LGBTQIA+ population spends 14% more in Brazil

According to survey by NielsenIQ, group spent R$10.9bn in 12 months through March; more brands support Pride Parade

06/17/2022

The LGBTQIA+ population spent R$10.9 billion in retail and e-commerce purchases in the 12 months through March, which represents 5.5% of the consumption of Brazilian households in the period. The average spending of this public, per household, is 14% higher than the general average. The data are included in an unprecedented survey conducted by the research company NielsenIQ in April and May this year.

The study heard representatives from 8,000 households in Brazil, in a representative sample of the Brazilian population profile, in addition to 2,300 online consumers. According to the survey, at least 5.5% of households in the country have at least one LGBTQIA+ member.

“This public is expressive and consumes at various levels, with specific characteristics and high purchasing power,” says Marcelo Osanai, head of e-commerce and pride at Nielsen IQ. He ponders that the percentage of 5.5% of homes with at least one LGBTQIA+ person may be higher than indicated by the interviews, since the question “if there is someone LGBTQIA+ in the house” is asked to a family member, who may not know or be embarrassed to answer. “It’s still a taboo question,” he says.

Even so, the study offers a glimpse of the profile of the “rainbow homes,” as they are called in the study. Most have more than one person and have pets; 29.2% have high income (compared to 27% of the general households); 13.6% have people with college or post-graduation degrees (compared to a general rate of 9.8%); they spend more on convenience products (ready-made food and beverages) and personal care.

Of all those consulted, 30% say they are willing to spend more with brands that support gender diversity. For 84.4% of the LGBTQIA+ households and 56.2% of the other households, the actions of companies in favor of this cause reflect positively on their image.

“Regardless of whether the household is LGBT or not, the influence of affirmative actions by brands is being noticed and generates real impact on the purchase decision,” says Mr. Osanai.

Companies are more attentive to this. The 26th São Paulo LGBT+ Pride Parade, which takes place this Sunday, has the sponsorship and support of 13 brands, such as Terra, Smirnoff, Burger King, Amstel, Mercado Libre, Jean Paul Gaultier and Vivo. “In the first years, we had practically no sponsorship. We heard from many companies it was a delicate topic,” says Diego Oliveira, member of the São Paulo LGBT+ Pride Parade Association.

The scenario began to change more strongly since 2016. In recent years, he highlights, the global LGBT pride movement has grown, as well as internal diversity actions in companies, which realized they needed to update.

This year, 3 million people are expected to take part in the event on Paulista Avenue and its surroundings. The first edition, in 1997, gathered about 2,000.

Telefónica’s Vivo is making its debut this year as a sponsor. “We have an extensive performance in diversity on several fronts. We believe that we have to have a very solid internal performance to reverberate outwards,” says Marina Daineze, director of brand and communication at Vivo. For five years the company has had affinity groups, as the groups of employees belonging to minorities are called, which are created to dialogue with all departments of the company.

“We know the power of communication in the formation of a more inclusive society,” says Rony Santos, manager of Diversity, Equity and Inclusion at Grupo Boticário. The company was one of the pioneers in showing gay couples in its advertisements. In 2015, its Valentine’s Day campaign, which featured men and women exchanging gifts with each other, generated much controversy and a lawsuit in the Brazilian Advertising Self-Regulation Council (Conar).

The group not only continued but intensified its work with topics related to diversity inside and outside the company. Its LGBT affinity group, with more than 400 employees, participates in product development meetings, as well as in the formulation of internal policies. In 2021, these meetings generated the Orgulho (Pride) line, which express support for the cause.

Two years ago, Alpargatas’s brand Havaianas created the Pride line with rainbow-themed flip-flops and clothing, with 7% of its profits going to actions for the LGBTQIA+ community. According to the company, the sales of the line, which has 30 items, generated R$2.4 million in donations by the end of last year.

Another brand that does not escape the controversies related to gender issues is Burger King, sponsor of the LGBT Parade in São Paulo since 2018. Last year, a campaign showing LGBT families through the eyes of children was the target of hate attacks on the social media. “It is an event that marks all our positioning and support to the cause of equity, inclusion and diversity,” says Juliana Cury, chief marketing officer at BK Brasil. “Those who connected and understood the message became more loyal to the brand.”

*By Luciana Marinelli — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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EU’s new environmental demands pave way for agreement with Mercosur

Bloc reportedly intends to wait for presidential election in Brazil

06/16/2022

Virginijus Sinkevicius — Foto: Silvia Zamboni/Valor

Virginijus Sinkevicius — Foto: Silvia Zamboni/Valor

The European Commissioner for the Environment, Virginijus Sinkevicius, told Valor that by the end of the year, the European Union may present to Mercosur its demands for additional commitments in the environmental front. This would give a new impetus to the bi-regional free trade agreement.

For Pascal Kerneis, managing director of the European Services Forum (ESF), the commissioner reflects the intention to wait until after the presidential election in Brazil, in October. The executive now says that, for the first time in a long time, he is optimistic about the direction of the European Union-Mercosur agreement.

The European bloc, since the beginning of 2021, has been talking about presenting Mercosur with a proposal for a side letter to the negotiated agreement, to mitigate a good number of concerns raised by several member states, mainly involving the protection of the Amazon.

Without mentioning internal differences between environment and trade, the commissioner argues that the delay is because the European Union needs to make the side letter compatible with the Green Deal, the European strategy for growth until 2050. The Green Deal is to be reflected in all major policies of the community bloc, including to meet issues raised by the European Parliament.

For Mr. Sinkevicius, the new geopolitical conditions do not influence the directions of the bi-regional agreement. “I don’t think it has a big impact, because we address issues that haven’t changed,” he said, apparently referring to persistent environmental issues in Brazil raised by some European sectors.

Asked if opposition to the European Union-Mercosur agreement had subsided lately, the commissioner replied: “Members of Parliament have the democratic right to raise their questions and I think they are legitimate questions to know whether our trade agreements are in line with our main policies. I think they should be in line.”

For Mr. Kerneis, the Brazilian election is on the radar, but what seemingly concerns him is the crisis in Argentina, with high inflation, social demonstrations and other turbulences.

“The stars may not be aligned between Brazil and Argentina,” he says. And the European Union needs to look more for the South American market, to compensate for lost business in other parts of the world.

He says, however, that he is now encouraged because the countries that will assume the rotating presidency of the European Union in the coming semesters are very favorable to the agreement with Mercosur. In two weeks, France will hand over the presidency of the European bloc to the Czech Republic, a major automotive producer. In the first half of 2023, it will be Sweden’s turn. And in the second half of next year, the presidency will be held by Spain.

The signing of the European Union-Mercosur agreement could thus have a chance to take place in the second half of 2023, with the Spaniards in the presidency of the European bloc, in the expectation of some sources.

The implementation of the free trade agreement between Mercosur and the European Free Trade Association (EFTA, formed by Switzerland, Norway, Iceland, and Liechtenstein) also depends on additional commitments by Brazil (and its partners in environmental protection) with the Europeans, a Swiss representative told a Brazilian negotiator this week in Geneva.

On the other hand, discussions with Asia are moving forward. Mercosur is expected to sign a trade agreement with Singapore in July. After that, it may start negotiations with Indonesia and Vietnam.

The European Union on Friday will relaunch in Brussels the negotiation of a trade agreement with India, one of the countries with the highest growth rate in the world. The expectation is to conclude the understanding by early 2024. The two sides have already been negotiating for 10 years, but the discussions were suspended due to India’s resistance to reducing tariffs on wine and car imports.

*By Assis Moreira — Geneva

Source: Valor International

https://valorinternational.globo.com/
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High prices drive beef, chicken exports from January to May

Main destination of Brazilian protein was China, up 91.3% year over year

06/15/2022

Driven by China and with significant increases in average prices, the country’s exports of beef and chicken grew in May and saw volume and revenue increase in the first months of the year.

The highlight continues to be beef, which faces lower consumption in the domestic market. The exports of this protein (fresh and processed) reached 176,000 tonnes and yielded $1.08 billion in May, according to data from the Secretariat of Foreign Trade (Secex) compiled by the Brazilian Beef Exporters Association (Abiec). Compared to the same month last year, volume grew 17.5% and revenue was 49.5% higher.

In the first five months of 2022, according to the association, the exported volume reached 887,300 tonnes, 25% more than in the same period of 2021, and revenue grew 55.9%, to $5.06 billion. The average sales price increased 24.7%, to $5,700 per tonne.

“This shows that Brazilian beef is being increasingly valued in the international market and that Brazil is consolidating itself as an important trading partner for the buying countries,” said Abiec’s head Antônio Jorge Camardelli in a note.

From January to May, the main destination of protein shipments was China ($2.9 billion, up 91.3% year-on-year), despite temporary embargoes imposed by Beijing to some Brazilian slaughterhouses because of the country’s Covid-zero approach.

Next comes the U.S. ($471 million, up 88% YOY), Egypt ($255.8 million, up 345% YOY) and the European Union ($212.8 million, up 29.4% YOY).

The exporters of chicken shipped 429,600 tonnes of protein last month, a volume 3.7% higher than in May 2021, the Brazilian Animal Protein Association (ABPA) reported Wednesday. The revenue from foreign sales grew 37.8%, to $904 million.

“The global inflationary framework, with rising production costs and strong demand for chicken in the foreign market, strengthened the average international prices, [which reached] levels above $2,000 per tonne,” said ABPA’s head Ricardo Santin in a statement. According to the executive, the exports performance in May helps to offset the impacts of the increase in the cost of inputs used in production (basically corn and soybean meal).

China was the main destination of Brazilian exports, even with the 8.8% drop in volume last month, to 50,200 tonnes. It was followed by the United Arab Emirates, Japan and the European Union, with shipments of 44,800 tonnes (+73.2%), 33,100 tonnes (+3.2%) and 26,300 tonnes (+80.7%), respectively.

From January to May, exports totaled 1.9 million tonnes, or 7.8% more than the same period in 2021. The revenue increased 33.6%, to $3.8 billion.

*By Fernando Lopes, Érica Polo — São Paulo

Vaslor International

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Chamber of Deputies passes bill that reduces tax on fuel, electricity

Federal government pushed bill through Congress to try and fight high inflation

06/15/2022

Arthur Lira — Foto: Paulo Sergio/Câmara dos Deputados

Arthur Lira — Foto: Paulo Sergio/Câmara dos Deputados

Chamber of Deputies passed Tuesday by 308 votes in favor and none against a complementary bill that cuts state tax ICMS on fuel, electricity, communications and public transport. Yet, technical problems in the lower house’s voting system meant that the conclusion will have to occur on Wednesday because two amendments from opposition parties were still pending. After this, the bill must be sent for President Jair Bolsonaro to sign it into law.

The problem with the conclusion is the lack of quorum. Most deputies had travel plans and the session on Wednesday, the day before a holiday in Brazil, would be empty. Chamber Speaker Arthur Lira (Progressive Party, PP, of Alagoas) apologized for the failure but determined that the absentees will lose part of their salaries to try and raise the number of voters.

Before the voting system failed, the lower house approved the Senate’s innovation of reducing to zero federal taxes PIS/Cofins and Cide on gasoline, ethanol and natural gas vehicle until December 31, without the need for the government to compensate for the revenue waiver. The exemption is already in force for diesel and cooking gas but has had little effect on final prices.

The bill that reduces the ICMS tax on fuel and energy is another attempt by the government to contain inflation.

Earlier on Tuesday, the federal government had requested Petrobras to wait a little longer before increasing diesel and gasoline prices, sources say. The administration wanted the oil company to hold the hikes until the bill to limit the sales tax ICMS to 17% on fuels, power, telecommunication services and public transportation was voted in Congress.

Estimates from sources close to Petrobras indicate that diesel is being sold at the state-owned company’s refineries 18% below the import parity price, while gasoline prices are 20% lower. The Brazilian Association of Fuel Importers (Abicom) estimates that gasoline and diesel sold by Petrobras were 16% below the foreign market on Tuesday. The consultancy StoneX calculated the need for a 23.1% hike in diesel and 10.4% in gasoline based on Tuesday prices.

Holding prices has become strategic for the government, given the high inflation and the elections calendar.

Valor found out that there was a meeting on Tuesday, between Petrobras CEO José Mauro Coelho and Minister of Mines and Energy Adolfo Sachsida in Brasília. The meeting was also attended by Petrobras chair Marcio Weber. Fuel price hikes were discussed in the meeting, but the issue was not solved, sources say.

Petrobras would be ready since Tuesday to increase the prices that would partially offset the diesel and gasoline disparity in the refineries. After the request of the government, however, it decided to wait, Valor has learned.

Some people believe that Petrobras is unlikely to hold a hike in the very short term, although political pressure may postpone it for a few days.

According to a survey by the National Petroleum Agency (ANP), the price of regular gasoline at gas stations in the Southeast region averaged R$7.160 per liter during the week of June 5-11. For diesel, the average price in the region was R$6.794 per liter in the same period.

At the same time, the delay to choose the new nominees for the Petrobras board continues.

The documents of the nominees have not yet all been sent for analysis by the Eligibility Committee (Celeg), linked to the Personnel Committee (Cope), which is in charge of evaluating the candidates’ compliance with the company’s internal rules and the state-owned company’s law.

The change in senior management at Petrobras is part of the government’s strategy to try and control fuel prices.

*By Raphael Di Cunto, Luísa Martins, Francisco Góes, Gabriela Ruddy — Brasília, Rio de Janeiro

Source: Valor International

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Banco do Brasil, Caixa compete for Crop Plan funds

Caixa has grown in agribusiness and wants bigger share; BB fears delays in releasing credits

06/15/2022

Soy planted in Mato Grosso: state-owned banks compete for clients in Brazilian farms — Foto: Ruy Baron/Valor

Soy planted in Mato Grosso: state-owned banks compete for clients in Brazilian farms — Foto: Ruy Baron/Valor

Banco do Brasil (BB) and Caixa Econômica Federal are fighting behind the scenes a fierce dispute for the funds of Crop Plan 2022/23. BB, which historically has always been the largest funder of the agricultural sector, fears that it may be left without a sufficient amount to meet the demand of its customers. Caixa argues that it is the largest bank in the country (in credit portfolio and number of customers) and that it makes no sense to stay out of a segment that represents almost a quarter of the Brazilian economy.

The imbroglio has even entered the radar of the Ministry of Economy, one of the organizations responsible for deciding how the funds will be divided. “There is a dispute for space, with Caixa trying to grow,” says a source.

Some in the sector fear that the competition will slow down the procedure to tap the funds. Following the jargon that there is a right time to plant, farmers need funding at the right time – as early as possible – to buy the technological package (seed, fertilizer, pesticides, machinery and so on) that will be used.

The dispute between the two government-controlled banks is not only technical, but also political. BB, led by Fausto Ribeiro, has the sympathy of the Ministry of Agriculture and also of several members of the rural caucus in Congress. Caixa, on the other hand, is led by Pedro Guimarães, who is close to Economy Minister Paulo Guedes and to President Jair Bolsonaro.

Valor has found that Caixa’s demand was over R$50 billion in subsidized funds, six times more than the R$7.3 billion operated in the 2021/22 season. BB wants R$60 billion, above the R$43 billion of this season. Altogether, the government is expected to release about R$120 billion in subsidized financing in the cycle that begins in July, above the R$88.5 billion in the previous year.

These subsidized funds are money lent by banks to rural producers through financing in Crop Plan lines, that receive government support in subsidizing interest rates. With this, instead of the farmer contracting operations with market interest rates, the government guarantees lower rates and subsidizes the difference in rates to lenders.

Last year, the Crop Plan had a total of R$251.2 billion, of which R$162 billion were non- subsidized funds, and R$89 billion were subsidized. BB took 48% of the subsidized volume. However, with the voracious appetite of Caixa and more and more banks participating in the program, the bank’s fear is to have an insufficient share to meet the demand of its clients. In this case, the borrowers can always go to another bank, but they would lose time to open an account, send all the documents and wait for the loan to be approved – which can take much longer.

The sector is in a hurry. The new Crop Plan begins on July 1st, which means that the government has a few days to arbitrate the dispute between banks and define who will get what. Passed in early 2020, the so-called Agro Law changed the program and the number of banks increased significantly. It went to 12 in 2021 from five that year, and is likely to reach 21 now, but Caixa is the most relevant.

A former secretary of the Ministry of Agriculture says that the teams that draw up the Crop Plan follow technical rules and that Caixa does not fit into many of them, which would reduce Mr. Guimarães’s chances of having his request granted. Still, considering the qualitative bias used by the government, it is possible that, politically, Caixa ends up winning a bigger slice.

“Caixa is pushing to divide the cake of the Crop Plan, which brings an unnecessary risk to the agricultural sector. We run the risk of ceasing to be the granary of the world,” a person familiar with BB’s plans said.

A source close to Caixa says that the bank has full operational capacity to meet the demand and that what irritated Mr. Guimarães was an attempt to exclude the bank from the program, and that the lender’s management team considers its debut in the 2021/22 harvest a success.

Operational capacity is one key point in the discussion. At the peak of the harvest, BB can do more than 4,000 transactions a day. In a recent presentation to the Parliamentary Agricultural Front (FPA), the bank’s CEO said that it executed 486,500 transactions in the current Crop Plan, while the cooperative system made 347,600, and Caixa only 11,700. BB says behind the scenes that Caixa failed to use all funds, an accusation rejected by the rival.

Sources say BB approached Caixa some time ago, seeking a greater synergy between the federal government banks. The idea was for BB to virtually leave the housing market for individuals and start distributing Caixa’s products in its branches. Caixa would give up agribusiness, leaving BB, which has more experience in the sector, to lead the segment. The proposal, however, would have been rejected by Mr. Guimarães, who argues that more competition is good for the system.

Behind the scenes and even in public events, Mr. Guimarães has already admitted that Caixa had some mishaps at the beginning of its operation, but that it has fixed them and has improved month by month. Proof of its success is that it went from eighth to second place in rural credit in two years. It plans to reach 100 agencies specialized in agribusiness.

In one of the most important agricultural shows, Agrishow, Mr. Guimarães was supposedly questioned by agricultural machinery manufacturers about the delay in releasing funds. On the stage of the event, he pushed back on criticism. “We were here and there are several criticisms in relation to Caixa. Great. That is why I am here, to learn. Today we are only ‘very bad’. The day that Caixa is ‘so-so’, we will be the biggest agribusiness bank in Brazil.”

At the beginning of the month, Caixa disclosed that it registered a monthly historical record of rural credit contracting in May, with R$6.1 billion granted for rural transactions. “The results highlight Caixa’s stance to support the Brazilian agribusiness, benefiting especially family farmers, such as fishermen and fish farmers, small and medium-sized rural producers, as well as cooperatives and agribusinesses,” the bank said.

Caixa’s foray in agribusiness makes sense because small producers often have a correlation with the social programs managed by the bank and also because it has a high potential to generate cross-sell, or the sale of more products to the same customer. Some crops have two or even three harvests per year. Besides this, farmers need credit cards, insurance, financing for machinery and so on. “In housing credit, Caixa will only see the client again 10 years later. In the case of agribusiness, they may see them three, four times in a year,” a source said.

Last month, when disclosing the bank’s earnings report, Mr. Guimarães commented that Caixa already uses 3% of what it raises in savings for rural credit and that it could reach the limit of 10%, if necessary. “We have total capacity to do housing and agricultural credit. We have R$10 billion for agro and we can go to R$36 billion.”

The bank has almost R$360 billion in savings deposits. Currently, Caixa does not comply with the percentages of directing savings to rural credit, which can be done with a communication to the Central Bank. If it opts for the hybrid system, it can maintain 90% of the volume in the real estate sector and allocate 10% to the rural sector. The bank would have an enormous amount of funding, but also the obligation to use these funds, under penalty of paying the financial cost to the Central Bank at the end of the harvest.

Mr. Guimarães had already said the bank has a market share of 4.5% in agribusiness and hopes to end the year with 10%, and that the plan was to achieve leadership by 2024.

Another crucial point that has opposed BB and Caixa is the Central-West Constitutional Financing Fund (FCO), which is operated by BB. Caixa thinks it is unfair that BB has exclusivity in the FCO and argues that this gives it an advantage in agribusiness, since the region concentrates the largest products in the country.

The FCO credit operations are subject to the so-called “del credere,” a commission of up to 6% received by BB due to the credit risk assumed. “With this fee, they can charge lower interest rates and endure a much higher default. We can’t compete with them. And 90% goes to big producers,” a source close to Caixa said.

BB and Caixa declined to comment.

*By Álvaro Campos, Rafael Walendorff, Estevão Taiar — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Analysis: Copom’s scenario for oil called into question

Future curve suggests barrel north of $110 by the end of the year, 10% above Central Bank’s main scenario

06/14/2022

The main scenario for oil prices used by the Central Bank’s Monetary Policy Committee (Copom) to fine-tune its interest rate policy is being called into question amid new pressures on the commodity.

The Central Bank adopted a scenario A for oil at its March meeting to avoid dealing with the volatility of prices, which at the time were over $120 a barrel.

Instead, the committee assumed that “oil prices follow approximately the futures market curve until the end of 2022, ending the year at $100/barrel, and then start increasing 2% per year in January 2023,” according to the English version of the minutes of the 245th meeting of the Copom.

Lately, however, the future curve suggests a barrel north of $110 by the end of the year, which means a 10% higher price. The Brent oil price was around $120 a barrel earlier on Monday.

Etore Sanchez, the chief economist of Ativa Investimentos, says that a portion of the fuel price used in the Central Bank’s models is formed from the opinions of industry experts. “Because it is discretionary, it can end up mitigating the worsening,” he said.

Mr. Sanchez estimates that the price of gasoline in the domestic market is about 35% below international prices. Many other market economists are finding similar spreads in their calculations, around 30%, and some believe that Petrobras will soon be forced to raise its prices.

This spread tends to mitigate at least part of the price drop expected if the government achieves all its objectives with a package aimed at cutting federal and state taxes, partly temporarily.

The fuel price hikes surprised Central Bank’s directors, who in recent statements have highlighted the fact that the Brent oil price is no longer such a reliable indicator of the evolution of prices of oil products.

Central Bank President Roberto Campos Neto — Foto: Billy Boss/Câmara dos Deputados

Central Bank President Roberto Campos Neto — Foto: Billy Boss/Câmara dos Deputados

As many had predicted, the adoption of scenario A by the Central Bank has made it difficult to keep inflation expectations in check. Many analysts have maintained the previous practice of projecting inflation based on the current price of the product.

This is one factor among many others that explain the detachment of the Central Bank’s inflation projections for 2023, which at the Copom’s meeting in May was 3.4%, from market projections.

Market expectations for inflation in 2023 are already at 4.6%, according to an analysis published Monday by Valor, compared with the Central Bank’s target of 3.25% for the year.

*By Alex Ribeiro — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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U.S. sees no political climate to lift tariffs on Brazilian steel

Restrictions on Brazilian steel were imposed in 2018 during the Trump administration

06/14/2022

Restrictions on Brazilian steel were imposed in 2018 during the Trump administration — Foto: Reprodução/Severstal

Restrictions on Brazilian steel were imposed in 2018 during the Trump administration — Foto: Reprodução/Severstal

The Biden administration has signaled to Brazil that it will not meet so soon the demand to review the quotas that limit the ingress of domestic steel in the U.S. market — although it has already made agreements with the European Union and Japan.

Valor has learned that the U.S. deputy secretary of commerce, Don Gaves, advised Brazilian representatives when he was in Brasília about a month ago that there was no political climate yet in the U.S. to deal with the review of the situation of Brazilian steelmakers.

However, the number 2 at the Commerce Department “promised to make the best efforts,” according to a source.

When asked recently in an interview about lifting tariffs on steel from China, the U.S. Trade Representative Katherine Tai said that “with respect to the tariffs, our approach, as with everything in this relationship, is to be strategic.”

The restrictions on Brazilian steel were imposed in 2018 during the Trump administration, despite President Donald Trump ideological affinity with the Bolsonaro administration. That was when Mr. Trump, amid trade tensions with China, decided that foreign steel threatened to “weaken national security” and imposed an additional 25% tariff on imports of steel products and 10% on aluminum imports, causing tremendous irritation in Washington allies who saw the measure as retaliation.

Of the $2.3 billion of steel that Brazil exports on average to the U.S. per year, 85% is semifinished products, that is, raw material for the American steel mills to make the final product.

Under President Joe Biden, the U.S. and the European Union reached in October an agreement whereby Washington kept the additional tariffs, but exempted a specific portion, allowing European companies to sell a certain “historical volume.”

Later, Washington struck a deal with Japan, another major ally, eliminating tariffs since April within an import quota of 1.25 million tonnes of Japanese steel — a volume still lower than the 1.8 million tonnes exported by Japan in 2018.

In the case of Brazil, the assessment in Brasília is that the Biden administration has no appetite to deal with trade. Last week, during the Summit of the Americas, the U.S. insisted on redesigning supply chains amid the new geopolitical situation, but showed nothing concrete, according to a source.

*By Assis Moreira — Geneva

Source: Valor International

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Foreigners to get more space in government procurement

Brazil takes to WTO proposal to expand access of companies in public bids

06/13/2022

Lucas Ferraz — Foto: Edu Andrade/Ascom/ME

Lucas Ferraz — Foto: Edu Andrade/Ascom/ME

In negotiations to join the Agreement on Government Procurement (GPA) of the World Trade Organization (WTO), Brazil will make this week a new offer that expands accession for foreign companies in the country’s public procurement. This includes giving more room for foreigners to participate in bids in financial services subsectors and also in more states.

On Monday, Brazil will also submit to the WTO the request for accession to the organization’s Agreement on Trade in Civil Aircraft, as revealed by the Economy Ministry’s secretary of foreign trade, Lucas Ferraz, who is in Geneva for the conference of trade ministers.

The secretary said the negotiations to enter the GPA are advanced, “with preservation of our public policy space, especially the one focused on stimulating small and medium enterprises, health, and science and technology.”

For him, “Brazil’s joining the GPA will represent a turning point in the fight against corruption in public procurement in the country, increasing the efficiency of public spending and aligning Brazil’s regulatory framework with international best practices.”

According to the secretary, after the internal consultation process, “the country will be able to make some movements in financial subsectors,” confirming that this includes the insurance area.

So far, Brazil has increased to 10 from 6 the number of states, plus the Federal District (Brasília), that will allow foreign participation in public procurement of goods, services, and works. But industrialized countries are asking for the inclusion of states with “substantial procurement volumes,” such as São Paulo, Rio de Janeiro and Bahia.

Mr. Ferraz informed that the number of states to be presented in the new offer will be substantially higher. “In recent weeks, we have had strong demand from federal entities to join the agreement, after clear evidence of its benefits for public administration,” he said.

The expectation was that it could be accepted at the current WTO ministerial conference in what is known as the “anti-corruption deal” in global trade rules. But the appetite of industrialized countries is great and demands for further concessions continue.

Australia presented new demands last week. One of them is for Brazil to offer access also to bids in construction services of the Ministry of Defense. It also asked the inclusion in the procurement list of the National Nuclear Energy Commission and the Brazilian Space Agency.

Brazil had already signaled that it could improve its offer but warned its partners to keep their feet on the ground, because it would not give the full opening demanded by some. The Brazilian evaluation is that what is on the table is already an ambitious offer, especially being the first Latin American country to join this agreement.

As for seeking accession to the WTO Agreement on Trade in Civil Aircraft, the goal, according to the Economy Ministry, is to try to facilitate the country’s access to a world market estimated at around $3 trillion. Brazil is the only relevant aircraft producer and founding member of the WTO still outside the agreement, which came into force in 1980 and brings together 33 members of the organization.

This agreement eliminates the import tax on civil aircraft, their parts, pieces and other goods used in air services. It also prohibits quantitative restrictions, licenses, and certifications that restrict trade and are contrary to the General Agreement on Tariffs and Trade (GATT).

A participation in the agreement, according to Brazil, has the potential to reduce the negative impact of the Covid-19 pandemic on the airline industry, aggravated by the war in Ukraine, according to the government.

*By Assis Moreira — Geneva

Source: Valor International

https://valorinternational.globo.com/
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Market expects new interest rate hike

Selic rate is expected to be raised to 13.25% on Wednesday because of worsening inflation and fiscal risk

06/13/2022

With the Selic policy interest rate already in double digits since the beginning of the year and in significantly contractionary territory, the Central Bank’s Monetary Policy Committee (Copom) meets this week to deliver a new interest rate increase. The market consensus points to a 50 basis points hike, which would take the basic rate to 13.25%.

The decision, however, became even more uncertain. The de-anchoring of inflation expectations for 2023 has intensified since the last decision and, in addition, the deterioration in the balance of fiscal risks has given additional support to the possibility of a further increase in the Selic in August – a scenario that has already been captured in the survey carried out by Valor.

The survey was carried out between Thursday and Friday, after the release of Brazil’s benchmark inflation index IPCA for May and included 91 financial institutions and consulting firms. The midpoint of the projections collected by Valor indicates that the Selic rate should be raised by 50 basis points this week and by another 25 bp in August, when it would reach 13.5%, at the end of the current monetary tightening cycle. In the survey released on May 30, the consensus pointed to a Selic rate of 13.25% at the end of the cycle.

The increase in expectations for the Selic rate comes in the wake of a further deterioration in expected inflation ahead. If, in the survey carried out before Copom’s May meeting, expectations for the IPCA in 2023 were at 4%, they are now at 4.6%. It is worth remembering the relevant horizon for monetary policy currently includes only calendar year 2023 and that next year’s inflation target is 3.25%.

Cassiana Fernandez — Foto: Divulgação

Cassiana Fernandez — Foto: Divulgação

“We expected that inflation would have already slowed down and the truth is that there is still inflationary pressure that is still very widespread and quite worrying in the composition,” notes J.P. Morgan’s chief economist for Brazil, Cassiana Fernandez. She also notes that this process has been reflected in the increase of inflationary expectations, especially in the relevant horizon for the Central Bank’s actions.

On Friday, J.P. Morgan began to see, in its baseline scenario, an even more extensive cycle of monetary tightening, with a final increase in the Selic in August. Ms. Fernandez notes that the Central Bank has promoted a very aggressive tightening cycle, raising the Selic by more than 1,000 bps since March 2021, which justifies the feeling that the cycle is nearing its end.

“The point is that it is still difficult to calibrate that end. And that is why I expect the Central Bank not only to deliver a 50 points hike, signaled in the last communication, but also to leave the door open for future movements, recognizing that, since the last meeting, there has been a worsening in the inflation scenario,” she says.

Fernando Gonçalves, superintendent of economic research at Itaú Unibanco, says it is unlikely that the Central Bank will interrupt the tightening cycle on Wednesday. “Even with the slightly better IPCA number for May, the cores are still extremely high and inflation has all the peculiarities of being persistent, quite widespread,” he says.

Itaú understands that Copom may indicate it foresees a new Selic increase in the August meeting. For Mr. Gonçalves, the statement may be similar to the last month’s decision, in which the committee gave strong signals, but opted to leave the next steps of monetary policy open, depending on the data.

Besides the two 50-point interest rate increases expected by Itaú, Mr. Gonçalves believes that in order to materialize the process of convergence of inflation expectations to the target, interest rates will need to remain at a high level for a very long period. “We can only see a cut in interest rates in the middle of next year. We know that long periods of relative stability in the Selic are not common in Brazil, but it will need to remain stationary to start exerting a greater influence of interest rates on the economy,” he argues.

Valor’s surveys have already captured an upward trend in expectations for the Selic rate at the end of 2023. Before the Copom meeting in May, the midpoint of the projections pointed to a basic interest rate of 9% next year. Now, the expectation is for a Selic at 9.75%, when bets that it will remain above 10% have increased.

The effort to try to cheapen fuel prices via tax exoneration is a fact expected to increase the uncertainties in the decision. “It has a considerably large deflationary potential, but the impacts would be temporary. Besides, the measures imply a worsening of the fiscal framework. As the discussion is ongoing, it may enter laterally in monetary policy via the balance of risks,” says economist Leonardo Costa, with ASA Investments.

For him, the measures worsen the balance of risks for meeting the targets in 2023. “Observing the attempts to control administered prices, I consider it an additional risk for the balance next year. Obviously you gain in inflation in the short term, at the cost of higher inflation in the medium term,” he points out.

Elisa Machado, chief economist at ARX Investimentos, who expects a Selic at 13.75% in the cycle, also believes that Copom may leave the next steps open, given the increased uncertainty and risks.

“Not only because of this view that there is no relief on the inflation side, but also because of these changes in [sales tax] ICMS, [social taxes] PIS/Cofins… On the one hand, this represents an increase in fiscal risk and. On the other hand, there would be a reduction of inflation in 2022, which would rise again in, disrupting the relevant horizon and throwing up inflation expectations for 2023,” emphasizes Ms. Machado.

Camila de Faria Lima, chief economist at Canvas Capital, defends a more open communication by the Central Bank given the high level of uncertainty. “However, I understand that if the Copom is effectively foreseeing the end of the high cycle, it would be better to make this vision explicit and, thus, guide market expectations,” she says. For her, this could happen with the indication of yet another residual hike or with the indication that the hike to be implemented this week marks the end of the cycle.

In its basic scenario, Canvas projects the Selic at 13.25% at the end of the cycle and 10% in 2023. Ms. Faria Lima recalls that the basic interest rate is already at a very contractionary level and that the most forceful effects on the economy are expected to appear in the second half. “Taking these aspects into account, in my opinion it is completely justifiable, in the scenario we have, to establish a credible inflation target for next year, extending the convergence to the center of the target to 2024,” she says.

Victor Candido, chief economist of RPS Capital, also adopts in his basic scenario the end of the cycle this week, with the Selic at 13.25%, although he points out the risks of a new high in August. For him, the Central Bank has already fulfilled the main part of its cycle and now only a “fine adjustment” remains. “I believe it will make the 50 bp hike that is priced into the curve and say it needs to evaluate the international scenario, the new internal risks and see how inflation itself will behave,” he predicts.

*By Victor Rezende, Gabriel Roca — São Paulo

Source: Valor International

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