Inequality in rural areas may worsen, study shows

Hunger also affects people in the countryside in a dramatic way — Foto: Divulgação
Hunger also affects people in the countryside in a dramatic way — Foto: Divulgação

It is not new that, in Brazil, agricultural activities that generate billion-dollar results still share the corners of the country with extreme poverty. Just over 15% of the country’s rural population experienced severe deprivation in 2019, around 5 million people. Another 17.6 million people (52.9% of the total) were poor. A worrying picture, which may have become even darker with the economic degradation during the pandemic.

In order for the situation to improve, the study “Productive Inclusion in Rural and Inland Brazil”, prepared by researchers from the sustainability nucleus of the Brazilian Center for Analysis and Planning (Cebrap) in partnership with the Arymax and Tide Setubal Foundations and the Humanize Institute, proposes a long-term approach with public and private sector efforts.

The Household Budget Survey of the Brazilian Institute of Geography and Statistics (IBGE) shows that Brazil reduced the rate of people going hungry between 2004 and 2013, but the trend was reversed. In the last five years, the country has returned to the levels of food insecurity seen 15 years ago, according to data from the IBGE and the Brazilian Food and Nutrition Sovereignty and Security Research Network (Rede Penssan). In 2020 and 2021, the increase in severe food insecurity reached an average of 27.6%.

According to the group, the social problems in the countryside will not be solved with isolated actions of financing, technical assistance, digitalization and cooperatives. It is necessary to work on these different fronts to structure micro-producers. More than “teaching to fish”, the study defends the need to guarantee opportunities in the surroundings.

The research emphasizes that inequalities in the countryside are too complex a problem to be solved only by the government or the private sector. “It works better if we have coordination between these actors. The private sector has localized embryos and innovations, but it is far from being the rule. And it can’t be,” says researcher Arilson Favareto.

According to him, it is up to the government to stimulate, through fiscal policies, companies that prioritize the purchase of small producers, as in the biodiesel sector, in which a good part of the raw material comes from this group of farmers. The private sector, on the other hand, needs to understand that it is worth investing in the surroundings beyond the roads. The construction of schools, hospitals and commercial areas benefits the local economy, generates demand and also better qualifies the workforce, which can reduce costs later on.

Mr. Favareto says that the private sector is advancing in the environmental agenda, but social issues are in the background and can be aggravated in the process. The objective of the study, he reinforces, is not to demonize agribusiness, nor to encourage a dichotomous view. For example: if the mechanization of agricultural production is a reality, it is necessary to find ways out for the workers who lost their jobs along the way.

As modernization is an irreversible trend, according to him, it is necessary to create income alternatives in rural areas that are not directly associated with agribusiness. “There is, today, a faith that the strength of agribusiness will generate opportunities for everyone, but it will not. The trend is to save work. This problem will not be solved naturally,” he stresses. Mr. Favareto cites an article that identified a 67% drop in jobs in the sugar-alcohol sector between 2008 and 2018, to 213,400 from 652,900 employees.

Despite the fragility of the local economy in these more remote regions, 49% of the employed population residing in rural areas do not work in agricultural activity. In addition, 35% of those who work in agribusiness live in urban areas of municipalities. “It is necessary to look at the space and think about where the opportunities for inclusion of people through work are,” he says.

Finally, the researcher believes that the digitizalition of the segment also needs to be considered from a social point of view, so that there is no longer an abyss between large and small properties. The survey highlights that 71.8% of rural properties do not have internet access, according to the 2017 Agricultural Census. There are more than 3.6 million farms without internet connection.

In addition, much of the innovation for agribusiness is developed in the South-Central, focusing on the needs of producers in this region — only 7% of the almost 1,600 Brazilian agtechs are in the North and Northeast regions, according to the Radar Agtech 2021 report. “How will a researcher in the countryside of São Paulo develop a precise solution for a farmer in the up in Acre state? He won’t, it’s not his reality.”

According to the researcher, a strategy is needed to take agtechs to the peripheral regions of the country, as happened with large multinationals that opened operations in emerging countries to develop technologies suitable for those countries with very different conditions from rich nations, such as the United States and countries in Europe.

Source: Valor International

https://valorinternational.globo.com

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Political wing of government acts to zero taxes on gasoline

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The political wing of the government acted on Thursday to approve a Proposed Amendment to the Constitution (PEC) that would allow President Jair Bolsonaro (Liberal Party, PL) to zero taxes on all fuels, including gasoline, without having to compensate for the increase in other taxes. In addition, it authorizes a reduction in the Tax on Industrialized Products (IPI) and Tax on Financial Transactions (IOF) on any products without counterparts. The project contradicts the position of Economy minister Paulo Guedes, who is concerned about the impact of this measure on public accounts and who defended a tax exemption restricted to diesel oil, with a lower fiscal cost.

Deputy Christino Áureo (Progressive Party, PP- Rio de Janeiro) filed the PEC on Thursday at the request of a part of the government. The text, as revealed by Valor, was formulated in the Chief of Staff Office, controlled by minister Ciro Nogueira (Progressive Party, PP), and allows for a partial reduction or even zero taxes in 2022 and 2023 to counter one of the main criticisms of voters to the current administration: the high price of gasoline, cooking gas and diesel oil, because of Petrobras’ pricing policy.

The cost, according to economic sources, will be around R$54 billion per year, higher than the total investments planned for 2022. The exemption on gasoline alone would bring a loss of almost R$27 billion to the taxpayer: R$23.8 billion from social taxes PIS/Cofins and another R$3 billion from federal tax Cide. Diesel, on the other hand, would cost another R$18 billion. If Congress resumes the idea, already defended by President Bolsonaro, of cutting taxes on electricity, the impact would rise to up to R$75 billion. In addition, the PEC authorizes a cut in IPI and IOF, among other taxes that had not entered the waiver calculation.

Tax laws require that the reduction of one tax be offset by the increase of others, but a wing of the government decided to propose the PEC to circumvent this rule temporarily. The country has been living with a primary fiscal deficit for seven years and in 2021 it recorded a deficit of R$35 billion in the central government. For 2022, the estimate is a deficit of R$79.3 billion – and that is before the idea to exempt fuel.

The Ministry of Economy did not participate in the elaboration of the PEC, says a source. On the contrary, the ministry considers it bad and. In the opinion of the technicians, it would not even be necessary to change the Constitution. The cut could be authorized by a supplementary law (which would amend the Fiscal Responsibility Law to allow it to happen without the need to create other sources of revenue to compensate for the loss) and adjustments to the Budgetary Guidelines Law (LDO).

The option for a complementary law would also allow Mr. Guedes to pressure President Bolsonaro to veto “exaggerations” approved by lawmakers. On the other hand, a constitutional amendment, although it requires greater support to be approved, is enacted by Congress itself, without this alternative. “PEC is very bad,” said a member of the ministry. The so-called “PEC dos Precatórios” — regarding writs that represent federal debts from loss of court disputes, voted on in December — had the space for spending doubled by congressmen.

The content was also far from what was advocated by the economic area. Until the day before, the perception in the ministry was that the proposal would be expensive to the taxpayer to generate relief in prices that could quickly disappear when faced with a depreciation of the Real against the dollar or the price of oil. Mr. Guedes even publicly criticized the removal of taxes on gasoline at a time of transition to a low-carbon economy. Diesel tax release, on the other hand, was seen as acceptable, given the importance of the fuel in the country’s logistics, not to mention that it pleases one of the president’s bases of support, the truck drivers.

The version filed by Mr. Áureo allows the full release of fuel taxes in 2022 and 2023 without the need for compensation – it would be enough to present financial estimates and adjust the budget laws to the new rates. The endorsement would be for the federal government and also the states and municipalities, giving strength to Mr. Bolsonaro’s strategy of pushing the burden of the gasoline price to the governors who refuse to accept the reduction of ICMS.

On Thursday, the governors declared support for the bill proposed by Senator Jean Paul Prates (PT-RN) to change Petrobras’ fuel price policy, creating a tax on crude oil exports and a fund to stabilize prices in the domestic market. “The bill is born from the problem itself, from the extraordinary profit from the increase in fuel prices,” said the governor of Piauí, Wellington Dias (Workers Party, PT), who coordinates the Governors Forum. The discussion about the ICMS on fuels would be left only for the tax reform.

According to the bill, the reduction of taxes will only have to respect the requirements of presenting an estimate of the budget and fiscal impact of the measures adopted, to comply with the annual goals of fiscal result (which can be changed by law), and to be part of the budget laws (such as the annual budget and the multi-annual plan).

Mr. Áureo told Valor that the text is of his authorship, negotiated with the federal government and that he will wait to discuss the project. “I will continue my dialogue with the government and with productive sectors and society”, he said. The document data, however, show that it was written in the computer of a government technician, the assistant sub-secretary of Public Finance of the Chief of Staff’s Office, Oliveira Alves Pereira Filho, and sent to the deputy to officially present it.

Initially, the idea of the federal government was that Senator Alexandre Silveira (Social Democratic Party, PSD of Minas Gerais) would file the PEC in the Senate if he accepted to be the government’s leader. But he has signalized that he will refuse the leadership after pressure from colleagues and the changing of government’s strategy, with the process starting in the House, where the government’s base is stronger. Mr. Silveira, in turn, is preparing an alternative PEC for the Senate that would contemplate the fuel tax release, and also the use of Petrobras dividends to finance a social fund to balance prices.

The text needs the support of 171 deputies to start being processed. As the Constitution and Justice Commission (CCJ) is not expected to be opened until after Carnaval [March 1], it is most likely that the speaker of the Chamber of Deputies, Arthur Lira (Progressive Party, PP of Alagoas), will decide on admissibility on a floor vote. After that, a special commission would be created and a rapporteur appointed to discuss an updated version of the PEC, within a period of 11 to 40 sessions.

For the economist and consultant Adriano Pires, president of the Brazilian Center for Infrastructure (CBIE), the PEC will have almost no impact on consumers, the same way that occurred with the exoneration of the PIS and Cofins on cooking gas, in effect since March, and diesel, which was valid for three months in 2021. “The government zeroed the PIS and Cofins on diesel, but as the barrel kept rising and the exchange rate kept depreciating against the dollar, the price went up,” he said. He believes that the PEC will also face opposition from the rural caucus and the states that produce hydrous ethanol, which today has a lower PIS and Cofins than gasoline. “If the tax is reduced for both, ethanol will lose a lot of competitiveness,” he said.

(Edna Simão and Estevão Taiar, from Brasília, and Marta Watanabe, from São Paulo, contributed to this story)

Source: Valor International

https://valorinternational.globo.com

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Brazilian soy bag breaks new record price

Soya Beans In A Bag Isolated On White Stock Photo, Picture And Royalty Free Image. Image 36302303.

The soybean bag reached R$200 in Brazil, a record not imagined until last year, and premiums at the ports are also six times above the average for this time of year, as a reflection of a dispute between foreign and domestic markets. With a 15% increase accumulated in 2022 in Chicago’s stock market, the oilseed will is getting closer to the historical value reached in the first half of 2021, of $16.42 per bushel. And the coming months may be even tenser.

The persistent drought that affects the South of Brazil, Argentina, and Paraguay, caused by the La Niña weather phenomenon, tends to make production in the three countries lower than previously calculated. As a result, for fear of product shortages, soybean importers, mainly China, are intensifying purchases from the U.S.

“China needs to buy a sizable percentage in April and May. This has created an uncommon situation, which is the simultaneous increase in values and export premiums,” says analyst Cristiano Palavro, with Pátria Agronegócios.

On Wednesday, in Passo Fundo (Rio Grande do Sul state), industries were already offering R$202 per soybean bag, according to consultant Vlamir Brandalizze.

And the premium in Paranaguá (Paraná state) – national reference – was between $1.10 and $1.20 for March, when the prices for this time of the year usually stay between $0.20 and $0.30 a bushel, says Etore Barone, with StoneX consultant.

“With shortages from other suppliers, the 2020/21 ending stocks in the U.S. will be reduced. And with the smaller crop here, the 2021/22 crop is already tighter. If there is no area increase in the U.S. for the April season, or if something goes wrong during the cycle, we will have a worldwide problem,” Mr. Etore adds.

In the last few days, a new round of estimates pointed out that the harvest loss in Brazil will be even greater than expected. At the beginning of the cycle, 140 million tonnes were expected. Then, with the drought problem, the expectation went to a range between 130 million tonnes and 135 million tonnes. Now, it has dropped one more level, to 125 million tonnes, among the main consulting firms.

According to Mr. Barone, the harvest loss in Argentina may reach up to 6 million tonnes, and it may reach between 4 million tonnes and 5 million tonnes in Paraguay.

“The dream of the Brazilian producer was for the bag to reach R$100, which happened in August 2020. Last year’s average was between R$150 and R$170 and now we foresee that it may reach more than R$ 200,” he evaluates.

The producer also has the exchange rate in his favor, still attractive despite the recent fall. “The dollar at R$5.30 makes the Brazilian soy bag very profitable,” adds Mr. Barone.

There is a fight today to keep the product in the domestic market, since the main crushers are in Paraná and Rio Grande do Sul, the states most affected by the drought, according to Mr. Barone and Mr. Palavro. In Paraná, StoneX’s initial harvest forecast was 22 million tonnes, but now is 15 million tonnes. In Rio Grande do Sul it went from 22 million tonnes to 12.5 million tonnes.

With such attractive figures, Mr. Palavro says that soybean negotiations in Brazil have regained pace. However, part of the farmers is delaying business to wait for even higher prices.

Source: Valor International

https://valorinternational.globo.com

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Nestlé launches social impact cereal bar

Nestlé inaugura Empório com produtos de todas as marcas em sua nova sede

Nestlé launched on Wednesday its first social impact food: a cereal bar with sale profits going entirely to NGO Gerando Falcões, which fights poverty in 1,700 poor neighborhoods in Brazil.

Called Gerando Falcões bar, the product is a global novelty of the multinational, present in 83 countries, and will initially be sold only on the internet, on platforms Mercado Libre and Empório Nestlé. “This is the first of many. My dream is to one day see, in supermarkets, exclusive shelves with all kinds of products, chocolates, cookies, coffees, whose profits are donated to social transformation,” said Nestlé Brazil CEO Marcelo Melchior.

The initial expectation, according to Carolina Sevciuc, head of digital transformation at Nestlé Brasil, is to generate R$1 million monthly, which will be allocated to the NGO´s iniciative Favela 3D.

The Favela 3D project — “dignified, digital and developed” — aims to restructure Brazilian poor neighborhoods to promote transformation through income generation, housing, citizenship, health, culture, education, and entrepreneurship programs.

This is the second major partnership announced by Gerando Falcões in less than two months. In December, Ânima Educação announced it will invest in courses in the communities where the project is being developed: Marte, in São José do Rio Preto (São Paulo state); Vergel, in Maceió (Alagoas state); Morro da Providência, in Rio de Janeiro; and the Boca do Sapo neighborhood, in Ferraz de Vasconcelos, Greater São Paulo.

“This initiative with Nestlé opens the way and will accelerate the development of social technologies. It can lead other companies to also want to create similar products, with actions that are institutionalized, that last,” said Eduardo Lyra, founder and CEO of Gerando Falcões.

According to Mr. Lyra, the NGO is supported by Kayma, an Israeli company run by Dan Ariely, a prestigious researcher in psychology and behavioral economics. The company specializes in creating digital solutions and methodologies that will help measure and assess the impacts of Favela 3D. “The goal is that it can be replicated in all the favelas in Brazil.”

The creation of the cereal bar involved the participation of 60 people, including employees of Nestlé and the NGO. There were more than 40 ideas presented, until reaching 12 final concepts that resulted in the bar. “We are starting sales through online channels because we don’t want to make this a chicken flight, but a hawk flight. We want all this learning, whether in distribution, in the price point, or in the investment made, to help us build something bigger, with sales that reach the whole of Brazil,” said Mr. Melchior.

According to Instituto Locomotiva, around 17.1 million people live in Brazilian favelas, equivalent to 8% of the population. Added together, they would form the fourth most populous state in the country, behind only São Paulo, Minas Gerais and Rio de Janeiro.

Source: Valor International

https://valorinternational.globo.com

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Central Bank raises interest to 10.75%, indicates slower pace in new hikes

Interest rates expected to rise more slowly now — Foto: Pixabay

With a resistant inflation that tends to burst again this year’s target, the Central Bank’s Monetary Policy Committee (Copom) this Wednesday raised the basic interest rate by 150 basis points, to 10.75% per year. The Selic has not been in double digits since July 2017, when it went to 9.25% from 10.25% per year.

“The Committee judges that this decision reflects its reference scenario for prospective inflation, a higher-than-usual variance in the balance of risks and is consistent with the convergence of inflation to its target throughout the relevant horizon for monetary policy, which includes 2022 and, to a larger degree, 2023. Without compromising its fundamental objective of ensuring price stability, this decision also implies smoothing of economic fluctuations and fosters full employment”, said the Central Bank in the statement released after the meeting.

According to the committee, in spite of the more favorable public accounts data, “uncertainties regarding the fiscal framework maintain elevated the risk of deanchoring inflation expectations and, therefore, the upward asymmetry in the balance of risks”

Copom signaled that from now on it will reduce the pace of monetary tightening, but reinforced that the Selic rate should advance “significantly into the restrictive territory” on the relevant horizon.

“This indication [of a reduction in the pace] reflects the stage of the tightening cycle as its cumulative effects will manifest themselves over the relevant horizon,” justified the committee in the decision statement. In practice, this means that the Selic is already at high levels and that it will still take some time for the effects on inflation to be noticed.

The Central Bank highlighted that the increase is compatible with the convergence of inflation to the targets over the relevant horizon, which now includes 2022 and, to a greater extent, 2023. The next meeting, in March, is the last in which the BC considers this year’s target for monetary policy decisions.

“The Committee judges that this decision reflects its reference scenario for prospective inflation, a higher-than-usual variance in the balance of risks”, the committee highlighted.

Although it indicated a deceleration in the rate of interest rate hikes, the committee highlighted the increase in its inflation forecasts and the risk of de-anchoring expectations for longer terms. In addition, he emphasized that “it will persist in its strategy until the disinflation process and the expectation anchoring around its targets consolidate”.

The decision was in line with the market consensus, which was for an increase of 150 basis points, as signaled by the monetary authority at the previous meeting, in December. At the time, the Selic was raised by 150bp, to 9.25% per year, and the committee said in its statement that it anticipated “another adjustment of the same magnitude” for the meeting on Wednesday.

This was the eighth consecutive hike in the basic interest rate.

In a survey carried out by Valor on Monday with 112 financial institutions and consultancies, the expectation was unanimous that the Selic rate would be raised this week by 150 bp, to 10.75% from 9.25% per year.

The interest rate shock began in March last year — when the Selic was at 2% — and has been applied to cool the economy in response to rising prices and higher expectations of rising inflation expectations for this year. The reflexes of the Selic can be seen in the financing of home ownership, government debt, productive investments and consumption.

In the anteroom of the Copom decision, the stock market and the exchange rate had a correction movement after a sequence of positive results.

Pressured by the banking sector, in which Santander’s less-good-than-expected earnings balance published by the bank, benchmark stock index Ibovespa returned to operate at the level of 112,000 points. The commercial dollar, on the other hand, surpassed R$5.30, but ended up losing strength in the last hour of trading and closed practically stable.

After adjustments, the reference index of the local stock market closed down 1.18%, at 111,894.36 points. Negative highlight of the trading session, Santander units fell 2.99%, pulling with them other shares in the segment: Itaú Unibanco shares fell 1.57%, while Bradesco common and preferential shares dropped 1.68% and 1.81%, respectively.

In the case of the exchange rate, the prospect of a higher Selic rate, which increases the differential with the outside world, weighs positively – one of the components of the attractiveness of any currency. After hitting R$5.3145 at the maximum of the day, the dollar closed at R$5.2754, a rise of only 0.09%. As a result, it remains at the lowest levels since September.

(Marcelo Osakabe, Gabriel Roca and Victor Rezende contributed to this story)

Source: Valor International

https://valorinternational.globo.com

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Industry resumes growth in December, but is still weak

Luana Miranda — Foto: Ana Paula Paiva/Valor

The Brazilian industry resumed growth in December (2.9% compared to November), even more than expected (1.6%, according do Valor Data), which helps to sustain a more positive view of economists for the GDP of the fourth quarter of 2021. The result, however, does not change the balance that 2021 was a challenging year for the sector, nor the prospect that 2022 will likely be a new period of contraction.

Industrial production had not recorded growth since May 2021 (1.2%). Besides these two months, there was a positive result in January (0.2%) and stability in November. As released on Wednesday by the statistics agency IBGE, 20 of the 26 activities analyzed rose in December, with vehicles (12.2%) standing out — the sector grew 20.3% in 2021, but still behind the 27.9% drop in 2020.

With the December result, the industry managed to be stable in the fourth quarter of 2021, compared to the three months immediately before, after three consecutive quarterly declines.

Three of the four major categories advanced in 2021, especially capital goods (28.3%), driven by agriculture and construction. The exception was semi- and non-durable goods (-0.5%).

Industry as a whole accumulated a 3.9% rise in 2021, the first year of expansion since 2018 (1%) and the highest annual rate since 2010 (10.2%). It was not enough, however, to offset the entire 4.5% drop in 2020, coming from -1.1% in 2019. “It is necessary to relativize the advance of 2021 with the losses of 2020 and 2019,” says André Macedo, manager of the Monthly Industrial Survey (PIM).

The industry is still 0.9% below the pre-pandemic level (February 2020) and 17.7% away from the highest level of the series (May 2011). The numbers for 2021 reflect a year marked, on the supply side, by more expensive production costs – such as higher energy tariffs – and the persistence of problems in global chains. On the demand side, high inflation eroded the purchasing power of families, which became even flatter as the labor market recovers with low-paying jobs.“

It was a good result to end the fourth quarter,” says Luana Miranda, economist at GAP Asset, regarding the rise in the industry in December. She recalls that October was “very bad” for the major sectors (industry, retail and services) and November brought mixed numbers, with the industry still in decline. Before the December PIM, Ms. Miranda projected a GDP of around 0.1% for the fourth quarter of 2021, a number that, now, “should go up a little bit,” she says.

The numbers reflect a year marked, on the supply side, by higher production costs – such as higher energy tariffs – and the persistence of problems in the supply chains. On the demand side, high inflation has eroded the purchasing power of families, which has been even more pressured with a labor market recovery based on precarious, lower-wage jobs.

Source: Valor International

https://valorinternational.globo.com

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Brazil Industrial Production Grew in December for First Time in 7 Months

Industrial Production in Brazil Back to Growth in August, but Pace Still Below 2018 - The Rio Times

SAO PAULO–Brazil’s industrial production rose in December, the first increase in seven months, as output of durable goods jumped and production of capital goods increased.

Production rose a seasonally adjusted 2.9% in December and fell 5.0% from a year earlier, the Brazilian Institute of Geography and Statistics, or IBGE, said Wednesday. The IBGE revised the number for November to flat in the month from a decline of 0.2% and left the figure for November from a year earlier unchanged at down 4.4%.

Brazilian industry has been plagued by the same supply problems that affected businesses around the world in 2021 as backed up ports, a shortage of containers and higher shipping costs got in the way of production. In Brazil, high unemployment and rapid inflation have also cut into demand.

Production increased in all the major categories measured in the report, with output of durable goods rising the most in the month at 6.9%. Production of capital goods increased 4.4%, output of consumer goods rose 3.1% and production of intermediate goods grew 1.2%.

Source: Market Watch

https://www.marketwatch.com/

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Embraer’s Eve will have four major business areas

Conheça a Eve, a marca de 'carros voadores' da Embraer | CNN Brasil

Eve, Embraer’s urban air mobility company, will operate in four major business areas and not only in the production and marketing of its electric vertical take-off and landing vehicle (eVTOL). On its way to being listed on the New York Stock Exchange (NYSE), it will operate in support and services, operations, and air traffic control, with the development of management software for the so-called flying cars.

“All the numbers available point to a large market. This is what attracted Embraer and led it to incubate this project in EmbraerX,” said Tuesday the Eve CEO, Andre Stein, at the Credit Suisse 2022 Latin America Investment conference.

According to the executive, this is a market of more than $750 billion by 2040, considering the urban air mobility ecosystem. For Eve, the initial conservative projections suggest potential revenue of $4.5 billion by 2030, with a 15% market share.

Launched as an independent startup in October 2020, Eve is in the process of merging with U.S.-based Zanite Acquisition, in a deal that values it at $2.4 billion. The deal was announced at the end of 2021 and is expected to close in the second quarter of 2022.

According to CFO Eduardo Couto, Eve plans to be listed at Nyse as of the second quarter. “This is a relatively new operation for Brazilian companies, mixing M&A with a traditional IPO,” he said.

Eve is joining an already listed company, which has about $237 million of cash. Another $305 million in new money will come into Eve’s cash reserves from the deal, so that after the merger the company will have raised more than $500 million to develop its project. Embraer will be the controlling shareholder, initially with an 80% stake in the company.

According to Mr. Stein, the decision to launch Eve as a company independent from Embraer will maintain the agility characteristic of startups while providing access to the resources and structure of a global leader, in this case the aircraft manufacturer. “Eve will be able to seek new partnerships very freely, and even new investors, which would not be possible as a division of Embraer,” he said.

With 17 announced partnerships and 1,735 aircraft in its order backlog, valued at $5.2 billion, Eve keeps plans to certify its eVTOL in 2025 and put it into commercial operation in 2026. The gross margin of the operation is expected to be around 25% and the EBITDA margin between 15% and 20%.

Four companies that are developing flying cars are already listed on the NYSE. But Eve’s management believes that its project is differentiated, given the size of the current order portfolio, the diversity of clients and the aeronautical knowledge of the partners, especially Embraer.

According to the executives, Eve also offers greater certification capacity, in the wake of Embraer’s accumulated experience with regulatory bodies and the close relationship between the National Civil Aviation Agency (Anac) and the FAA, the U.S. authority. According to Mr. Stein, the plan is to certify eVTOL first at Anac and then seek FAA validation. “Brazil has the potential to be one of the pioneers,” he said.

For Embraer’s Vice-President of People, ESG and Communication, Carlos Alberto Griner, electric propulsion corresponds to one of the main solutions for reducing the environmental impact of aviation — particularly in regional aviation, a market in which the Brazilian company stands out globally. “These changes will start with regional aviation. And Eve will revolutionize the market,” he says.

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Factory-gate inflation hit a record high of 28.39% in 2021

The so-called factory-gate inflation in the country, without taxes and freight, hit a record for the second consecutive year. This is what the Brazilian Institute of Geography and Statistics (IBGE) reported yesterday when announcing the Producer Price Index (IPP), the official indicator that measures price evolution in this segment.

According to the institute, the IPP fell 0.12% in December, down from 1.46% in November, favored by price drops in the mineral extraction industry, especially iron ore, in that month. However, the negative rate in the monthly evolution was not enough to prevent a record high of 28.39% in the annual IPP for 2021 – the most intense in the historical series that began in 2014, and well above 2020 (19.40%).

Several factors led to the result, according to the manager of analysis and methodology of the IBGE’s Coordination of Industry, Alexandre Brandão. Besides the appreciated dollar, he recalled, which makes imported inputs for production more expensive, raw materials commodities also became more expensive in 2021 due to a higher demand than supply. This was the case of iron ore, crude oil, chemicals, and food. All those factors in a pandemic scenario led to the disorganization of the industry’s global input chain, not yet completely fixed, observed the specialist.

When questioned about the possibility of a continued high in the indicator this year, the manager recalled that the IBGE does not make forecasts. However, he admitted that most of the reasons that led to the record high IPP in 2021 were not completely resolved at the beginning of this year. “The environment hasn’t changed much from the end of the year to here,” he acknowledged. “But we have to wait and see what will happen [with the IPP].”

When talking about the trajectory of the indicator, Mr. Brandão recalled that the IPP for the industry is formed by two indices: the transformation industry and the extractive industry. The transformation industry inflation rate was 0.63% in December, compared to 1.89% in November, while the IPP for the extractive industry was down 12.77% in December, after a retreat of 5.21% in November.

With the December performances, the factory-gate inflation for the transformation industry closed in 2021 with an increase of 29.24%, compared to a high of 18.18% in 2020. The IPP for the extractive industry, on the other hand, rose 13.83% in 2021. In 2020, the increase in the extractive industry was 45.35%.

Although both the extractive and transformation industries have contributed to the increase of the IPP in 2021, the latter had a larger impact in the formation of the spike of prices calculated by the indicator, said Mr. Brandão. He informed that the annual factory-gate inflation of the transformation industry also hit a record last year. “The prices of the transformation industry represent around 95.12% of the total indicator,” he recalled, adding that the strong weight, along with expressive high, drove the record IPP.

Among the segments that rose the most in price last year, the specialist cited oil refining and biofuels. “This segment had a price rise of 69.72% last year,” he added. The specialist commented that the area was strongly influenced by upward fluctuations in the price of a barrel of oil – which makes related derivatives more expensive, the analyst pointed out.

In practice, noted the specialist, it was not most segments, but those of greatest weight in the calculation of the IPP, which had a significant increase last year. In 2021, eight out of 24 activities of the extractive and transformation industries closed higher than the previous year. Besides oil refining, other highlights cited by Mr. Brandão were the price increases last year in food products (29.24%), other chemicals (64.09%), and metallurgy (41.79%). “The increases in these four [segments] explain most of the rise in the year [of the IPP],” he summarized.

Source: Valor International

https://valorinternational.globo.com

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Guedes confirms a moderate tax reduction is on the table

Paulo Guedes — Foto: Divulgação
Paulo Guedes — Foto: Divulgação

The Minister of Economy, Paulo Guedes, said Tuesday that the federal government is considering a moderate reduction in some taxes. Among them are those levied on diesel and the Tax on Industrialized Products (IPI). Guedes also criticized the idea of creating a stabilization fund for fuel prices.

“We are studying which taxes could be moderately reduced,” he said in a virtual event promoted by Credit Suisse.

Valor published on Tuesday that the government was evaluating to zero the IPI tax rate. At the event, Guedes was asked about the topic and the Proposed Amendment to the Constitution (PEC) of Fuels.

“It has always been part of our program that increases in tax collection would be transformed into tax simplification or reduction,” he said.

The minister pointed out that last year the collection grew by almost R$300 billion compared to 2020, of which R$100 billion were permanent gains.

“If they don’t want to make a overhaul of the Income Tax, this increase in collection will not be in the hand of a fat State,” he said.

According to Mr. Guedes, to reduce taxes, the federal government could give up, for example, 10% to 20% of the structural revenue growth. In this case, the primary deficit would grow from 0.4% of Gross Domestic Product (GDP) recorded last year to something around 0.6% to 0.7%, in his calculations.

According to the minister, the IPI reduction would serve “to benefit the industrial sector, mass consumption” and “reduce the incidence of taxes on the most fragile”. The collection on diesel is around R$ 18 billion per year.

“We could reduce this a little too,” he said.

In the case of the reduction of taxes on gasoline, Guedes was less favorable. According to him, it might not make sense to adopt a measure similar to a gasoline subsidy “if we are moving towards a green economy.”

He also said that “we are already starting to signal that we are going to reduce indirect taxes as well.

At the event, the minister was asked about the proposal to create a stabilization fund for fuel prices and sharply criticized the idea, considered by him to have little chance of success and to be expensive.

“More than 80 percent of [fuel] price stabilization funds in other countries have gone wrong,” he said. “Those that are alive cost the population a lot.”

Mr. Guedes pointed out, for example, that the first proposal on the subject indicated annual spending in the region of R$ 120 billion, “three times what the Bolsa Família was.” To him,

“It is easier to eradicate poverty than to subsidize gasoline.”

The minister also said that a possible second term of President Jair Bolsonaro (PL) would bring changes in fiscal policy. He said that the existence of so many fiscal rules is “unfortunate,” but said that now they are necessary because of the rigidity of the Budget.

“Is it necessary to have five, six, seven rules? I don’t think so,” he said. “As long as we don’t unbind, untie and deindex the Budget these rules are going to continue as containment, which is regrettable.” According to him, in a second mandate, “we would remake this logic of the Budget.”

For Mr. Guedes, the country is going through an “irreversible transition” and that “happens in many dimensions” towards a less centralized economy and with greater participation of the private sector.

(Lu Aiko Otta and Edna Simão contributed to this story)

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