Most fintechs are in search for capital

Global crisis and local factors reduced investor appetite, survey by PwC and ABFintechs shows

08/29/2022

At a time of scarce IPOs and fewer, smaller checks from venture-capital funds, 80% of fintechs are seeking capital or intend to do so in the next 12 months, according to data by Fintech Deep Dive 2022, a survey held by PwC in partnership with the Brazilian Association of Fintechs (ABFintechs). The study found that 69% of fintechs finance their activities with their own funds.

“The crisis has reduced investors’ appetite for risk. Currently, there is little availability of venture capital to finance startup innovation due to some investments being frozen because of elections in Brazil and uncertainties related to prices and interest rates around the world, which were aggravated with the invasion of Ukraine by Russia in early 2022,” the study says. A 56% share of the 156 fintechs heard say they have never participated in an investment round.

Among the fintechs that managed to raise funds in the last year, 49% raised between R$1 million and R$10 million. Among those seeking funds, 60% intend to receive between R$1 million and R$30 million.

Diego Perez, head of ABFintechs, said that the interviews were conducted in March and April, but with data referring to 2021. In other words, they do not yet capture the effects of the war in Ukraine and monetary tightening in the United States. Investments in fintechs are expected to drop even further this year. “I don’t understand the movement of previous years as a bubble, but perhaps more adverse scenarios, such as the pandemic and geopolitical tensions, have been underestimated or even ignored,” he said.

According to him, the current moment is one of the more selective investors, but with the capacity to make investments. “These investments are being held back at the moment, but there is always recovery after a storm. Investments are expected to decrease this year, but they are not going to disappear. They are waiting for the right moment to come.”

Luís Ruivo, a partner and financial services consulting leader at PwC in Brazil, said that the segment has consolidated in recent years. The boom of new companies seen five years ago is in the past, but those fintechs that managed to stand alone often did so supported by a large customer base, but still without cutting a profit. “They all have in common the pioneering spirit of entering underserved markets using the right recipe. Today, however, the spaces are occupied even by fintechs, and the challenge is to grow and generate profitability against a backdrop of scarce investment capital.”

Currently, 31% of fintechs invoice up to R$350,000 per year. In the previous edition, 38% said they had no revenue. Those with revenues over R$10 million total 16%. Although 65% expect to double their revenues this year, only 35% were able to break even. Breaking companies down by segments, 21% operate in credit, 16% in means of payment, 13% as digital banks, 8% in financial management, and 8% in investment management.

According to Mr. Perez, with ABFintechs, many startups began with payment means because of the regulatory opening promoted by the Central Bank in 2013. In 2018, credit fintechs were created, and now this segment is starting to mature. “In the macro scenario, we are at a time when there is high demand for credit and many micro and small businesses, which are not served by banks, are starting to turn to alternative sources, such as digital lenders,” he said.

In addition to credit supply, one area that fintechs are strongly turning to is open banking. A 43% share says they develop solutions for both open banking and Pix (Central Bank’s instant-payment system); 15% do so only for Pix; 13% do so only for open banking, and 28% are serving neither. “Most fintechs say they are already reaping or about to reap benefits from their investments in solutions related to open banking and Pix. After the mass adoption of Pix by Brazilians, companies still see opportunities to explore the new payment method to diversify their product and service offerings and draw customers. Likewise, open banking has not yet fully shown its potential to transform the market,” the study says.

Among the greatest difficulties cited by fintechs are drawing qualified human resources (56%), obtaining investment for the business (51%), achieving scale (41%), having brand recognition (38%), and generating revenues (29%). For the head of ABFintechs, there tends to be an improvement in the first item, either by the crisis in the cryptocurrency segment and the wave of layoffs it has been causing or by the devaluation of the euro against the dollar, which makes European IT professionals cheaper to hire – which will possibly reduce the pressure of U.S. companies on human resources in Latin America.

*By Álvaro Campos — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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Twitter tests live-stream shopping model in Brazil

“Live commerce” is aimed at drawing advertisers and increasing revenues in the second half of the year, when major events such as the FIFA World Cup take place

08/28/2022

Fiamma Zarife — Foto: Silvia Zamboni/Valor

Fiamma Zarife — Foto: Silvia Zamboni/Valor

Twitter, one of the most popular social media among Brazilians, began testing the live-stream shopping model in the country. The so-called “live commerce” is one pillar to attract advertisers and increase revenue in this second half of the year, when major events such as the FIFA World Cup in Qatar, Black Friday, and year-end holidays take place.

“We are sharing a lot with brands the increase in conversations about the World Cup on the platform because it will definitely be one of the biggest events within Twitter this year,” Fiamma Zarife, Twitter’s country manager for Brazil, told Valor.

Twitter launched live-streamed product sales last year in the United States. “We had a simultaneous audience of 2 million people in a Walmart live commerce,” the executive said.

Although Twitter is not a short video-centric platform like TikTok, Kwai, and Instagram, Ms. Zarife says that video content generates conversations on the platform and accounts for 50% of the audience, currently. “We have a symbiotic relationship with TV in content like reality shows, soap operas, and soccer, which are passions of Brazilians,” she said.

But she also considers that the economic situation is complex. “Today we have a difficult macroeconomic scenario for the whole world, not only in Brazil, which leads companies to be more cautious and assertive with marketing investments,” she said. “We know that media investment is a reflection of the economy, but we take a very positive look at how Twitter can join these major events with an influential audience, which is much more opinionated.” In the political field, in particular, Twitter is considered an important social media and is used by politicians and their followers.

This year’s Brazilian elections, with the first round of voting scheduled for October 2, are stirring up the social networks. But it is during the soccer World Cup and Black Friday that Twitter and its competitors see more opportunities to make money with video advertising, live sales, and content produced by influencers.

Meta, the parent company of WhatsApp, Instagram, and Facebook, had the largest share (26%) among digital networks in advertising investments between January and the end of July, according to Nielsen, followed by Google’s YouTube, with 22%.

Meta’s strategy to draw advertisers – the company says there are 200 million worldwide – is to turn advertising into a natural part of users’ navigation. “We combine our business solutions with the way people use our products naturally. That’s why we have invested in so many ways to create a personalized, seamless user journey from the moment people meet a brand to the moment they buy a product,” said Conrado Leister, Meta’s managing head for Brazil.

Video ads, especially long-form ads, are a major bet. “Video is a big part of why people like our apps — there are a lot of opportunities tied to this format on our platforms,” says Mr. Leister.

Globally, more than 2 billion people watch ad-eligible videos each month on Meta’s platforms, and 70% of video ad views on Facebook ads are seen in full.

Meta’s managing head in Brazil says that “short videos are a success. But long videos generate greater audience adherence to ads on the company’s networks.”

Videos also guarantee longer permanence of users in social networks and, consequently, greater exposure to advertising.

“With the increase in consumer dwell time on social media and more information collected about their interests, social media becomes a good channel to generate both brand creation and short-term sales,” said Sabrina Balhes, Nielsen’s measurement leader in Brazil.

Kwai, a social video network known as Kuaishou in China, saw a 200% jump in the dwell time of Brazilian users on the platform last year. Currently, more than 45.4 million monthly active Brazilian users of Kwai spend on average 60 minutes a day on the platform.

Soccer is one key topic among the platform’s content to draw audiences and advertisers. In September last year, Kwai signed a two-year sponsorship deal with the Brazilian Football Confederation (CBF), which provides exclusivity in the production of short videos for the platform on the official profiles of the men’s and women’s national teams, including backstage and training sessions.

For the World Cup, the company has begun to plan special content and filters. “We will make a strong correlation with content about the event,” said Mariana Sensini, Kwai’s country managing director in Brazil. “Our research shows that users want entertainment.”

The social-media website also seeks to foster content created by social media influencers. Between March 2021 and April this year, Kwai invested R$250 million to pay 20,000 content partners in Brazil.

On Black Friday, Kwai bets on live-streamed sales. This model was launched in October in Brazil with retailer Casas Bahia.

This year, advertisers are likely to combine campaigns for the World Cup, Black Friday, and year-end holidays, said Ms. Balhes, with Nielsen. The idea is that “instead of creating a specific advertising campaign for each event, advertisers will work with umbrella campaigns that encompass the year-end sales,” she said.

Consumer confidence in social media is a key point for advertisers to direct their campaigns to this audience. According to a Nielsen study conducted in September 2021, 64% of Brazilians say they trust ads on social media. In another survey, from June, 39% said they have already bought some products promoted by social media influencers.

For the social media Pinterest, the World Cup brings the opportunity to capture the desires of Brazilians who seek decoration, fashion, and style references around the event. “With a lot of competition among social media for soccer, we decided to act on the cultural side of the World Cup,” said André Loureiro, Pinterest’s managing director for Latin America.

The social-media website is also preparing the launch of a public data tool about the behavior of its users, like Google Trends, which should go live before Black Friday, providing more elements for advertising campaigns on the platform.

“Combining the seasonality of Black Friday with the World Cup, at the same moment of the year, we have a great expectation of return in the fourth quarter,” Mr. Loureiro said.

*By Daniela Braun — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Government postpones super terminal project in Santos

Auction is seen as materializing only after port privatization, which depends on presidential election

08/29/2022

BTP is one of the port’s container terminals — Foto: Ana Paula Paiva/Valor

BTP is one of the port’s container terminals — Foto: Ana Paula Paiva/Valor

The federal administration gave up on auctioning this year a new “super terminal” at the Port of Santos, which is expected to expand container handling capacity by up to 40%. Depending on the election results in October, the new terminal – also known as STS10 – will be put on the block only after the privatization of Santos Port Authority (SPA). The studies for that are expected to reach this week the Federal Court of Accounts (TCU), a public spending watchdog not related to Brazil’s Judiciary system.

The change in plans was caused by problems in the studies made by the state-owned company Empresa de Planejamento e Logística (EPL), which will have to be updated, and to competition issues, sources say.

The volume of investments initially calculated in the study, around R$2.2 billion, would have to be updated by 50% because of inflation and the higher prices of the main inputs.

Competition is another concern. Three smaller terminals currently handle vehicles and other break bulk cargoes, such as wind turbine blades and transformers, in the area where STS10 would be built. It is still unclear how cargo flow would be accommodated after the containers arrive.

The studies will be updated because of that, which puts the auction back at an earlier stage than today’s port privatization process. “The end of an administration is not the best moment for such decisions,” said an official that follows the case closely.

The outcome will also depend heavily on the election. If President Jair Bolsonaro is reelected, the privatization of the Port of Santos is likely to be concluded in the first half of 2023, and the “super terminal” would have to be auctioned by the port’s new private-sector owners.

The Ministry of Infrastructure planned to auction the terminal before privatizing the port, but the second option turned out to be the more feasible one. “It was very much reliant on the pace of one project and another. As the STS10 ended up being delayed, they made this decision,” a source within the government said.

In this new scenario, privatization may include some additional requirements, such as maintaining an area in STS10 to handle vehicles and wind power equipment.

If former President Luiz Inácio Lula da Silva wins the election, the original plan is likely to remain in place. Advisors to the Workers’ Party (PT) have already said Mr. Lula da Silva does not intend to privatize the port. In this case, the container “super terminal” would be auctioned by the government, accordingly to the current model.

Designed to revamp the port and encourage competition, the new terminal has the potential to attract R$1 billion in fixed concession payments. If the concession takes place even after Santos is privatized, the government would have to increase the fixed concession payment to offset the loss of such an asset.

STS10 will have a similar capacity to that of Brasil Terminal Portuário (BTP) and Santos Brasil terminals, which today are competing fiercely for leadership in container handling.

According to the current design of the auction, BTP could not make a bid. However, the company’s controlling shareholders – Maersk’s APM Terminals and MSC’s TIL – would be able to participate separately.

According to preliminary studies, the new terminal will have a static capacity for up to 47,500 TEUs (20-foot equivalent units of containers) at the end of the contract, in a total area of 463,800 square meters.

To offer a glimpse of what the investment foresaw in the implementation of the super terminal means, the government has called the bidding for STS08 and STS08A, two terminals for fuels, “the largest port concession ever.” Both terminals will be auctioned in November and will receive a combined capital expenditure of R$950 million.

*By Murillo Camarotto, Daniel Rittner — Brasília

Source: Valor International

https://valorinternational.globo.com/

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Customers can pay for purchases with a smile in 6 states

Facial recognition system allows customers to pay in stores without using an electronic device or a card

08/26/2022

Eladio Isoppo — Foto: Nilani Goettems/Valor

Eladio Isoppo — Foto: Nilani Goettems/Valor

When making a purchase, consumers want to avoid queues or time-consuming bureaucracy. To solve this, startup Payface brought to the market a new means of payment that simplifies operations in retail.

The solution uses facial biometrics technology and connects the entire ecosystem of payment methods, including credit cards, private label credit cards, wallets, acquirers and sub-acquirers. Users are not required to use any device or card. Payments are approved through face recognition – it takes a simple glance at the device installed at the cashier.

Payface’s first client was São Paulo-based supermarket St Marche, which saw broad acceptance since the innovation was put in place three months ago. “We are in 500 points of sale in six states,” said Eládio Isoppo, the fintech’s CEO and co-founder. The list of clients include supermarkets Zona Sul (Rio de Janeiro), D’ Ville (Uberlândia, Minas Gerais), Frade (Ilhabela, São Paulo), and Muffato (Paraná). The solution is also in use in Santa Catarina and Bahia.

Customers like it because operations are instantaneous and do not require point-of-sale terminals, cards, or intermediaries. “The consumer can go for a walk and stop at the supermarket to shop, without having to present any document, card, or cell phone,” Mr. Isoppo said. Payface’s next move is to expand to pharmacy chains and smaller stores. To do so, it is seeking partnerships with issuing and acquiring banks to reach small and medium retailers.

The security of the new payment method is in the technology behind the solution, Mr. Isoppo said. Payface holds a PCI Compliance certificate, which attests that the company follows the necessary security rules in processing card data. The consumer’s registration on the Payface platform gathers data such as the tax ID, payment method, and facial biometrics, and is integrated with the software installed in the retail chain. The insertion of the means of payment uses tokenization (the process of replacing real data with equivalent data, with the same format and protected by cryptography).

The development of technologies to reduce reliance on passwords and improve the experience by eliminating friction in data validation has advanced. The process, called passwordless authentication, is also being adopted by the financial system.

A survey by consultancy Netbr, conducted with the support of its global partner Ping Identity, showed that 77% of the lenders already execute – or are about to do so – some kind of passwordless electronic operation. “We are talking about the same standards used by big techs, now being adopted by the financial industry,” said André Facciolli, CEO of Netbr. According to him, four of the six largest Brazilian banks use the technology in authentication and authorization processes.

Another advance was the use of benefits for employees, such as food and meal vouchers. Bee Vale’s application, with multiple wallets, allows contactless payments by mobile phones. Daniel Oliveira, CEO of paySmart, a fintech that processes payments for companies and has Bee Vale as a client, said that the near field communication (NFC) technology is present in most cell phones and is an option for electronic payments.

*By Fatima Fonseca — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Bamaq unveils R$700m investments by 2025

Group with interests in heavy construction equipment, luxury cars expects to reach R$2.2bn in revenues this year

08/26/2022

Clemente Faria Junior — Foto: Maria Tereza Correia/Valor

Clemente Faria Junior — Foto: Maria Tereza Correia/Valor

Bamaq, a group with interests in heavy construction equipment, luxury cars, financing, and car insurance, plans to invest R$700 million by 2025 to expand current businesses and enter new services. The group ended 2021 with revenues of R$1.6 billion and expects to reach R$2.2 billion this year, up 37.5%. The expected profit for this year is R$108 million.

The largest investment will be made in a new business focused on leasing of heavy equipment (such as backhoe loaders and motor graders), trucks, and utility vehicles for construction. The group represents the brands Iveco, New Holland Construction, FPT Powertrain Technologies, and Continental in 14 states.

The group will also invest in opening a fintech, expanding a new tire sales business, opening new heavy equipment and luxury car dealerships, expanding a remote equipment management service, and expanding insurance services.

The CEO of the Bamaq Group, Clemente Faria Junior, said that by 2023 an investment of R$134 million will be made with own funds in the structuring of the heavy equipment and truck rental business. “From the second year of operation on, the intention is to finance half of the amount to be invested,” he said. The executive’s forecast is to make investments of R$160 million in 2024 and R$204 million in 2025, totaling R$498 million in three years. Mr. Faria added that most funds will be invested in the acquisition of a fleet for rental.

“Customers used to want to buy heavy equipment, but today there is growing demand for the use as a service model,” the executive said. He noted that the heavy machinery sales business now has 40,000 customers. For each heavy machine purchased, the same customer uses, on average, three trucks on the construction sites. And a portion of customers do not have funds available to acquire the entire fleet but are interested in the rental model.

Mr. Faria said that even the demand for the purchase of heavy equipment in Brazil is heated, mainly because of the demand from large agribusiness producers located in the region known as Matopiba — named after the four bordering states of Maranhão, Tocantins, Piauí, and Bahia. “Agribusiness accounts for 30% of our sales,” the CEO said. Besides equipment sales, the group sells auto parts, tires, and lubricants. It also does equipment maintenance and remote fleet management.

The area of heavy machinery and trucks operates today with 14 business units and revenues of R$672 million in 2021. This year, Bamaq foresees the opening of Iveco and New Holland Construction units, two of them in Marabá (Pará), one in Sinop (Mato Grosso) and one in Luís Eduardo Magalhães (Bahia).

Another bet in the heavy machinery area is the sale of Koneq, a remote telemetry service that allows the remote management of equipment. The service controls engine temperature, the hydraulic system, fuel level, machines in operation, and the electric fence. Currently, there are 940 pieces of heavy equipment in the field in the country monitored by this system. The goal, according to Mr. Faria, is to reach 3,000 systems installed within 12 months. Bamaq invested R$5 million to develop the technology and will invest more R$5 million in 2023 in the service.

In the area of luxury cars, which accounts for 25% of the group’s revenue, there are plans to open a Porsche store in Salvador this year. Bamaq is also investing in the expansion of the consortium for luxury vehicles. The group has Mercedes-Benz and Porsche dealerships and represents both brands in Minas Gerais. “We have just been appointed to represent Porsche in Bahia. The store in Salvador, expected to be opened in the fourth quarter, will be the first in the state,” said Mr. Faria.

The CEO said that vehicle sales grew 22% in the 12 months through June. “Today we have 1,200 people waiting in line for a Porsche, 400 waiting for a Mercedes-Benz, and 550 waiting for the delivery of heavy equipment,” said Mr. Faria. According to the executive, industries face difficulties to meet the heated demand of consumers in the post-pandemic due to lack of parts.

In this scenario, the group sees as an alternative to help control customer anxiety a successful Brazilian institution, the so-called “consórcio”. It’s a kind of buyer’s club, a purchasing pool through which a group of people pays monthly installments on a certain item, such as a car or a house so that every month the group can afford to buy one. In 2021, said Mr. Faria, the “consórcio” business grew 180% compared to the quotas sold. The volume of commercialized credits grew 89% and the portfolio increased 82%, surpassing 20,000 active clients.

Another bet of Bamaq is in the financial industry. The group has filed a request with the Central Bank to open a fintech, which will offer financial products and services by digital means, including vehicle and heavy equipment financing, loans, credit cards, and acquisition of receivables. The fintech will be composed of a direct credit company (SCD) and a credit rights investment fund (FIDC). The portfolio is expected to reach R$100 million in the first year, R$500 million in the second year and R$1.7 billion in five years.

Bamaq was founded in 1974 by Clemente Faria, grandson of the banker who founded Banco da Lavoura, in 1925, also named Clemente Faria. In 1971, his sons Gilberto and Aloísio Faria split Banco da Lavoura into Banco Bandeirantes and Banco Real, which were later sold to Caixa Geral de Depósitos (today Itaú-Unibanco), and ABN (today Santander). In 1974, the banker’s grandson, Clemente Faria, founded Bamaq, which started as a Fiatallis dealership (today New Holland Construction). The group operates in 16 states in the Northeast, North, Central-West, and Minas Gerais, employs 770 people, and has just over 70,000 active customers.

*By Cibelle Bouças — Contagem, Minas Gerais

https://valorinternational.globo.com/
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Bradesco expands investments in Mexico

Bank seeks to double its 3 million-user base and multiply its portfolio by four in five years

08/26/2022

Octavio de Lazari Junior — Foto: Leo Pinheiro/Valor

Octavio de Lazari Junior — Foto: Leo Pinheiro/Valor

Bradesco has announced the acquisition of Ictineo Plataforma, a popular financial institution (sofipo) that operates with individuals in Mexico, strengthening its first and only international retail operation. The deal will give access to regulatory authorization to distribute new products in the country.

The bank has been operating for 12 years in the Mexican market and has about 3 million clients of white label and branded cards. The acquisition was made through subsidiary Bradescard México.

The goal is to, at least, double this user base and multiply the portfolio by four in five years — although the bank does not reveal how large the portfolio is now. The value of the transaction was not disclosed.

According to Bradesco, Bradescard México is one of the leading consumer finance companies in the retail chain segment but does not have a license to work in other financial business fronts because it operates as a limited liability company in Mexico.

“The acquisition of the Ictineo Plataforma institution will open a new financial business front for us with high growth potential in Mexico, a country with several attributes, such as being the second largest GDP in Latin America,” Bradesco CEO Octavio de Lazari Junior said in a statement. “We will have the possibility of expanding our operations to be similar to a digital bank to gain a more robust presence in a relevant market such as the Mexican one,” he adds.

Recently, Mr. Lazari had already suggested that he intended to expand the operation in Mexico, which has a market similar to the Brazilian one. He even said that the movement could include the creation of a digital bank, stating that it could take one of the brands used here in Brazil there: “There is no digital bank called Digio in Mexico,” he said.

Alexandre Monteiro, head of Bradescard México, said that the goal with the purchase of Ictineo is to focus on a digital strategy. “The first step will be to offer digital accounts, payroll-deduction loans, and investment accounts,” he said in the note. “It is a relevant move to consolidate Bradescard in the Mexican financial market.”

Bradescard México has plans to carry out the distribution of other products, such as car financing and housing credit. In the credit card segment, in five years Bradescard intends to be among the largest card issuers in Mexico, expanding the number of trade agreements with new retailers and strengthening the digital distribution channel with important investments in technology.

Ictineo has a portfolio of only about R$4 million and less than 3,000 clients. That is, Bradesco is basically buying the license. The bank has no branches there and does not intend to have any. The idea is to strengthen distribution in the stores of partner retailers — one of the most important is Walmart’s chain Bodega Aurrerá — and invest heavily in digital channels, which will include a marketing campaign. For now, the name of the digital bank is likely to be Bradescard, but a change in the future is possible. There could even be an agreement to use the Digio brand, or another Bradesco digital initiative, but this has not been decided yet.

In the cards’ operation, with a focus on low-income clients, Bradescard has a significant market share, close to 24%, and competes with names such as Coppel and Azteca. By creating a digital bank, it will compete with the operations of the large traditional banks and also with new entrants such as Nubank and Rappicard, a partnership between the delivery app Rappi and Banorte.

“We have an important banking role. We are the first card for many of our users. We’re going to maintain that focus, but also increase the number of products and have a broader relationship with our clients. We are going to move up a little from the base of the pyramid and compete with Nubank, which, in my view, targets a slightly more middle-class audience,” the executive said.

Mr. Monteiro points out that another positive aspect brought by the new license has to do with funding. Until then, the card operation was basically financed by accrued profits. Now Bradescard will be able to capture deposits. According to him, the popular financial society license (sofipo) meets all the bank’s needs and there is no plan, at least for the time being, to seek a bank license.

The conclusion of the deal is subject to approval by the authorities in Mexico (Comisión Nacional Bancaria y de Valores, CNBV) and Brazil (Central Bank).

*By Álvaro Campos — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Large retailers project R$7.8bn in losses from defaults

Payments in arrears surged in Brazil amid a widespread deterioration in income and rising inflation

08/26/2022

Economists do not believe retailers are at risk and see the current situation as very different from that of the late 90s thanks to better internal controls and available cash — Foto: Ana Paula Paiva/Valor

Economists do not believe retailers are at risk and see the current situation as very different from that of the late 90s thanks to better internal controls and available cash — Foto: Ana Paula Paiva/Valor

Brazil’s large retailers increased projections of loss from defaults as payments in arrears surged amid a widespread deterioration in income and rising inflation.

The 10 largest public companies in the industry set aside R$7.79 billion in provisions for bad debts between January and June, up 22% from the end of 2021, and also 42.2% above the first half of 2021. The figure is as high as last year’s sales of Leroy Merlin and Riachuelo.

The weight of the provisions for bad loans in relation to the companies’ net revenue rose to 4.92% this year from 4% in the first half of 2021. In December, it was 3.9%, which means that the ratio was stable until this curve started to grow this year.

Economists do not believe retailers are at risk and see the current situation as very different from that of the late 90s thanks to better internal controls and available cash. They also see small and medium-sized retailers, those off the radar of the market, as companies more exposed to such an effect.

The provisions for bad loans work are deducted from an asset account because it affects the accounts receivables, and also has a direct effect on the cash flow and the net result of the retailer. This is because, in accounting, it is considered a commercial expense. When the retailer considers that it will not receive a certain amount, it provisions this loss, and follows its own criteria for this, but tries to collect the money. A debt that is more than 180 days delinquent enters the “default” stage and is already considered a loss.

Retailers also reported more new losses than loans in arrears being paid. This is a changing line in financial statements because of constant inflows and outflows of funds. From January to June, the 10 companies expanded provisions by R$1.59 billion, but R$1.1 billion left this pool in the same period.

According to a former chief financial officer of an electronics retailer, the increase in loss additions reflects the scenario of lower real income and difficulty in renegotiating with customers. “Many times, the retailer renegotiates the debt with the customer, and the agreed value is already accounted as 100% recovered. This eases the provision, but is a questionable practice since the retailer will still receive the payments in the future. Even this renegotiation, which helps in the recovery, may be difficult,” the source said.

Pressure from new losses is mounting as retailers need to increase credit granting to encourage sales because electronics sales are growing slowly and fashion retailers need to consolidate recovery. In order to curb the increase in payments in arrears, however, the companies have been reviewing their policies for buy now, pay later options, and store credit cards.

“They face a dilemma. Retailers are forced to offer more lines of credit, despite very high interest rates [up to 8% a month], as they have to set aside even more money for payments in arrears,” said Claudio Felisoni, a professor at the University of São Paulo (USP) and head of the institute of retail executives (Ibevar). “There is only one solution: betting on data, on profile analysis tools, to sell more to good payers,” he said.

Fashion retailer Marisa is among those that started to make some moves and has been more rigorous in granting credit since late 2021, while rival Renner has reduced limits for purchases by higher-risk customers and expanded debt collection offices since March. “The more challenging credit and default backdrop hit the industry across the board, and we reacted to that. We already have now better quality [in the portfolio],” Renner CEO Fabio Faccio said in a conference call weeks ago. The retailer reported R$821 million in credit losses up to June, 40% above December.

An analysis by Valor shows that retailers are calculating more losses linked to payments in arrears — Foto: Valor

An analysis by Valor shows that retailers are calculating more losses linked to payments in arrears — Foto: Valor

The problem is also seen in food retail, a segment that typically faces fewer delays due to the client’s need to use credit lines for purchases of staples. Carrefour reported a rate of nonperforming loans – those 90 days in arrears – of 13.2% in the January-June period, compared with 8.1% a year earlier. The company has restricted credit granting since December. “We are working on it, and although this rate is still growing, we saw a lower expansion rate in the default rate since March,” Chief Financial Officer David Murciano told Valor in July.

Central Bank data show that the default rate in the credit portfolio for goods was at 3.42% in April 2021, then rose to 4% in December. Four months later, it was already at 4.71%, according to the latest data available.

Another interesting piece of data in the financial statements is the profile of payments in arrears. The percentage of debts less than 90 days in arrears grew. These are the new debtors, who had been paying on time until the first months of 2022 but stopped doing so from March on.

In December, this group represented on average 53.5% of total nonperforming loans and increased to 56.6% in June. Old debtors, with loans more than 90 days in arrears, accounted for the remaining percentage.

According to the former chief financial officer heard, this entry of new payments in arrears occurred because the companies “opened the tap for credit” last year to stimulate demand. “Now, they are closing it again, because they felt the delays, but that’s the way it is. It’s about continuously adjusting credit-granting policies. We are talking about large companies with better criteria and controls, so it is a temporary situation,” he said.

Since these are forecasts, each retailer can project in a more or less conservative way how much loss they expect. Therefore, retailers do not always change this at the same time, as is the case now. This time, the prevailing assessment is that the worsening of the macroeconomic scenario forced them to set aside more money for losses.

“Default rates are not growing because of uncontrolled spending or accelerated consumption. Instead, it reflects the resilience of inflation,” said Fabio Bentes, an economist at the national trade confederation (CNC). “We have even seen prices deflate recently, but inflation is still high. That’s why we believe that this increase in provisions is here to stay for a while, despite the increase in Auxílio Brasil, because we saw a deep deterioration in income and inflation will slow down gradually,” he added, citing Brazil’s main federal social program, which is now giving higher handouts for more people.

Analysts with banks like XP expect that this greater pressure will gradually ease next year. Marisa, Riachuelo, and Renner believe that default rates will improve in the third and fourth quarters, especially after September. The retailers also pointed out that, since there was a drop in provisions a year ago, the basis of comparison is low. According to the companies’ financial statements, companies focused on electronics – both through websites and brick-and-mortar stores – and fashion retailers increased their provisions the most as they are highly dependent on buy now, pay later options.

*By Adriana Mattos — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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ConJur launches new edition of the Brazil Justice Yearbook

26 de agosto de 2022

In its 11th edition, the Brazil Justice Yearbook describes the role of the Judiciary Power amid the grave crisis raging among the powers. Based on the 80 million lawsuits under way in the country’s courts and tribunals, the publication clearly shows that it is to the courts that the people turn to when they wish to ensure their rights. The Yearbook it is the English version of the Anuário da Justiça Brasil. 

The reader will find on the pages of this Yearbook a selection of the rulings of the Supreme Court and higher courts that have defined the course of the country and the case law on the most controversial and recurring topics in court.

In addition to the profiles of the justices heading the Judiciary Power, this edition also brings, for the first time, the voting tendencies of each judge in the main legal areas — if they lean more towards the legalistic or guaranteeist point of view in the criminal sphere, the tax authorities or the taxpayer on tax issues or vote more in favor of the consumer or the worker. This is essential information for those who follow the daily routine of the Brazilian courts.

The 2022 Brazil Justice Yearbook also offers data on the productivity of each court and its members: the number of cases assigned, judged, and in backlog.

A special report features the changes in the case law of Carf (the Administrative Tax Appeals Court) after the end of the tiebreaker vote, and includes the profile of the new Chief Justice Carlos Henrique Oliveira, and the members of the council’s Superior Chamber.

The reader will also learn more about the members of the National Justice Council, the National Council of Prosecution Services, the Brazilian Bar Association, the Brazilian antitrust authority (Cade), and the Federal Audit Court.

The digital version of the 2022 Brazil Justice Yearbook is free of charge and will be available online at anuario.conjur.com.br and in the Anuário da Justiça app. The printed version is for sale exclusively at Livraria ConJur.

2022 BRAZIL JUSTICE YEARBOOK
Issue: 2022
Number of pages: 288
Publisher: Consultor Jurídico
Printed version: R$ 40 at Livraria ConJur
Online version: available at anuario.conjur.com.br or in the Anuário
da Justiça app

Advertisers of this edition
Arruda Alvim & Thereza Alvim Advocacia e Consultoria Jurídica
Associação Educacional Nove de Julho – Uninove
Ayres Britto Consultoria Jurídica e Advocacia
Conselho Federal da Ordem dos Advogados do Brasil
Dannemann Siemsen Advogados
Décio Freire Advogados
JBS S.A
Machado Meyer Advogados
Refit
Sergio Bermudes Advogados

80.000.000 de motivos
ConJur lança nova edição do Brazil Justice Yearbook
Em sua 11ª edição, o Brazil Justice Yearbook mostra o protagonismo do Poder Judiciário em meio à grave crise entre os poderes. Diante de 80 milhões de processos em tramitação nas varas e tribunais do país, a publicação deixa claro: é à Justiça que a população recorre para garantir seus direitos.

Nas páginas do Yearbook, o leitor encontra uma seleção das decisões do Supremo Tribunal Federal e dos tribunais superiores que definiram os rumos do país e da jurisprudência nos temas mais controversos e recorrentes na Justiça.

Além do perfil dos ministros da cúpula do Poder Judiciário, novidade desta edição é a tendência de voto de cada um deles nas principais áreas do Direito: se mais legalista ou garantista na esfera penal, se mais favorável ao fisco ou ao contribuinte nos temas tributários, se tende a decidir a favor do consumidor ou do trabalhador. Informação fundamental para quem acompanha o cotidiano da Justiça brasileira.

O 2022Brazil Justice Yearbook apresenta ainda dados da produtividade de cada tribunal e de seus integrantes: a quantidade de processos distribuídos, julgados e em acervo.

Reportagem especial trata das mudanças na jurisprudência do Carf (Conselho Administrativo de Recursos Fiscais) com o fim do voto de qualidade e traz o perfil do novo presidente, Carlos Henrique Oliveira, e dos conselheiros que integram a Câmara Superior do conselho.

Conheça também os integrantes do Conselho Nacional de Justiça, do Conselho Nacional do Ministério Público, da Ordem dos Advogados do Brasil, do Conselho Administrativo de Defesa Econômica (Cade), do Tribunal de Contas da União.

A versão digital do 2022 Brazil Justice Yearbook é gratuita e está disponível no site anuario.conjur.com.br e por meio do app Anuário da Justiça. A versão impressa está à venda exclusivamente na Livraria ConJur.

2022 BRAZIL JUSTICE YEARBOOK
Edição: 2022
Número de páginas: 288
Editora: Consultor Jurídico
Versão impressa: R$ 40 at Livraria ConJur
Versão online: disponível no site anuario.conjur.com.br ou no app Anuário
da Justiça

Anunciantes desta edição
Arruda Alvim & Thereza Alvim Advocacia e Consultoria Jurídica
Associação Educacional Nove de Julho – Uninove
Ayres Britto Consultoria Jurídica e Advocacia
Conselho Federal da Ordem dos Advogados do Brasil
Dannemann Siemsen Advogados
Décio Freire Advogados
JBS S.A
Machado Meyer Advogados
Refit
Sergio Bermudes Advogados
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Revista Consultor Jurídico, 26 de agosto de 2022, 9h00

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Bradesco, BV create independent asset management firm

New company is born with R$41bn and will have a compensation formula to draw, retain talents

08/25/2022

Roberto Paris — Foto: Ana Paula Paiva/Valor

Roberto Paris — Foto: Ana Paula Paiva/Valor

The creation of a new asset management company by Bradesco together with the assets that came from BV DTVM aims at building a structure similar to that of independent assets and wealth management firms. This means having a corporate model capable of attracting and retaining professionals, in addition to assessing possible acquisition opportunities, especially in the universe of alternative funds, said Roberto Paris, Bradesco’s managing director.

The deal complements a niche in which Bradesco’s asset management business did not operate directly, and makes this core of private banking originated from the BV base gain an appearance of wealth management, in which banks do not need to hold custody of assets, said José Alberto Salvini, CEO of BV. “It has to do with the partnership structure, to make things easy, aligned with the interests of investors, portfolio managers, and with more agility in offering more complex alternative products that require specific approvals, which can sometimes take longer in a conservative structure,” Mr. Paris said.

According to him, the investment industry in Brazil has undergone profound changes and, along the way, many specialized assets of several types have emerged. BV Asset has participation, development, and real estate funds. “Bradesco even provides clients with third-party [alternative] products, but it didn’t participate directly in this market,” Mr. Paris said.

The asset management company, with no name yet, is born with R$41.7 billion under its umbrella, and R$22 billion in private banking custody. The idea is that the new brand will not refer to any of the groups to which it will be linked and will even operate at different addresses of the two banks. At the end of July, BV ranked 24th in Anbima’s ranking of asset managers. It had R$12.9 billion in private-equity funds, including wealth management funds and investment organizations. The firm’s real estate funds have R$6.1 billion, and there are more R$8 billion in hedge funds. Fixed income, the large base of Bradesco Asset Management (Bram), totaled only R$11.3 billion.

According to the agreement, Bradesco will hold 51% of BV DTVM’s capital, will have a majority of representatives on the board and the members will choose jointly who will be the executive leadership of the operation. Currently, the asset management company and BV’s private bank are institutionally represented by Luiz Sedrani, the firm’s chief investment officer. The value of the deal was not disclosed.

Mr. Salvini, with BV, said that the partnership with Bradesco makes perfect sense because the portfolios complement each other. On top of that, having access to a giant distribution channel, such as Bradesco’s, is an advantage, as well as other possibilities that arise from the partnership. “Our private banking model is likely to improve a lot. Bradesco offers products that we don’t have, they have BAC in Florida [which props up Bradesco’s platform in the U.S.], and our clients will be able to use this channel,” he says.

According to him, if BV DTVM had partnered with BB Asset, from Banco do Brasil, of which BV is a partner, this would not bring so much difference in the supply of products. In addition, as the asset management firm is controlled by a state-run bank (Banco do Brasil), it would face more difficulties in hiring professionals in an industry in which the compensation model is tied to the performance of the funds.

BV is focused on retail, and the executive realized that if he wanted to do something different, he would need to find a strategic partner. “We didn’t even get to talk to other players, the match with Bradesco was complete.”

Today, BV DTVM is connected to the main investment platforms, although with a small presence in some. The association with Bradesco does not change this performance. The offer to private-banking clients is likely to include investment consolidation services, access to other applications, and an online trading platform, in addition to estate and succession planning.

As for the products offered, the BV DTVM’s executive acknowledged that the company is known for its structured funds but says that it does not intend to be limited to that. “We will also have liquid funds, with very specialized people.” Considering the custody part, BV DTVM has almost 150 employees. Mr. Salvini says the private-banking team is being expanded, but that the staff does not need to grow that much in the coming years.

In its history of consolidation, Bradesco has always preferred complete acquisitions, but this design is not defined at the start of the deal with BV. “At the first moment, it is a partnership, that’s what you have, and it is expected to continue for a long time. As time goes by, everything can be evaluated, but the goal is to keep this structure to serve the client and consolidate itself as an independent reference asset management company,” says Mr. Paris. Mr. Salvini said that it is not in BV partners’ plans sell the entire operation.

This year, Bradesco took over BNP Paribas’ wealth management portfolio in Brazil and had already made a similar move with J.P. Morgan’s private equity structure. “The strategies are ultimately aimed at strengthening services to high-income clients,” Mr. Paris says. In 2015, one highlight of the acquisition of HSBC was the high-net-worth client base the English group had in Brazil. Bradesco gathered then R$100 billion in private banking and about 15% of that came from HSBC. Currently, Bradesco has R$380 billion in private banking and R$544 billion in asset management.

*By Adriana Cotias, Álvaro Campos — São Paulo

https://valorinternational.globo.com/
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Imports of solar equipment doubled in first half, study shows

Survey shows imports may enable capital expenditure of R$35bn in projects

08/25/2022

Industry foresees a “race for the sun” this year, as consumers are expected to join now to use the grid free of charge by 2045 — Foto: Pixabay

Industry foresees a “race for the sun” this year, as consumers are expected to join now to use the grid free of charge by 2045 — Foto: Pixabay

Imports of solar equipment to supply the markets of distributed generation (own generation) and centralized generation (large-scale farms) have risen 100% year-over-year in the first half of 2022, a survey with 1,600 companies linked to the sector found.

This can enable capital expenditure of R$35 billion in the entire project cycle and represents an installed capacity of nearly 10 gigawatts-peak. The data was released by Greener, a consulting company specializing in studies about the solar power market, during the event Intersolar South America.

“We had a strong acceleration in volumes in the first half of the year, with more than 100% growth in equipment arriving in Brazil, especially photovoltaic modules, which indicates an investment of more than R$35 billion. Distributed generation is the main driver of this growth,” Marcio Takata, a director at Greener, told Valor.

The study also found a slight decrease in prices. The previous survey pointed to an 8% increase in solar panel prices due to freight costs, commodity prices and exchange rates.

Now the prices of photovoltaic systems have cooled by 4.3% for the final consumer due to cheaper freight costs, the stronger real, growing competition in the domestic market and the larger number of equipment distribution companies as a result of the sector’s growth.

“Unlike three years ago, Brazil is now among the main markets. This brings competition in manufacturing and distribution. Today, there are more than 200 distribution companies in Brazil. Not so long ago, there were at most 20 companies,” he said.

The return on investment has also dropped to four years. An average residential system in Brazil costs R$19,500 for 4 kWp, compared with R$20,600 a year ago. The reduction in the discounts for distributed generation installations as of 2023 should change this situation, since the industry foresees a “race for the sun” this year, as consumers are expected to join now to use the grid free of charge by 2045.

The change in the rules for solar generation associated with the increasing interest of power consumers in reducing costs has driven growth. “This shows that distributed generation is a competitive solution for consumers, even though electricity bills [in general] have dropped due to the reduction of the state tax [ICMS],” the executive said.

On the other hand, the high interest rates held financing back. About 54% of sales were financed, compared with 57% in the previous survey. Mr. Takata bets that despite pressured production chains, the solar power industry should maintain strong growth in the coming years.

*By Robson Rodrigues — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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