Investments will be directed to expansion of areas for refrigerated cargo,purchase of cranes
06/21/2022
Terminal de Contêineres de Paranaguá (TCP), controlled by China Merchants Port, will start an investment plan of nearly R$370 million, which will be injected by the end of 2023. The goal is to increase capacity, both for storage and cargo handling.
Part of the funds will be used to purchase 11 RTG cranes, which are used to move containers. The investment was already part of the obligations of the concession, but the decision to acquire them at this time was due to the tax exemption window opened with the extension of Reporto, a tax regime that suspends the collection of federal taxes on imports of equipment in the industry, until the end of 2023.
The company’s goal is to expand its cargo-handling capacity by 15%.
The investment plan also includes a 43% expansion of the area destined for reefer containers, which will reach 5,178 sockets. One of TCP’s main cargoes is frozen meats – in 2021 the terminal accounted for 35.4% of Brazil’s chicken exports.
The container yard will also be expanded, by 20,000 square meters. This will be possible through the optimization of the terminal’s structures, which currently occupy 480,000 square meters.
The need for expansion emerged, in part, from the logistical chaos generated by the pandemic. In late 2019, just before the health crisis, TCP completed investments that expanded its area by 150,000 square meters. At the time, the expansion was seen as being enough to meet the demand of the next decades, said Thomas Lima, the company’s chief commercial and institutional officer. “With the pandemic, we had our capacity taken right away. All the parameters changed,” he said.
During the Covid-19 crisis, global logistics chains went through complete disorganization amid port closures, interruptions in production lines and delays in clearance. The effects seen since 2020 include clogged ports, container shortages and crammed warehouses.
In addition to the pressure generated by the pandemic, cargo handling is up. The volume of full containers handled by TCP grew 5.9% in 2021 compared with the previous year. In the first quarter of this year, it rose again – by 2.3%.
In the executive’s view, the perspectives are positive. “The Port of Paranaguá is very focused on agribusiness, which is a growing industry, despite the country’s GDP. The world is consuming more meat, and this tends to boost cargo-handling operations.”
Mr. Lima acknowledges that the pandemic still impacts operations. Recent lockdown measures in China have reduced the number of empty reefer containers coming into the country. This could create a bottleneck for meat exports, which need the equipment. “Exporters have their warehouses full because slaughtering has not stopped,” he said.
The executive considers that it is complex to foresee when the situation will be normalized. However, for him, the trade flow between Asia and Brazil is expected to normalize at the end of this year if China refrains from imposing new Covid lockdown measures.
Law update to end restrictions seen as positive by specialists
06/21/2022
The Bolsonaro administration is betting on a bill being considered by the Chamber of Deputies to update the law on forest concessions and unlock the auction of nine areas this year. The proposal, authored by an oppositionist federal deputy, has already been approved by two committees and allows the use of these forests for the carbon market, which is growing rapidly worldwide.
The current legislation prohibits forests under a concession from being used in the carbon market (in which interested companies pay to maintain the vegetation of a place and, by doing so, offset their own emissions). The bill ends with this restriction, a move specialists understand as positive to draw interest in the sustainable exploration of these forest areas.
Jaqueline Ferreira, a portfolio manager at Instituto Escolhas, says that countries like Peru and Bolivia already explore the carbon market in the Amazon and that Brazil “is lagging behind.” “These are areas that need revenue to maintain themselves and the concessionaires themselves need diversification of income sources to maintain them,” she said. A study by the institute shows that in the region there are 37 areas with the potential to generate R$125 million per year in this market – revenue that, according to the project, will be shared with the federal government.
She regrets, however, that the Environment Committee in the Chamber of Deputies has removed from the blueprint the possibility of periodic review of the contracts. “One of the main problems of the concessions is precisely price volatility. Today the main activity is the sustainable management of wood and there is a lot of competition with the illegal market. The possibility of reviewing the amounts paid, logically with rules, would be an important gain,” she said.
One author of the project, Deputy Rodrigo Agostinho (Brazilian Socialist Party, PSB, of São Paulo) defends that concessions are the best model to protect forests against illegal logging and deforestation. “I know that it will be criticized by environmentalists who think that this means selling the forests, but today there are two very efficient strategies in the world to keep forests standing: payment for environmental services, in the case of private areas, and concessions, in the case of public areas,” said Mr. Agostinho, part of the opposition to the government.
For Mr. Agostinho, the current law is very bad and has slowed down these operations. He points out that the government estimates that it is possible to grant 43 million hectares to the private sector, an area larger than the entire territory of Germany, but that only 1 million hectares have been granted after more than a decade. “And these contracts are very focused on the extraction of wood, which suffers with the illegal market. In the world, what has been working well are concessions for tourism, for the production of medicines and cosmetics or forest agriculture, like heart of palm, chocolate and açaí,” he highlighted.
The proposal modernizes the rules for the bidding and environmental licensing of these areas. One of the main changes is to invert the order of the bidding process. Today, the documents of each company are analyzed, with possible contestations, before the proposals are checked. If the project is approved, only the winning company would have its documents checked.
In addition, the project transforms the forest allocation plan prepared by the government from annual to multi-year, every four years. The objective is to allow the employees of the Brazilian Forest Service (SFB) dedicated to this task to be free to take care of other functions, such as the inspection of the concessions.
The Finance and Taxation Commission approved the bill last week, with Deputy Sanderson (Liberal Party, PL, of Rio Grande do Sul) as rapporteur. The federal government put the matter on its list of priorities for the year and even accepted, in order to approve it, the voting of other proposals with which it disagreed, such as updating the revenue ceiling for companies included in the Simples Nacional, a simplified tax regime for small businesses. “The government is very interested in speeding up this project to attract private-sector companies to a business that, with the current legislation, is prohibitive. There are areas waiting for this to go to auction,” Mr. Sanderson said.
The Bolsonaro administration included 22 projects in the Investment Partnerships Program (PPI) in 2020, but so far only four areas have been tendered and contracted. According to PPI data, the 18 contracts signed so far had yielded R$70 million in grant payments and helped preserve forests with sustainable management.
The bill’s consideration in Congress is not yet fully defined. Two ways are being discussed: to vote in the Constitution and Justice Commission (CCJ), where the blueprint would have conclusive approval, without needing to go through the plenary; or to present an urgent request to take it directly to the plenary, which Chamber of Deputies Speaker Arthur Lira (Progressive Party, PP, of Alagoas) has already signaled he agrees with if there is a consensus among the parties.
The Steinbruch family’s CSN group, which aims to become a global iron mining giant, is preparing a plan that may solve the imbroglio that the judicial reorganization of Samarco Mineração has become. The iron ore pellet producer reported more than R$50 billion in debts when it filed for protection from creditors on April 9, 2021.
The idea is to meet the interests of shareholders – Vale and BHP Billiton – and the company’s creditors, sources say. The two sides failed to reach an agreement on the recovery plan drawn up by Samarco and its owners. As a result, it was rejected at the creditors’ meeting on April 18.
CSN hired Ricardo Knoepfelmacher’s consulting firm, which is specialized in corporate restructuring and complex cases involving corporate and creditor disputes like Samarco’s. Any deal between the parties is better than litigation – to where the case is heading if there is no agreement, according to a source.
Preliminary talks have already been made with Samarco’s shareholders and representatives of the financial creditors – 17 foreign distressed funds. Among these are Oaktree, Goldentree, Solus, Monarch and Silverpoint.
The group holds more than R$23 billion in bonds issued by the company. These bonds refer to loans made by Samarco before 2015. These creditors did not agree with the terms of the company’s plan and submitted to the judge an alternative plan, which is being analyzed.
The group’s plan includes, among several points, a capital injection of 38% of the debt in the form of bonds, which removes Vale and BHP from the group that controls the mining company. The plan is referred to as “Nova Samarco” and one goal is to seek, soon after, a strategic investor. In other words, a company that operates in the mining industry. This means an opportunity for CSN.
Vale and BHP supported a second, alternative plan – much less radical than the one from the financial creditors – from two workers’ unions from Minas Gerais and Espírito Santo. Basically, they made some improvements to the recovery plan made by Samarco.
Both plans were submitted on May 17 to the judge in Belo Horizonte in charge of the suit, but according to a source familiar with the case, any ruling could still take 45 to 60 days. A conciliation hearing for shareholders and creditors with the judge has been scheduled for this Tuesday. At the first moment, the meeting is aimed at defining whether there will be mediation, according to information provided to Valor.
CSN has a difficult task ahead – mainly to convince Vale to listen to its proposal. The mining company is unwilling to do so. The others seem more open to listening to what it has to offer. If the funds’ plan is accepted, the two shareholders will be trounced in the clash and will go to court, a source said.
If it succeeds with an attractive proposal, it will be a great opportunity for CSN to take control of Samarco. CSN’s owner, Benjamin Steinbruch, famously avoids entering a business if he will not be able to be the controlling shareholder.
Samarco is in the condition of being again the large producer of iron pellets it was before 2015, when it sank together with the tailings from the collapse of the Fundão dam. The company, which can handle 30 million tonnes a year, resumed operations at the end of 2020 with only 26% of its capacity.
Pellets, as they are known, are a premium product in the international iron ore market.
CSN Mineração, which went public in February 2021 and already produces around 33 million tonnes of fine ore per year, will start making a superfine material known as pellet-feed, which is used as a raw material in the manufacture of pellets. This way, it would integrate its production – as Vale, which has several pellet plants in the country, already does.
BHP and Vale prepared a joint note. “BHP Brasil and Vale inform that Samarco is not for sale and affirm their support for the restructuring plan filed by Samarco’s worker unions and other creditors on May 18. Both shareholders are focused on preparations for the conciliation hearing tomorrow [Tuesday] and on ensuring Samarco’s sustainability and its responsibility to the remediation efforts, which are not addressed by the creditors’ plan.”
Ricardo Knoepfelmacher, CSN and the creditors did not immediately reply to the requests for comment.
Emissions must be priced even in activities in countries still lacking a regulated carbon market, like Brazil, executive says
06/20/2022
Charles Fernandes — Foto: Leo Pinheiro/Valor
Companies that want commitments to sustainability need to start including the cost of carbon emissions in their operations, said Charles Fernandes, managing director and country chair for Brazil at TotalEnergies.
The executive believes that emissions must be priced, even in those activities in countries like Brazil that still lack a regulated carbon market.
“Every company with commitments to sustainability has to price in this matter. That way, it sends a message about which is the right direction for the capital,” he said.
Estimating costs associated with carbon in each project helps companies not to push to the back burner matters that may turn them less viable in the future, Mr. Fernandes said.
The French company’s executive also highlighted that pricing emissions forces every investment to be as efficient as possible.
“When we launch a project today, we estimate the price of carbon to evaluate if the initiative is still robust in a scenario in which emissions have a price. In our view, companies have the responsibility to start pricing in the vision that carbon will have a price five or 10 years from now. This way, investment decisions will be aligned to that,” he said.
The debate about voluntary and regulated CO2 markets is related to the transition to a low carbon economy in search of tackling climate changes.
The executive believes that the debate about taxing carbon will gain ground in Brazil in the next three years. “Brazil does not price emissions yet, but companies need to start setting a price for that,” he said.
Last month, the federal government published the decree that created a carbon market in Brazil. Mr. Fernandes said that it is still unclear when companies will start to effectively pay for emissions in the country. Yet, this is an “unavoidable” trend, he said.
“In Europe, there is already a market and, depending on the level of emissions, the company has to pay a given cost for the emissions, which changes according to the carbon price in the market. This is the trend in the world,” he said.
In the context of the energy transition, TotalEnergies defined that it will set aside 25% of global investments to renewable energies. Another slice of 25% will be injected into projects for the transition to a low-carbon economy, which is the case of liquefied natural gas projects.
As a result, the investments to maintain the current businesses in the oil and gas industry will receive only 50% of the total investments.
In Brazil, TotalEnergies currently produces 66,500 oil barrels a day and 2.5 million cubic meters of gas a day, data by the National Agency of Petroleum (ANP) show.
The low cost and the low rate of emissions of oil and gas produced in Brazil turn the country into a key region in the company’s portfolio, Mr. Fernandes said.
In the renewables segment, the company works through subsidiary Total Eren, which totals 300 megawatts in solar and wind generation assets in operation in the country.
The company has also shown interest in investing in offshore wind power generation and has a team tasked with studuying opportunities in this segment here. Brazil does not have offshore wind power projects, and regulations for the segment are still in the making.
“We are interested, and we count on regulation to be defined to move forward with that,” said Fernanda Scoponi, senior business developer at TotalEnergies, at an industry event this week in Rio.
Entrepreneurship is the way out of a weak labor market
06/20/2022
The gradual return of the flow of people and the change in habits, with the expansion of remote work and the acceleration of digitalization, generated an increase in new firms in 2021, but with a greater bet on activities like healthcare, technology and technical services, which had already emerged before the Covid-19 pandemic and are now gaining ground more quickly. Entrepreneurship is also growing as an alternative to a labor market that is still recovering, according to specialists.
Although commerce in general remains the leader in the activity profile of new companies, the sector has lost space to segments linked to healthcare and social services, technical and information technology (IT) activities, or professionals who, supported by the flexibility of remote work, have decided to become entrepreneurs.
At the same time, the accommodation and food group, which includes hotels and restaurants, lost space, although it maintains a recovery curve in new businesses. This is the general trend verified by data about the opening of companies from boards of trade in the states of São Paulo, Bahia and Paraná. The three states accounted for about 40% of all new businesses registered last year in the country, according to data from the federal government’s Business Map.
In São Paulo, there was a record in the start of new companies in 2021. According to data from Jucesp, the state’s board of trade, the number of new businesses totaled 288,500 last year, up 28.7% compared to 2020 and 28.5% against 2019, the year before the pandemic. Terminations also increased, but with a much smaller number and in a more decelerated way.
In 2021 a total of 120,900 companies closed doors in São Paulo, up 16.2% from the previous year and 0.5% against 2019. The numbers for the state do not include data from Individual Micro-Entrepreneurs (MEIs).
A look at the data over a longer period shows a change in the sectors that today attract those who want to open their own business. In São Paulo, the general commerce group, including retail and wholesale and the sale of vehicles to end consumers, represented 33.8% of the new companies in the state in 2014, but has gradually lost share over the last few years, reaching 26.8% last year. The data indicate this shift was already underway before the pandemic. In 2019, the sector’s share was 28.5%. That is, the number of new businesses in the segment grew over the seven years, but at a slower pace than the total number of new enterprises.
The commerce space was taken up by health and social services activities, which jumped to 9.6% last year and to 6% in 2019 from 2.5% 2014. Information and communication, which brings together IT-related areas, advanced to 7.7% last year and 6.6% in 2019 from 4.6% in 2014. Professional, scientific and technical activities – which include diverse branches such as consulting, auditing, business management, firms in architectural, engineering, advertising and market research services – advanced to 12.1% in 2021 from 6.78% in 2014.
The state of São Paulo continues with a record number of new companies in 2022. From January to May there were 123,500 new businesses, or 8.4% more than in the same period in 2021.
In Bahia and Paraná, the dynamics of change in sectors were similar. With a total of 37,827 new companies in 2021, Juceb, Bahia’s board of trade, also recorded a historic peak last year and a change in the formation of new businesses over a longer period. From 2014 to last year, the share of general commerce among new companies opened in the state, including headquarters and branches, fell to 40.5% from 45%.
Even in a state recognized for its tourism vocation, the share of lodging and food ventures, a group in which restaurants and hotels are included, dropped to 4.1% in 2021 from 7.1% in 2014. In 2019, the year before the pandemic started, the share was 5.1%, showing that the segment, although growing, was already expanding at a slower pace than other activities. The data for Bahia do not include MEIs.
The data from Jucepar, Paraná’s board of trade registry, includes MEIs and also points to a record number of new companies in 2021, with a total of 268,440 companies, an increase of 14.8% compared to the previous year. Also among Paraná companies, commerce in general is the main sector among new businesses, but its share fell to 26.5% in 2021 from 32.3% in 2015. There was an increase in the participation of professional, scientific and technical activities, health and social services, and information and communication. Together, these segments advanced to 14.1% from 8.7% in the same period.
Carla do Nascimento, an economist at the coordination of economic situation of the Superintendence of Economic and Social Studies (SEI) of the Bahia government, says that the advances in some activities were accelerated by the pandemic, but are within a change that was already happening as a reflection of technological innovation and increased demand. This is the case of the health and information technology sectors, she points out.
New businesses in health and social assistance advanced to 9.5% from 4.8%. Retail and even sectors linked to tourism may have felt the economic downturn. Ms. Nascimento recalls the period covered includes 2015 and 2016, when the country’s GDP contracted, without a complete recovery from 2017 to 2019. In 2020 there was the recession within the pandemic, with recovery in 2021.
The economic contraction of the pandemic, explains the economist, led many entrepreneurs to close their doors in 2020 and part of 2021. With the recovery of the economy last year, however, there was a bet on new businesses. At the same time, with the advance of digitalization and remote work, people who lost their jobs or even people who had jobs decided to bet on their own enterprises, which also, she says, can help explain the performance of the group of professional, scientific and technical activities, which advanced to 7.6% from 4.9% in 2014.
Ademar Bueno — Foto: Silvia Zamboni/Valor
Ademar Bueno, head of Jucesp, points out that the pandemic has changed the work system of many professionals. In some activities that were almost exclusively done in person, he says, they started to work only remotely during the most severe period of the health crisis and, with the most recent opening of the economy, the hybrid system was adopted. This led to a professional and activity reorganization that also required the start of new companies, he says.
Mr. Bueno also points out that about 40% of new companies set up in São Paulo have among their partners some tax ID number that is already in another company. It is someone who closed a business that broke down, he says, and who, after regularizing the situation, decided to start up a business again. He points out that programs offered by the state government have helped in this regard.
Despite the fact that the accommodation and food group has lost share in the start of new companies – to 4.8% last year and 6.3% in 2019 from 7.7% in 2014 –, Mr. Bueno points out that bars and restaurants still remain a big bet for new businesses. In the state of São Paulo, according to him, 40 companies are opened in this area per day, on average. Closures are also high, about 30 a day.
In Brazil, 6.7% of new computers are rented, but worldwide leasing will grow 30% this year
06/20/2022
Hiring computers as a service, in a subscription model, instead of buying the machines, is no longer an emergency measure taken during the pandemic. The need to update computers in the resumption of face-to-face work and the complexity of managing machines distributed among remote employees have encouraged more companies to adopt the model of renting instead of buying.
Worldwide, the market for PC as a service — PCaaS — is expected to reach $2.6 billion this year, a 30% increase over the volume of 2021, and reach $3.2 billion in 2023, according to consultancy Gartner, but still representing a small slice, 5%, of the computers used by companies.
In Brazil, according to IDC (International Data Corporation), the volume of new equipment contracted as a service was 200,000, or 6.7% of the 3.3 million new computers sold to companies during the period.
The modest adoption rate of subscription machines still reflects a cultural resistance in Brazil. “For publicly traded companies, one thing is the depreciation of the asset that will be diluted and another is a fixed monthly expense that is not necessarily well regarded by the accounting department”, says Daniel Voltarelli, technology analyst of IDC Brazil.
In pandemic, however, the need to equip remote employees quickly brought a new look to the service model. In 2019, 11% of large and medium-sized companies in the country used the PCaaS model. The percentage rose to 20% in 2021, points out a survey carried out in January by consulting firm IT Data Market Intelligence with 1,500 medium-sized (100 to 500 employees) and large (over 500 employees) companies. Among large companies, 23% adopted the computer as a service last year.
“The preference for notebooks over desktops to give employees flexibility in the hybrid working model has made managing the machines a more complex task,” notes Ivair Rodrigues, founder of IT Data. “Many have adopted leasing.”
The food manufacturer M. Dias Branco opted for PC as a service even before the pandemic, in 2018, because it demanded fast support with national coverage.
The company, which today has 4,800 computers in use, in 19 industrial units and 42 distribution centers throughout the country, also chose the service model to accelerate the installation and support of the equipment. “What was important for us was the quality of service, which is fundamental prevent the employee from stopping because of an issue with the computer”, says Janilton Luz, M. Dias Branco’s information technology operations manager. “The computer represents a lot in our operation”.
Computer manufacturers, which depend on the sale of new machines, don’t want to be left out of the subscription model market either. Aware of the potential cost reduction with asset depreciation, remote machine management and employees for maintenance, companies such as Lenovo and Positivo Tecnologia also offer equipment packages as a service, including leasing, rental, support and machine management.
“As there is a generalized financial squeeze, many companies have decided to adopt the model,” says Rodrigo Guercio, vice president corporate sales at Positivo Tecnologia. Last year, the company had a turnover of R$62.5 million with the offer of hardware as a service — HaaS —, an increase of 105% in annual comparison.
Giselle Santos — Foto: Carol Carquejeiro/Valor
For the travel agency Agaxtur, the adoption of the computer as a service helped prepare the company with new machines for the resumption of the tourism sector, after the peak of the pandemic. “We renewed our computers with laptops for all employees, who work remotely some days of the week,” says Giselle Santos, project manager and technology at Agaxtur.
Of the 110 machines used in the company, 70 are in the service model. “We have invested more in machines that use specific software to connect to the entire hotel, air and maritime network worldwide and that demand a lot of hardware performance,” says Ms. Santos. Still this year, Agaxtur intends to expand the hiring of the service to all the company’s computers and to 55 franchises in Brazil.
To help the financial departments of the companies quit the PC as an asset model, the equipment supplier Simpress created a return on investment calculator, which compares the value of the lease to the purchase of the machines. “It is important to calculate the indirect costs that are avoided by the service provision model, such as labor and even the reverse logistics of component disposal,” says Vittorio Danesi, CEO of Simpress.
Cristiano Herbert, president of OfficeTotal, an equipment and services outsourcing company, which started its operations with printers, foresees that the subscription computers — today in 20% of the companies — will increase similarly to that of printers in the next four to five years. “Today, 80% of corporate printers are rented, a curve that began to grow in the 1990s,” he recalls.
Aurélio Amaral says country should create stocks, or harvest will be harmed
06/20/2022
Aurelio Amaral — Foto: Leo Pinheiro/Valor
Even with the announcements of fuel price increases imposed by Petrobras last Friday, there is a great risk of shortage of diesel in the second half. The warning comes from the former director of the National Petroleum Agency (ANP) and consulting partner at Schmidt Valois Advogados, Aurélio Amaral.
To Valor, the expert, who was director of ANP for four years, including during the truckers strike in 2018, said that the shortage can lead to occasional shortages of fuel in regions that depend more on imports, such as the Central-West. Even after Petrobras announcement on Friday, making diesel and gasoline more expensive, the gap in relation to international prices still remains, according to importers.
This inhibits imports, which account for about 30% of the diesel demand in the country, Mr. Amaral warns. The technician, who was also superintendent of supply of the agency, defended the formation of stocks by Petrobras to help reduce the risks of shortages. But, instead of stockpiling, Brazil gets lost in discussions about prices, Mr. Amaral says.
However, he considers a generalized lack of supply unlikely. But he stressed that the lack of diesel can damage the harvest, since the Central-West, the largest grain producer, is more dependent on imports.
Read the main excerpts of the interview:
Valor: What is the scenario of fuel supply in Brazil?
Aurélio Amaral: We need to keep some stock, because diesel is short in the world. It is necessary to pay so that Petrobras has the capacity to import and keep stocks. We also need to maintain some kind of parity [with international prices], at least for now in this current model, so that other players are encouraged to import and to supply part of the fuel that is not produced in the country. To mitigate prices to the consumer, it is necessary to have some compensatory policy, which the government so far has not wanted. If nobody gives in on one side or the other, the road ahead is that of a crisis.
Valor: Will Friday’s increase help?
Mr. Amaral: I think that the hike was necessary. The government and Petrobras are currently going through a dilemma: how to balance a mixed capital company, which has a social role, and holds a significant monopoly. According to the current law, and the way the pricing is established, Petrobras board has no choice but to raise the prices. It is a very difficult situation for those who are ahead of the board to find a way to hold prices without having a compensation that ensures they will not be held responsible by regulatory agencies [for possible losses].
Valor:How is the scenario for fuel importers?
Mr. Amaral: Nobody is importing. We are in a complicated situation. We need to bring diesel, because we are approaching the harvest, but the price [of oil] continues to rise, although it has had a small drop. There is a big pressure on the world demand for diesel. We are heading towards something dangerous. It is a complex issue that requires a systemic look and, mainly, harmony between Petrobras and the government, an environment of less tension and conflict. Today, it looks like a war, which is not good for anyone.
Valor:What are the risks?
Mr. Amaral: We are not stockpiling, because almost nobody is importing, so we are heading towards a big risk [of shortages]. It is a risk derived today from the war and the pressure of the embargoes on Russia [oil exporter].
Valor:Is there room for Brazil to start building stocks today?
Mr. Amaral: Only Petrobras is able to build a relevant safety stock today, because it owns the entire infrastructure. But how to do this without passing it on to prices? It is a difficult equation. In this current crisis, I think it is very difficult to have time to think about increasing stocks, while discussing price impacts. It would also be necessary to review the pricing policy and the remuneration policy for Petrobras’s investors. Under the current policy, it would have to pass on the costs of inventories. This is difficult in today’s politicized environment.
Valor:Will there be a shortage of fuel?
Mr. Amaral: I don’t believe in a widespread diesel shortage. But the risk of occasional shortages is great if we don’t move towards creating some stock. Mainly in regions that today depend on imports, like the Central-West, agribusiness regions, where the demand for diesel will be high in the second semester. We are heading towards a very emotional situation. It will be tense.
Valor:How to reduce the impact of high prices?
Mr. Amaral: I don’t see a way out that doesn’t involve compensation. But this has fiscal impacts on the federal budget, and can affect congressional earmarks in an election year, the government does not want it. It is not a simple discussion, it is complex. The resources have to come from somewhere. It requires cold blood and more calm, not this atmosphere of tension. If it stays just on Petrobras’ account, it would also be necessary to change the remuneration to shareholders, the dividends, it would be necessary to look at the management rules for publicly traded companies. If Petrobras simply does not pass on the prices, it will be subject to losses.
Valor:What do you think of the proposals made so far?
Mr. Amaral: The way the [sales tax] ICMS reduction was proposed, there is no compensation. With the increase in oil prices and the passing on of margins [the tax reduction] will have, in my opinion, an insignificant impact in terms of prices.
Valor:Will the sale of Petrobras’ refineries solve the discussion?
Mr. Amaral: I have always been in favor of divestments, I think they are welcome to create a competitive market. But they must be done with regulatory monitoring to mitigate competitive effects and avoid abuse of economic power in regions where refineries are dominant. It should be done in the medium to long term. This requires a smooth transition, in order to stimulate other investments. We stopped this process in the middle. We didn’t manage to divest all the refineries in order to start a competitive market. Petrobras continues to have a large monopoly.
Valor:What measures are needed for more competition?
Mr. Amaral: Refining was always thought of with Petrobras, in the Brazilian system as a whole. To take this system that was created to act in an integrated way and dismember it, it is necessary to create alternatives. If you simply sell the refinery, you will transfer the monopoly from the public to the private agent. It is necessary to have measures to create import competition. Brazil cannot, by law, have price control. But how to make this transition without some accompaniment? It is complex.
Improvement of health situation drives consumption but continuity is uncertain
06/20/2022
Carlos Antonio Rocca — Foto: Silvia Zamboni/Valor
After rising for seven quarters in a row since the pandemic hit Brazil, in early 2020, household saving has shrunk in the first quarter of this year, a survey by the Center of Capital Markets Studies of the Economic Research Institute Foundation (Cemec-Fipe) shows.
The declined of R$32.4 billion compares with a R$75.8 billion increase in the fourth quarter of 2021. The amount accounts for 6.1% of net household saving amassed between early 2019 and that moment, which totaled R$529.7 billion at the end of 2021. As a result, the amount held until the first quarter of 2022 fell to R$497.1 billion. The figures include savings accounts, investment funds, stocks, bank deposits, government and corporate bonds and bank funding.
The fact that more people are moving around and the lower uncertainties about the pandemic help to explain this situation, experts say. The phenomenon has driven a higher consumption in the first months of the year, as GDP data for the period already show. Other reasons may explain this: rising inflation and lower average income. Economists believe that lower household saving rates may remain in place, but will have a limited impact on consumption considering higher indebtedness and interest rates.
Two factors that helped increase household saving during the pandemic ceased to work or lost steam this year, said Carlos Antonio Rocca, the coordinator of Cemec-Fipe. There was a circumstantial factor caused by social distancing measures, which restricted consumption alternatives, especially services; and there was a precautionary factor caused by uncertainties related to the health crisis, which made people more willing to hold on to money.
“The reduction in household saving in the first quarter is not dramatic at all, but it indicates a falling trend. The number of cases and deaths fell,” he said. “The pandemic is perceived as more controlled, and uncertainties are lower as well,” the coordinator of the study said.
Since there are no indications that household saving has moved to real estate or investments abroad, Mr. Rocca highlighted that savings helped to drive consumer spending in the quarter, considering goods and services.
Marcelo Kfoury Muinhos, a professor at FGV’s São Paulo School of Economics, also sees a relationship between lower household saving and rising consumption in this group in the first quarter, as seen in GDP growth data.
“People started to spend savings amassed over the pandemic. Part of this has already translated into stronger GDP growth in the first quarter,” he said. The economist links the phenomenon to several factors, including the fact that society is going back to normal regarding the health emergence situation, the falling average income caused by a labor market recovery with lower-paid jobs, and some effects from inflation.
Household saving behave accordingly to income brackets, said Isabela Tavares, an economist at Tendências Consultoria. “In poor households, the drop follows the inflation and the pressure on the household budget. The savings mean relief for what people need to consume and to pay bills, for instance. On the other hand, segments of essential items more linked to high-income households have been a highlight in this moment of normalization of the pandemic,” she said.
Previous studies by Cemec-Fipe have suggested that people who managed to amass less money were withdrawing funds from savings accounts in 2021. In the most recent study, along with the general phenomenon of shrinking household saving, Cemec-Fipe found that household investment portfolios have changed as funds from savings accounts, investment funds and stocks were moved to more profitable fixed-income assets after the Central Bank started raising interest rates.
The savings amassed during the pandemic are expected to shrink even more, but economists are divided about the effect on consumption.
Mr. Rocca believes that the trajectory seen in the first quarter raises the probability of this movement over 2022. Should the pandemic remains under control over the year, the household saving rate would shrink by R$130 billion, which would allow household consumption to grow by 2%, more than the projections for GDP growth, which are around 1.5%, he said. “This could drive consumer demand, and it could be substantial, since it represents nearly 9% of total consumption in 2021,” he said.
A little more cautious, Mr. Muinhos believes that the household saving rates are likely to shrink even more, but he does not consider the impact on consumption a given. Confidence data are improving for now, but the activity indicators are not all advancing in the same direction.
Ms. Tavares believes that household demand will be lower throughout the year, but will end the year above the levels seen before the pandemic. But the pressures of higher interest rates on loans and debt will limit the amount of funds that reach consumption. She estimates that household savings will fall by 1.5%, considering savings accounts, capitalization title (a type of savings scheme with drawings), private pension, government bonds and fixed-rate corporate bonds, after increasing 19% in 2020 and falling 4% in 2021. “The net result is still positive,” she said.
Yet, Brazilian group will not give up on electrics, will continue to make internal combustion vehicles
06/17/2022
Marcio Alfonso — Foto: Silvia Costanti/Valor
The automotive industry is divided. Some believe that, in Brazil, electrification will only advance with hybrid cars – which run on power or internal combustion and can already be produced in the country. Another part prefers to follow the trend of developed countries and go straight to fully electric cars, which are imported. CAOA Chery has decided to bet on both fronts. It will import and produce vehicles with both technologies and thus be prepared, whichever path is adopted by the country and more accepted by consumers. The automaker is, however, inclined to believe that ethanol hybrid cars will gain space.
This week, the company born five years ago from the union of the Brazilian group CAOA with the Chinese brand surprised the market by detailing the electrification plans it had been emphasizing in its advertisements. It presented five new models – four hybrids and one fully electric. Two of the hybrid cars have already started to be produced in the Anápolis (Goiás) plant, and the others will come from China. The fully electric one, also Chinese, called iCar in Brazil, will be the cheapest in its category. It will cost R$139,990.
The apparently sudden initiative is, in fact, the result of a process that began to mature six years ago in the CAOA group and four years ago in the Chery division, according to the group’s vice president of operations, Márcio Alfonso. “We have reached the point where you can no longer advance in the emission of pollutants with combustion-only engines,” said Mr. Alfonso, a mechanical engineer with a long stint in Ford before joining CAOA, seven years ago.
The arrival of the hybrid line in Anápolis is part of the R$1.5 billion investment program unveiled in December 2020. It is also the result of a dream cherished by the founder of CAOA, the businessman Carlos Alberto Oliveira Andrade, who died in August last year. CAOA thus becomes the second automaker to produce hybrid vehicles in Brazil, with models Tiggo 5X Pro and Tiggo 7 Pro. And, like the pioneer in this initiative, Toyota, the hybrids manufactured in Anápolis can be fueled with ethanol.
“The hybrid model is expected to dominate because ethanol is a strategic product for Brazil,” Mr. Alfonso says. The country would be, according to the executive, “an adequate place” for fully electric cars, since it holds renewable power source, with hydroelectric plants, besides the good perspectives regarding solar and wind power generation. “But the consumer’s purchasing power is low,” he says. “It is not clear, from what we see in Europe, what to do with the electric car after the warranty period.”
For Mr. Alfonso, there is no point in bringing cars that few can buy. According to him, the number of consumers who bought vehicles over R$180,000 in 2021 does not reach 150,000. The market for new cars totaled almost 2 million. Therefore, the company will make a composition between hybrids and fully electric cars and will continue to produce combustion models. “We need to have all the cards up our sleeve for when the government defines which technologies will receive incentives,” he said.
Chery’s hybrid models will cost between R$159,990 and R$269,990. The most expensive of them, the Tiggo 8 Pro Plug-In Hybrid, an imported car, will be of the plug-in type, a hybrid that allows charging in the socket in addition to the combustion engine. The advantage of the model is fuel economy and better control of emissions.
The hybrid technology used by CAOA Chery will use the “light” hybrid technology, with a 48v battery, which costs less than a conventional one. In this case, the electric motor is less involved. According to Mr. Alfonso, one advantage of the hybrid model is to allow, during the development of new generations of the same car, the electric part to gain more space. By this reasoning, a hybrid model can become increasingly “more electric.”
According to the executive, the hybrids will represent 30% of the production in Anápolis. The idea, he highlights, is to electrify the line more and more. For the time being, the production of fully electric vehicles is not foreseen. No company produces this type of vehicle in the country.
The Anápolis plant was already prepared to receive lines with the new technology. The same does not happen with the Jacareí unit, in São Paulo, where production was suspended at the beginning of May.
The São Paulo-based plant, which the CAOA group acquired when it joined Chery, has an older manufacturing system. According to Mr. Alfonso, it is necessary to adapt the plant with equipment that accepts the most modern platforms, of electrified vehicles. The expectation is to complete the process in two years.
With the end of production in Jacareí, almost all the almost 600 workers were dismissed. Mr. Alfonso says that the company’s management was reluctant to take this attitude “in an election year and with an unstable economy.” He added, “But there is no point in continuing to invest in an old platform.”
Market is heated and grew until May, but a slowdown is expected in the second half of the year
06/17/2022
After falling 31.2% in Brazil between 2010 and 2020, to about 46,000 units, sales of agricultural machinery grew again last year – 26%, to 58,000 units – and are likely to remain strong in 2022, a report by Consultoria Agro Itaú BBA released last week, based on data from the National Federation of Automotive Vehicles Distribution (Fenabrave), shows. But the high costs and interest rates are expected to limit the recovery.
In May, according to Fenabrave, sales increased 35.1% compared to the same month in 2021 and reached 6,100 units, driven by tractors and harvesters. In the first five months of 2022, the total reached 20,200 units, up 36.6% year over year. This increase, Fenabrave said, reflects the increase in producers’ income due to the high prices of commodities and occurs despite the strong increase in inputs such as fertilizers.
Yet, as a large part of the inputs for the 2021/22 harvest was purchased in advance, the farmers’ margins were preserved and even expanded in the season, whose summer harvest has already ended. Hence the still heated demand for new machines, most of them financed with Moderfrota funds, in the first half of the year. Moderfrota, the main investment line of the federal government’s Crop Plan, is expected to finance around R$6 billion in the 2021/22 cycle, which will end on the 30th.
But there is concern among sources in the segment about the behavior of demand in the second half of the year, since, for the 2022/23 harvest, which will begin to be sown in August, the costs will weigh more. The forecast is for a reduction in profit margins in the fields, although operationally the results forecast by banks and consulting firms are still attractive. No “collapse” is expected, but a cooling-off is on the radar.
Driven by the 58,000 agricultural machines sold last year, the sales of the segment reached R$38.3 billion, up 40.3% year over year, according to the Brazilian Association of the Machinery and Equipment Industry (Abimaq). And, according to Abimaq’s forecast taken into account in the study, revenues are expected to total R$40.2 billion this year, up 5%.
The contracting of Moderfrota funds also reinforces the scenario of lower growth. The amount for 2021/22, although in line with the government’s strategy of shifting more funds from large to small and medium farmers, is the smallest in this recent recovery of sales. In the 2019/20 and 2020/21 seasons, when the total amount also included a non-earmarked line from Banco do Brasil, there were R$7.3 billion and R$7.5 billion in credit, respectively. For 2022/23, neither the volume of funds for Moderfrota nor the interest rates – currently at 8.5% per year and expected to rise because the Selic, Brazil’s benchmark interest rate, is higher now – have been defined yet.
As flush farmers are not a Brazilian phenomenon, the country’s agricultural machinery exports, which peaked in the second half of the decade of 2000 and then went into free fall until 2020, also recovered last year. There were $236.6 million in total in 2021, according to data from the National Association of Motor Vehicle Manufacturers (Anfavea), up 23.4% year over year.
According to Anfavea’s data highlighted by Consultoria Agro Itaú BBA, most exports continued to be directed to Argentina ($25.4 million), but the neighboring country was once a much more relevant client. Machinery imports reached $66.9 million in 2021, compared to $83.6 million in 2020, and purchases came mainly from the European Union (28.8% of the total) and the United States (25.7%).
*By Fernando Lopes, Rafael Walendorff — São Paulo, Brasília
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