analysis on how it will be implemented. It will be a technical decision,” Banco do Brasil CEO Fausto Ribeiro said in an interview after the release of the quarterly results.

Last Thursday, Caixa’s chief financial officer Rafael Morais told Valor that the bank will offer the line of credit to the beneficiaries of the social program – especially because these people are already its customers – and that it will offer the lowest rates in the market.

When asked about the interest rates charged, he said that this is still under study. “We don’t have any guidance from the President of the Republic. Our decision is extremely technical. We are still waiting for these loans to be regulated, but we expected to participate. We still don’t know what the interest rates will be, and every approval of new products goes through the bank’s governance, through committees,” he said.

Other smaller banks told Valor they are unlikely to join. “We are still thinking about it. We haven’t made a decision. It is a new product. But if I had to say, we are more likely not to offer this product than to offer it,” Banco Inter CEO João Vitor Menin said.

Daycoval has not yet made a definitive decision, but chief investor relations officer Ricardo Gelbaum said that the bank is not very excited about it. “The board and the management team are seeing the movement, but we are not very excited. I don’t see much excitement in the internal discussions of the bank,” he said in a recent interview.

Agi says that the measure represents access to credit for millions of Brazilians who need money for some project or even for basic needs. The bank says it is “an important mechanism for financial inclusion.” Pan, on the other hand, said that it is getting ready for the line of credit. “At the moment, any activity is limited to the discussions about the lines.” The decision to offer the line of credit “is subject to the effective regulation by the authorities and other applicable legal, administrative and operational provisions,” the bank said.

The Brazilian Federation of Banks (Febraban) said in a note that, after the regulation, it is up to each lender to offer or not the line according to its business strategy. “Some large banks have already announced that they will not offer it,” it says. “As with other types of credit, the offer will be evaluated by banks and borrowers in order to prevent over-indebtedness.”

*By Guilherme Pimenta, Álvaro Campos, Estevão Taiar — Brasília, São Paulo

Source: Valor International

https://valorinternational.globo.com/
/by

States increase spending on education, health in first half

Covid-19 pandemic, last year’s booming revenues helped improve expenditure by 12.4%

08/19/2022

Ursula Dias Peres — Foto: Silvia Zamboni/Valor

Ursula Dias Peres — Foto: Silvia Zamboni/Valor

The various and successive extraordinary conditions that have marked the current term of office of governors — such as the Covid-19 pandemic and last year’s surprising tax revenues — resulted in a larger share of state spending for education and health in the first half of 2022 while security and social security expenses lost space. Driven by higher investments in an election year, areas linked to infrastructure, such as transportation, urban planning, housing, and sanitation, also grew. In the general scenario of the 26 states and the Federal District, the highlight is social assistance, which has small participation but expanded at an accelerated pace under the effect of income transfer programs that states started to offer to mitigate the social impact of the health crisis.

A survey by the Center for Metropolitan Studies (CEM), a public think tank run by the University of São Paulo, shows that the fiscal situation of the states favored public policies in the first half of the year. The technical note produced by Ursula Dias Peres and Fábio Pereira dos Santos indicates, however, that in addition to the deficit in the demand for services in several areas, the recent reduction in sales tax ICMS rates in important collection sectors brings uncertainties for the second half of the year and the future sustainability of the favorable picture of the first half of the year.

Health and education combined absorbed R$133.09 billion in state spending from January to June this year, with a real increase of 12.4% against the same months last year and 16.5% compared to 2019. These expenditures include personnel, costs, and investments. The total expenses of the states, discounting compulsory transfers, grew at a much slower pace, of 6.1% and 6.2%, respectively. The faster-than-average pace made the combined share of health and education improve from 27.6% to 30.3% of total expenses from 2019 to this year, also considering the first half. They considered the expenses paid, with values updated by the benchmark inflation index IPCA. The data were taken from the fiscal reports submitted by the states.

In the same period, security, which reached from January to June this year spending of R$46.6 billion and a share of 10.6% of total spending, lost 0.6 percentage points of share against equal months of 2019. The share of the most representative of the functions, Social Security, was also reduced to 22.9% from 24.1%. States spent R$100.37 billion in the first half of this year.

The salary hikes, the initial projections of higher sales tax ICMS collection for 2022, and the compensation for expenses that have already fallen in 2020 contributed to the advance of 24.9% in real spending on education in the first half of 2022 against the same period last year considering all the federated entities, said Ms. Peres, who is a professor of public policies at the University of São Paulo’s School of Arts, Sciences and Humanities. She also recalled that states that did not meet the constitutional minimum of 25% of revenues in 2021 must do so by 2023, which drives spending on education this year.

In health, the expenditure from January to June 2022 advanced only 0.7% compared with the same months last year. The area, however, has a high base of comparison as spending has been boosted since 2020 because of the health crisis. The total increase since the first half of 2019 was 17.5%. Mr. Santos, a researcher associated with CEM, evaluates that health is expected to continue presenting real expenses above the pre-pandemic level at least in the next few years, due to services that began to be offered and that generated new demands. Ms. Peres also highlights the additional demand for public health services generated by the demand restrained during the pandemic and by the patients with sequelae of Covid-19. There is also the effect of investments in health facilities, which generate annual current expenses of up to 90% of the value of the work, as is the case of hospitals, she said.

The evolution of spending on social security and security, on the other hand, was diverse. Although with a real increase of 2.9% from January to June of this year in comparison to the same period last year, social security spending was only 0.9% above that of the first half of 2019. The reduction in the share of pension spending, Mr. Santos points out, was generally not due to structural measures such as pension overhauls. The stagnation of spending, he says, is related to the restrictions of Complementary Law 173, which in 2020 limited hiring and salary increases to civil servants in return for extraordinary transfers to tackle the effects of the pandemic. The effect is explained because there is still a strong link between the salaries of workers and retirees.

The same restriction, says Mr. Santos, weighed on security, whose spending increased 4.9% this year, in real terms, compared with 2021, with an increase of only 0.6% compared to 2019, also considering the first half of the year. For Ms. Peres, the restriction on hiring also weighed on security, which probably did not have staff personnel replaced in all states.

The areas related to investments in infrastructure also drove state expenses. Altogether, the areas of housing, sanitation, transport, and city planning reach expenses of R$25.28 billion in 2022, up 72% year-over-year and almost doubling the R$12.99 billion in 2019. The four areas together grew to 5.8% this year from 3.1% of total expenditures in 2019, keeping the comparison from January to June.

The performance reflects in part the evolution of total investments, which advanced to 6.5% from 1.9% of total spending over the same period. From 2019 to date, investments jumped to R$31.4 billion from R$8.6 billion. Compared to the previous year, with investments affected by the elections, spending almost tripled, also considering values adjusted by the IPCA.

*By Marta Watanabe — São Paulo

Source: Valor International

https://valorinternational.globo.com/
/by

Spain’s Aena to run Brazil’s crown jewel airport Congonhas

Lot with airport in São Paulo and other 10 was auctioned for R$2.45bn; Aena was the only interested buyer

08/19/2022

Main lot includes São Paulo’s Congonhas airport and 10 others in Mato Grosso do Sul, Minas Gerais, and Pará — Foto: Edilson Dantas/Agência O Globo

Main lot includes São Paulo’s Congonhas airport and 10 others in Mato Grosso do Sul, Minas Gerais, and Pará — Foto: Edilson Dantas/Agência O Globo

Brazil’s new round of airport auctions had little competition and was market by XP Asset’s debut in the industry. The main lot, which includes São Paulo’s Congonhas airport and 10 others in Mato Grosso do Sul, Minas Gerais, and Pará, was won by the Spanish company Aena. Despite the lack of competitors, Aena placed a bid of R$2.45 billion, or 231.02% over the minimum price.

Besides this initial payment, variable payments are foreseen throughout the contract, equivalent to a percentage of the gross revenue, which will reach 16.15% as of the ninth year of the concession.

Capital expenditure of R$5.9 billion is foreseen in the lot, in a 30-year concession. According to the feasibility studies, the forecast for passenger traffic in the lot in 2023 is 24.7 million. The projection for 2052 is 37.5 million passengers.

Besides crown jewel airport Congonhas, the lot includes the airports of Campo Grande, Corumbá, and Ponta Porã, in Mato Grosso do Sul; Santarém, Marabá, Parauapebas, and Altamira, in Pará; Uberlândia, Uberaba, and Montes Claros, in Minas Gerais.

Aena joined the Brazilian market by winning an auction to operate six airports in the Northeast region in 2019 – with fierce competition at that time. Today, the company operates terminals in Recife (Pernambuco), Maceió (Alagoas), João Pessoa (Paraíba), Aracaju (Sergipe), Juazeiro do Norte (Ceará), and Campina Grande (Paraíba). The company plans to reach an investment figure of R$1.4 billion by the end of 2023 in these assets. Globally, the group operates 46 airports in Spain (including Barajas, in Madrid), one in the United Kingdom (London-Luton), 12 in Mexico, two in Colombia, and two in Jamaica.

The operator is controlled by the Spanish government, which holds a 51% stake. The remaining shares are traded on the stock exchange.

In the business aviation lot, the winner was the infrastructure fund XP Infra IV FIP, which took the airports of Campo de Marte, in São Paulo, and Jacarepaguá, in Rio de Janeiro. The group, which was the only interested buyer, placed a bid of R$141.4 million for fixed concession payment, the minimum amount foreseen in the call for bids.

The move meant the entry of XP Asset into the industry. The asset management company signed a partnership with the French company Egis, which had already participated – not very successfully – in the airport concessions market in Brazil. The company holds a 2.94% stake in Aeroportos Brasil Viracopos, which controls the airport of Campinas (São Paulo), together with companies Triunfo and UTC. Today, the contract is on its way to being returned amid a turbulent process. In January this year, the French group was joined by the fund Tikehau Capital, which holds now a 40% stake. The French state-owned company Caisse des Dépôts, which previously held control of the company, now holds 34%. The remaining 26% portion is held by executives and employees.

The only lot that attracted competition was the North one, which includes the airports of Belém (Pará) and Macapá (Amapá) and foresees investments of R$875 million in construction works. The Novo Norte consortium (Socicam and Dix Empreendimentos) won the bidding, after a long dispute through an open outcry auction. The company offered a fixed concession payment of R$125 million, or 119.78% more than the minimum value defined in the call for bids.

The company beat Vinci Airports, which offered R$115 million, or 102.19% more than the minimum value.

The 30-year contract foresees a capital expenditure of R$875 million. Besides the fixed concession payment offered in the auction, there will be variable fees starting in the fifth year of the concession. The percentage will reach 7.09% starting in the ninth year of the contract.

The airports included in the lot are expected to draw 4 million passengers in 2023. Passenger traffic is projected at 9 million in 2052, according to feasibility studies.

Socicam, which runs bus terminals, has started operating smaller airports in recent years and today controls 24 facilities in seven states. Pernambuco-based Dix Empreendimentos is already working in partnership with Socicam in the concession of 11 regional airports in São Paulo, won at an auction last year.

*By Taís Hirata — São Paulo

Source: Valor International

https://valorinternational.globo.com/
/by