Winter corn drives record grain harvest

The Risks of Leaving Corn Standing in Fields Through Winter

With the accomplishment of the harvest of crops such as summer corn and rice, and the expectation of an increase in the planting area of winter corn, the National Supply Company (Conab) has raised its estimate for the national production of grains and fibers in this 2021/22 season.

The projection now indicates 270.2 million tonnes, 851 million tonnes more than estimated in April and a record volume, 5.7% higher than the 2020/21 cycle. According to the Brazilian Institute of Geography and Statistics (IBGE), which also updated numbers on Thursday, with a slightly different methodology, it will be 261.5 million tonnes, a rise of 3.3%.

“This improvement in production is explained by the larger planted area in the second-crop of corn, in addition to the better development at the end of the crops cycle, especially rice, corn and soybeans,” writes Conab in its 8th report on the season – which was revised at the end of the day, due to an error about the second yearly crop

For corn, total production is now estimated at 114.6 million tonnes, a 31.6% increase in comparison with 2020/21, when there was a harvest loss due to drought in the winter. “The longer window for planting the second harvest, together with market conditions, favored the growth of the cereal area,” Conab says.

Last month, the state-owned company forecasted a total corn harvest of 115.6 million tonnes. The second crop production alone is expected to reach 87.7 million tonnes, an increase of 44,4% over 2020/21.

“During field trips, the company’s technicians identified sown areas even outside the ideal window, which shows that the expected profitability for the crop is still attractive to producers,” says Conab’s president Guilherme Ribeiro in the text released.

This increase reduced the negative impact of adverse weather conditions in important producing regions for the second harvest, such as the state of Goiás and part of Mato Grosso.

“The current harvest will not reach the potential productivity, but it still tends to be a good production, mainly because of earlier plantings. However, we still need to pay attention to the crop development,” Conab points out.

Another important second yearly crop production, cotton has counted on favorable weather. And, also with a gain in area, production should reach 2.82 million tonnes, the same volume projected in April. If confirmed, it will be the second best result since official records began, with a 19.5% increase over the previous harvest, being lower only than the 2019/20 cycle.

The expectation of a good second harvest is being confirmed for beans, according to Conab. “The more favorable weather has contributed to a higher grain yield, in most producing regions, which brings a harvest expectation at 1.4 million tonnes, an increase of 23.3% compared to the same period of the 2020/21 season.” Together, the three bean crops are expected to total 3.1 million tonnes – the same volume expected last month, 8.4% higher than 2020/21.

Among the first-crop products, soybeans are already 95% harvested. The estimated production is 123.8 million tonnes, a reduction of 10.4% in relation to the previous harvest, but with an increase of 1.14% in relation to last month’s calculation.

In the case of rice, the harvest had already reached 91% of the sown area when the Conab report was completed, and Brazil is expected to produce 10.7 million tonnes, slightly above the forecast in April (10.5 million). Compared to last year’s harvest, there is a drop of 9.1%.

“The drop reported for these grains [soy and rice] in this cycle is explained by the drought in the Southern states of the country and in part of Mato Grosso do Sul between the end of 2021 and the beginning of this year,” explains the Conab text.

Among the winter crops that have not yet been sown, the international scenario stimulates the planting of wheat. Conab expects the area to increase by 3% in relation to the previous cycle, to 2.82 million hectares. With this, and if good weather conditions are maintained, production may reach 8.13 million tonnes, 5.9% more than last season.

Source: Valor International

https://valorinternational.globo.com

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Enel Green Power to build new wind farm

The wind power is the second most desired form of electricity generation in Finland – Baltic Wind

Enel Green Power, the renewable energy arm of Italy’s Enel, has started to build a 348-megawatt wind farm in Bahia as part of its investment plan in clean power. The plan is to install a solar farm and a battery system in the future so that the venture becomes hybrid. Located in the municipalities of Umburanas, Morro do Chapéu and Ourolândia, the wind farm will have investments of R$2.5 billion and will consist of 81 wind turbines, all already contracted with Nordex Acciona.

Power generation will be intended for the free market. Becoming hybrid, however, still depends on the definition of technical regulations — rules for hybrid farms were approved last year — but Enel is already ready for this step, said Roberta Bonomi, head of Enel Green Power in Brazil. The company is also ready to expand if demand for power in the free market remains high, she told Valor.

Ms. Bonomi pointed out that not only Aroeira, but all the company’s plants are being considered for hybrid operation, with solar plants or storage systems. At the first moment, clean and cheap energy development was the focus in the country, and now, with the possibility of working with hybrid power plants, the company seeks a solution for the intermittency of wind and solar.

“Considering that the country has a large hydroelectric capacity, which is the natural batteries of the electrical system, [systems of] batteries would be the perfect way to achieve stability,” she said. She points out that wind and solar complement each other at the peak of operation — wind generates more electricity at night — and batteries, today more competitive, will add stability. “This will allow us to take even more advantage of the Northeast region’s resources and increase the system’s capacity,” Ms. Bonomi said.

In the free market, it is possible to choose the power supplier, and decarbonization, as a rule, has led many companies to seek renewable generation as a way to meet the goals of reducing greenhouse gas emissions. Even with the effects of war and a more adverse economic scenario, Enel Green Power’s plans for Brazil are maintained. “The energy transition is a movement that cannot stop,” the executive said.

She commented that energy transition, and an eventual acceleration in this process, places more responsibility on the companies in the industry and forces them to have a broader look at issues related to sustainability, especially because they are increasingly seen as driving a less carbonized energy.

Bahia, she exemplifies, is a state where the company has been active since 2011 and is considered key for the company since 40% of Enel Green Power’s total 4.7 GW of installed capacity is in the state. For the implementation of the new farm, the company is negotiating with the authorities so that local professionals keep 50% of the 1,200 direct jobs to be generated. In the world, the company has accelerated the goal of zero carbon, which has to be reached in 2040, 10 years before the initial target, and wants to leave the coal-fired generation business by 2026.

As for offshore wind power, an offshore installation technology that is at the center of debates in the power industry, Ms. Bonomi says that the company is not yet considering entering this segment because it is still more expensive than onshore plants.

She pointed out that wind farms are close to the coast in Brazil, which means a very high cost for the benefits that would be obtained by the source. Another reason is that the country still has large tracts of land and potential for onshore plants, which is not the case in other countries.

For her, the source can make sense in the future, but the ideal would be to let other countries advance in the development of offshore generation, even as a way to reduce implementation costs. “At this moment, it doesn’t make sense to invest in Brazil in a technology that is more expensive. Our main goal is to reduce the bill for the final consumer.”

Source: Valor International

https://valorinternational.globo.com

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Schwab mulls buying Itaú’s stake in XP

U.S.-based Charles Schwab is said to be interested in a deal with Itaú — Foto: Reprodução
U.S.-based Charles Schwab is said to be interested in a deal with Itaú — Foto: Reprodução

After Itaú exercised the option to buy another stake in XP two weeks ago, of 11.36%, investors began to approach both to discuss a potential purchase of the shares. One interested buyer in talks is U.S.-based Charles Schwab, Valor’s business website Pipeline found out.

Finding a buyer for a relevant stake paves the way and speeds up Itaú’s intended exit, which, in principle, is seen as happening gradually after two block trades since last year. XP is very interested in moving forward with the talks with Schwab and replacing Itaú with a new strategic partner, the sources said.

The U.S.-based company inspired XP to become a retail investment platform. It is not the first time XP and Schwab get closer. The American financial firm studied investing in Guilherme Benchimol’s company years ago, but the size of the business did not make sense for Schwab then.

Although the seller is Itaú, XP has been directly involved in this matter to reach an outcome that makes sense for the company in the long run, one source said. XP said last week that it would study buying Itaú’s stake. XP unveiled Thursday a share buyback program of up to R$1 billion. Finding a partner in the market is a more economical and much more strategic way to do so.

XP started the international retail expansion with a project of international investment accounts abroad – it already offers “private” clients access to products through offices in New York and Geneva. XP could stand out with Schwab on its board and explore these markets.

“There are interested buyers approaching XP and Itaú. All they have to do is to put it on the block,” said another source, who declined to name investors. The potential sale of Itaú’s stake is a window for investors with a long-term vision to buy a relevant position into XP at a discounted price – the company continues in operational growth mode, but shares dropped to $18.95 from $27 in the IPO, in December 2019.

XP took another step to go global on Thursday. The company rose almost 7% right after unveiling XTAGE, a trading platform for digital assets in partnership with Nasdaq Market Technology, the group that operates the U.S.-based technology exchange.

XP is valued at $10.8 billion on Nasdaq. Schwab is worth $123 billion.

The original story in Portuguese was first published on Valor’s business website Pipeline.

Source: Valor International

https://valorinternational.globo.com

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Labor market reflects racial inequality in country

The Brazilian labor market is another segment of society that reflects racial inequality. Unemployment is higher among blacks (16.3%) and brown people (15%) than among whites (10.8%), according to data for 2021 from IBGE’s Continuous National Household Sample Survey (Pnad). The informality rate is also higher for blacks (52.9% for brown people and 49.4% for blacks) than for whites (43.8%).

The index measures the proportion of informal jobs in relation to the total number of jobs. In income, the gap is clearer: the average income of a black worker was R$1,907 in 2021 – only 57% of that of a white worker (R$3,310).

For specialists, the differences reflect, besides situations of discrimination, a previous trajectory of unequal opportunities according to race and social origin, especially in education. It is in this context that they highlight the role of racial quotas for universities — whose law is 10 years old — as one of the instruments to try to mitigate the problem.

The percentage of black and brown students between the ages of 18 and 24 in public universities, which was 32% in 2001, rose to 40% in 2012 and then to 52% in 2021, according to an estimate by Luiz Augusto Campos, a professor at the State University of Rio de Janeiro (Uerj).

Education explains a good part of the income difference between whites and blacks in the labor market, says Ipea researcher Rafael Guerreiro Osório, although there are regional influences, by occupation and type of activity.

Boards of directors

In the early 2000s, Wellington Silva was in company boards and never met any other black executive. More than 20 years later, discussions about racial diversity in the business world have increased, driven mainly by the adoption of ESG (environmental, social and governance) metrics in investment analysis. In practice, however, the evolution is very small.

Currently, some boards include members like Denísio Liberato (Neoenergia), Rachel Maia (Vale, BB and CVC), Fausto Augusto de Souza (Copel) and W. Don Cornwell (Natura). These black people represent a tiny slice of the more than 3,500 seats in Brazilian public companies considering board members, chief executive officers and chief financial officers.

Carlos Portugal Gouvêa, a professor at the University of São Paulo (USP), decided to conduct an unprecedented survey to map this situation. The research indicated that the chance of a white person to occupy some of the best paid jobs in the country is 58 times greater than that of person of color.

The study, conducted between January and May 2021, investigated the racial profile of the top management of companies listed on B3, the Brazilian stock exchange, by analyzing photos published on the internet. In all, 442 companies and 3,561 positions were surveyed. In this first stage, seven potential black and 28 brown board members were identified. Among CFOs and CEOs, it was noted that one CFO could be considered black. Among brown officers, the survey identified three CEOs and one CFO.

Afterwards, the racial information was submitted to the companies themselves for validation, and 69 of them (15.61% of the total) answered back. This new set, which represented 727 positions, showed that 712 of them were occupied by white people, nine were yellow, and six were brown. No black person was identified in this second stage among all the positions.

“We need much higher percentages for the numbers to become representative,” said Mr. Gouvêa, who, in addition to teaching at USP’s Law School, is the founder of law firm PGLaw. If racial diversity remains low, there is a risk of “tokenism,” when symbolic inclusion occurs with the aim of making superficial concessions to minority groups.

There is a mismatch between those who have the decision-making power in companies and the rest of society, which can be dangerous for companies, the professor warned. “It is important not to turn the subject into a marketing event. The idea of the diverse board is to offer new perspectives on the functioning of the company itself and for its own business plan,” says Mr. Gouvêa.

Cristina Pinho — Foto: Leo Pinheiro/Valor
Cristina Pinho — Foto: Leo Pinheiro/Valor

There are still barriers and cultural biases for the ascension of women and black people in the executive career, an important step for those who wish to join a board of directors, said Cristina Pinho, a member of the board of Ocyan, a private company. The rise to a position like this also depends on interpersonal relationships. “The nomination of white women comes from white men, who predominate on the boards. Where are the black men? They are not on the boards. That gear feeds on itself.”

Specific programs for the inclusion of blacks in top management positions in companies are still rare, said Cássio Rufino, a partner at MZ Consult. He is the chief operating and investor relations officer at the company that offers market solutions in IR. “Finding a white man among ‘farialimers’ is much easier,” he compares, citing the executives who work on Avenida Faria Lima, the corporate address of several companies in São Paulo.

When he attends trade shows and meetings with investor relations professionals, Mr. Rufino sees himself, more often than not, as the only black person present. These events bring together many analysts, managers and executives, who may in the future become CFOs or CEOs.

Large companies have a responsibility to be influencers for small ones, said Rachel Maia, board member and founder of RM Consulting. “Companies are looking for referrals for greater plurality.”

“I couldn’t even imagine that I would be able to do a college degree in engineering. My intention was to finish the technical course and work in Curitiba,” said Fausto Augusto de Souza, employee representative on Copel’s board of directors. Elected in 2021, he was the only black person among the candidates. The executive, who lived in the interior of the state of Paraná, studied electrical engineering after joining the company and then took a master’s degree. Now Mr. Souza is looking to expand his specialization and become an independent board member in the future.

Source: Valor International

https://valorinternational.globo.com

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Embraer to hire 1,000 people in Brazil

Carlos Alberto Griner — Foto: Silvia Costanti/Valor
Carlos Alberto Griner — Foto: Silvia Costanti/Valor

Embraer, the world’s third-largest manufacturer of commercial aircraft, is hiring 1,000 people in Brazil for different positions and levels in preparation for the projected growth cycle in the coming years.

Firm demand for executive jets, expectations of an upturn in commercial aviation, entry into new markets – including the launch of a cutting-edge turboprop and Eve Holding’s electric vertical take-off and landing vehicle (eVTOL) – and the expansion of affiliates underpin the opening of jobs across different units in the country.

“Hiring is the materialization of what Embraer had been indicating for the future,” Carlos Alberto Griner, the company’s vice president of people, ESG and communication, told Valor.

According to the executive, the move is aligned with the forecast that 2022 would be a year of recovery, with the resumption of growth in 2023. “Since the industry has a long cycle and requires qualification, we have to start looking at future needs with some anticipation,” he said.

In 2022, the company expects to deliver 60 to 70 commercial aircraft and 100 to 110 executive jets, compared to 48 and 93, respectively, last year – so the guidance already includes some growth.

Resumption of production at Embraer, creation of Eve, acceleration of EmbraerX, growth of Atech and Tempest, and other projects were considered in the package. “This brings a new demand for talent,” he added.

At the end of last year, the company boasted almost 18,000 employees worldwide, 80% of them in Brazil. By the end of 2022, there will be more than 19,000 employees.

The hiring comes two years after 900 workers were dismissed in Brazil as part of the efforts to face the crisis triggered by the Covid-19 pandemic and the losses from the cancellation of the sale of the commercial aviation business to Boeing. The entire aviation industry, from manufacturers to airlines, suffered from the effects of the pandemic that reduced the volume of travel worldwide.

About half of the new jobs were opened by Embraer in operation, and most of these positions are expected to be filled by people dismissed in September 2020.

According to Mr. Griner, the company will also take the opportunity to seek more diversity, in line with the environmental, social and governance commitments assumed. The working model is flexible now and can be in-person, remote or hybrid, depending on the requirements of the position. “The people strategy is to anticipate, qualify and take advantage of diversification,” he said.

Source: Valor International

https://valorinternational.globo.com

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Analysis: Consolidation takes off in airline industry with Avianca-Gol deal

Decision reinforces view of analysts and market experts that there are many mergers to come in the industry — Foto: Blende12/Pixabay
Decision reinforces view of analysts and market experts that there are many mergers to come in the industry — Foto: Blende12/Pixabay

The decision by Avianca and Gol shareholders to move forward with the creation of a holding company reinforces the view of analysts and market experts that there are many mergers to come in the industry. The Covid-19 crisis has caused many companies to suffer severe losses and led some, like Latam, to ask for protection from creditors. The situation is now compounded by the skyrocketing price of oil.

The main shareholders of Colombia’s Avianca and the Constantino family, which is the controlling shareholder of Gol, have signed an agreement to create a holding company that will control both airlines and hold a non-controlling stake of 100% of the economic interests in Viva’s operations in Colombia and Peru, as well as a convertible debt investment representing a minority stake in Chile’s Sky Airline. The holding company, called Grupo Abra, will be a UK-based private company. The Constantino family will have the largest stake, sources say.

This is a hot market. Besides the consolidation movements abroad, Latam became the target of competitor Azul, which sought to take advantage of the Chapter 11 plan (judicial recovery) of the Chilean company in the United States and is in talks with creditors to buy the rival. The effort, however, lost steam after Latam’s successful negotiation with creditors, which suggests that Azul’s approaches will not have an effect.

Gol CEO Paulo Kakinoff told Valor recently that mergers and acquisitions are likely to gain steam and cited American Airlines, which bought 5.2% in Gol, as an example. Now, the company has taken a new step.

Avianca Holding was once controlled by businessman German Efromovich, brother of José Efromovich, who owned now extinct Avianca Brasil. The businessman ended up losing control of the company because of an unpaid debt of $456 million with United Airlines. As a result, United emerged as one of the largest shareholders of Avianca before the pandemic and the company’s judicial reorganization.

Avianca completed its reorganization recently and raised $1.7 billion through financing. Shareholders now include Kingsland International Group, Elliott International and South Lake, as well as U.S.-based Delta. It is not clear what role United will play in the new holding company to be created.

On the other hand, Citi analysts pointed out that the agreement between United Airlines and Azul ends on June 26. As Gol has already received an injection from American Airlines, “it will be interesting to see if this business development will increase the urgency for United to reach a similar agreement with Azul,” the bank said. United currently owns about 8% of Azul.

In an earnings conference call this week, Azul executives were asked about talks to expand the agreement with United, but did not provide details. They only said that there is a window to extend the agreement and that there are ongoing talks.

The move by Gol and Avianca still lacks regulatory approval. Yet, sources signaled that there is no concern because the deal is not seen as creating much route overlap – the issue is one of the most sensitive in the analysis of antitrust agencies.

When Azul started approaching Latam, the former showed a strong appetite for consolidation. Behind the scenes, Azul even signaled that if talks with Latam were not successful, it would approach Gol.

In an interview with Valor in the middle of last year, Gol’s chair Constantino de Oliveira Júnior, who will take over as CEO of Abra, emphatically said that “by nature, we place ourselves in the position of consolidators, buyers, and not sellers in this process [of market consolidation].”

In view of the expected success of Latam’s judicial recovery, the group is expected to come out stronger than ever in view of the more favorable negotiations with partners, especially lessors, that Chapter 11 brings. The same happened with American Airlines and Delta, which faced restructuring.

At the end of the day, Azul, which has always signaled interest in consolidation, ended up lagging behind. It remains to be seen how the partnership with United will unfold and if the group has more cards up its sleeve.

Source: Valor International

https://valorinternational.globo.com

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New reading shows inflation persistently at double-digit levels

Will Gold Save You From Inflation? - Macro Hive

The result of the Extended Consumer Price Index (IPCA) for April reinforces the complicated scenario for inflation. It is yet another price index showing inflationary pressures spread throughout the economy, with strong increases in food, fuel, industrial goods and services prices.

It was the eighth month in a row with the 12-month inflation at double digits, which shows the difficulty of the Central Bank to bring down inflation to levels close to the targets, of 3.5% this year and 3.25% next year.

This points to the need for further monetary tightening, with interest rates likely to remain high for longer.

The IPCA in April was 1.06%, above the 1% expected by the analysts heard by Valor Data, even with the 6.27% deflation of the electric energy item. In 12 months, the indicator has risen 12.13%, the highest since October 2003. In the first four months of the year, the variation already stands at 4.29%, 0.79 percentage points above the Central Bank’s target for 2022.

The diffusion index once again brought bad news. The data, which show the percentage of items on the rise in the month, was 78.25%. It is the highest since January 2003, according to MCM Consultores Associados. It is a highly pervasive inflation.

There are effects of the war between Russia and Ukraine, which puts pressure on commodity prices and affects global supply chains, and the impact of the reopening of the economy with the easing of social distancing measures due to the improving numbers of the Covid-19 pandemic.

The cores, which seek to reduce or eliminate the influence of the most volatile items, continue at very high levels. The average of the five measurements most closely monitored by the Central Bank was 0.95% in April, close to the 0.98% seen in March, according to MCM figures. In 12 months, the average of these cores went to 9.69% from 9.01%. In summary, even indicators that seek to isolate or reduce shocks to inflation are close to double-digit levels.

The rise in food at home prices slowed down a little last month in relation to the 3.09% seen in March, but the increase was still very strong, at 2.59%. In 12 months, food at home went to 16.11% from 13.72%. Fuels had another significant increase, with gasoline prices rising 2.48% in the month.

The trajectory of rising prices of industrial goods is impressive. In April, they increased 1.22%, the ninth month in a row with 1% or over, points out MCM. In 12 months, these products have advanced 14.22%. Two years ago, in April 2020, the inflation of industrial goods on this basis of comparison was 0.05%.

The problems in global supply chains, due to the pandemic and the war in Eastern Europe, put pressure on the prices of these products. A lower exchange rate could ease these pressures, but the rate has appreciated again in recent weeks, to around R$5.15 to the dollar.

Finally, there is services inflation, which accelerated to 0.66% in April from 0.45% in March, taking the 12-month inflation to 6.94% from 6.3%. In the case of core service inflation, which excludes the domestic services, courses, tourism and communication groups, the picture is even worse. The rise last month was 0.79%, bringing the 12-month inflation to 7.74% from 6.98%. This measure is concentrated in the items that are most sensitive to demand, pressured in the services sector by the reopening of the economy.

This inflationary picture is president Jair Bolsonaro’s greatest weakness in his quest for reelection, as it wreaks havoc on the population’s purchasing power. And new pressures on prices are underway. The increase in diesel oil prices announced on Monday, of 8.87% in refineries, will not have a great direct impact on the IPCA, but has an important effect on the economy, by increasing costs in various industries. Such high inflation for so long is one of the main reasons for the low popularity of Mr. Bolsonaro, who heavily criticizes Petrobras’s pricing policy.

Some analysts project a double-digit IPCA also this year, which will contaminate next year’s indicator, because of the carryover effect, the phenomenon whereby past inflation increases future inflation. This scenario requires higher interest rates for longer, which will hit economic activity in the second half of the year and next year. The Selic, Brazil’s benchmark interest rate, which was at 2% until March 2021, is expected to rise to at least 13.25%.

Source: Valor International

https://valorinternational.globo.com

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Government eliminates import tax to curb inflation

Marcelo Guaranys — Foto: Marcelo Casal Jr./Agência Brasil
Marcelo Guaranys — Foto: Marcelo Casal Jr./Agência Brasil

The government is zeroing the import tax rate of several products to contain inflation, said on Wednesday the executive secretary of the Ministry of Economy, Marcelo Guaranys, in an interview to announce decisions taken by the Executive Management Committee of the Foreign Trade Chamber (Gecex/Camex). “These measures don’t reverse inflation, but businessmen think twice before raising prices,” Mr. Guaranys said. The discussion about steel was intense in the last two days, he added.

Beef, chicken meat, wheat and wheat flour, corn grain, cookies and crackers, and other pastry products had their import tariffs reduced to zero. Besides these, sulfuric acid and mancozeb (the latter had its tax reduced to 4%) are also on the list.

Tariffs were also reduced for two categories of steel, which are rebar used in construction, said Camex secretary Ana Paula Repezza “The impact, in this case, will not be direct on inflation,” she added, noting that the request to reduce steel taxes had been under consideration for eight months. For rebar, the import tariff fell to 4% from 10.8%.

The reductions are valid until December 31, 2022, and will bring an impact of R$700 million in tax waivers, said Herlon Alves Brandão, undersecretary of Intelligence and Statistics of Foreign Trade at Camex.

This loss, however, will not need to be compensated with the indication of other sources of revenue, because it is a regulatory tax, clarified the deputy executive secretary of Camex, Leonardo Diniz Lahud. “Import taxes don’t have a collection function, they regulate the market, either for one side or the other,” he said.

About the import tax of 4% established for steel rebar, Ms. Repezza said it is in line with the world average. She also added that the meeting held the day before with businesspeople from the steel sector was not the first to analyze the issue and that the decision taken now is the result of a process that has been going on for months and included a wide debate.

On Tuesday, after the meeting, leaders of the Instituto Aço Brazil, which represents steelmakers, said that Economy minister Paulo Guedes had instructed the team to re-examine plans to cut the product’s import tariff to 4% from 10.8%. The tariff cut is a request made by the construction industry, which complains of rising prices.

Mr. Guaranys contextualized the decision on the import tax by speaking that the opening of trade is related to improving the business environment and increasing productivity and competitiveness, one of the major pillars of economic policy. “We have made very important steps in this context,” he said. “Minister Paulo Guedes’s line is to make gradual opening.”

The first move was the 10% cut in import tariffs on capital goods and technology; then the 10% reduction of practically the entire Mercosur Common External Tariff (TEC). Then, an additional 10% cut was made on the tariffs for capital goods and technology and at the moment there are negotiations with Mercosur for a new cut in the TEC. Internally, the government cut the Industrialized Products Tax (IPI) by 35%.

“We have been going through a moment of great inflation, harmful to the population,” said Mr. Guaranys. “We he reduces rates on some specific products, with an impact on the population”.

Source: Valor International

https://valorinternational.globo.com

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Eve expected to be as large as Embraer in 10 years

Embraer’s Eve and Zanite agreed to merge air mobility businesses — Foto: Divulgação
Embraer’s Eve and Zanite agreed to merge air mobility businesses — Foto: Divulgação

In less than ten years, Eve Holding, Embraer’s urban air mobility company whose shares started being traded on Tuesday on the New York Stock Exchange (NYSE), may reach the Brazilian plane maker’s current size and become its main business. By current projections, the company is expected to reach revenues of $4.5 billion in 2030, against the $4.2 billion recorded by the aircraft manufacturer in 2021, and be at the head of a market estimated at $760 billion in 2040.

“Embraer has two lines of action: business efficiency and innovation. Eve is an example that this strategy is working,” CEO Francisco Gomes Neto, who attended the opening ceremony at Nyse along with the management team of Eve Holding, told Valor. The company already has non-binding orders for more than 1,800 eVTOLs (electric vertical take-off and landing vehicles), the so-called flying cars, which constitute a potential backlog of $5.4 billion.

Despite the figures, the debut on the American stock exchange was not smooth. Penalized mainly by the increase in interest rates, global inflation and investors’ flight from risky assets, the shares fell 23.5% in the first business session, to $8.66 each, in a movement that was already expected by analysts because of the recent negative performance of other stocks in the industry. In Mr. Gomes Neto’s evaluation, it is relevant the fact that the company has managed to move forward with the operation amid adverse market conditions.

The funds raised in the transaction — an IPO via merger with Zanite Acquisition, a special purpose acquisition company (SPAC) that was already listed at NYSE — were lower than expected. But, according to Mr. Gomes Neto, they are enough to finance Eve’s operation until eVTOL is authorized.

Initially, the estimate was that it would take about $500 million to reach certification of the aircraft, scheduled for 2025. Zanite’s financial partners, however, contributed less funds and Eve Holding raised $377 million. As a result, Embraer holds about 90% of the new company’s capital, compared to just over 80% in the original proposal.

“With more experience in relation to costs [of the project] and with competitive engineering, which is available in Brazil, the vision at this point is that the funds are enough,” the executive said.

According to Mr. Gomes Neto, one of Eve’s major distinctions in relation to its peers is being able to count on Embraer’s support, knowledge and global facilities. Other companies that are developing the so-called flying cars will have to build this structure, he pondered.

In addition, Embraer’s engineering team, which is recognized globally for its competencies, is participating in the development of the eVTOL. “We are confident that Eve’s design is simple and more favorable to operation than other designs,” he said.

The first 1:1 scale Eve prototype is due to take off in Brazil, at the Gavião Peixoto plant, in São Paulo state, in the next few weeks. There is still no decision on where the aircraft will be manufactured, and an international consulting firm has been hired to help define the assembly process. “We are going to make logistics and manufacturing network studies to decide where and how this process will be,” the Embraer CEO said.

In a note, Eve co-CEO Andre Stein called the IPO at Nyse a “historic milestone” in the journey started nearly five years ago by the startup incubated at EmbraerX. “This deal is a key enabler of our mission to become a leader,” he said.

Jerry DeMuro, also co-CEO, pointed out that the non-binding orders signed by major customers, including Azorra Aviation, Falkon Regional Aircraft, Republic Airways and Skywest, “provide powerful validation” of Eve’s business strategy and vision.

With the crisis triggered by the Covid-19 pandemic, which was especially hard on civil aviation, and the cancellation of the company’s commercial aviation sale to Boeing, Embraer had to reduce its operations and adjust to the new market reality. Eve’s success is one of the relevant axes for the company’s resumption of growth.

Source: Valor International

https://valorinternational.globo.com

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Kimberly-Clark expands operations to export from Brazil

Gonzalo Uribe — Foto: Ana Paula Paiva/Valor

Gonzalo Uribe — Foto: Ana Paula Paiva/Valor

Kimberly-Clark, the U.S.-based maker of personal care and household cleaning products, is expanding operations in Brazil in order to turn the country into the company’s innovation hub and main exporter for the Latin American market. “All Brazilian plants will produce items to be exported by the end of this year,” Gonzalo Uribe, the chief executive for Latin America, told Valor.

Since 2020, the owner of brands Intimus, Neve and Huggies is investing in capacity expansion, equipment, installation of new technologies and construction of an increasingly local raw material supply network. It also foresees sustainability targets, such as using 25% recycled plastics in packaging and reducing non-renewable fibers by 50%. The investment totals $120 million, one third of which will be injected this year.

“Brazil is our most important market in Latin America. It is one pillar of the company’s organic growth,” said Mr. Uribe. Earlier this month, the Colombian executive made his first visit to Brazil since taking office, bringing the entire management team from the region to follow the plans to strengthen the operation.

Brazil is one of Kimberly-Clark’s 10 largest operations worldwide, with 4,000 employees. In the first quarter, Mr. Uribe said, the sales of the Brazilian operation grew by double digits. Globally, the sales of the U.S-based multinational grew 7% year over year, to $5.09 billion, but operating income fell 10%, the same contraction as net income, which stood at $535 million.

“Margins are typically lower in the first quarter, but they are starting to show some recovery,” Mr. Uribe said. The cost of goods sold was 13% higher in the quarter, but, according to him, analyses and data point to an improvement this year.

During his visit to the country, he closely followed the changes in the Suzano plant, São Paulo. With the investments, the unit started producing 200 million diapers per month and automated the production of wet wipes. “Our entire production line is digitalized, with data every second on how the production is going, how much material we are consuming, how our products are in terms of quality,” Mr. Uribe said. Besides the local market, the unit already supplies Chile, Peru, Bolivia and Argentina.

But the allocation of funds includes the company’s other two plants, in Mogi das Cruzes (São Paulo) and Camaçari (Bahia). One brand that will have more products made in Brazil is Intimus. Today, some items in its portfolio come from Asia. They will be produced at the plant in Bahia, both to meet the domestic market and to export, at first, to Chile and Peru. The company expects the production to supply the entire region in the coming years.

The growth of domestic production also benefits product lines driven by the change in consumption habits during the pandemic, as is the case of the product Scott Duramax. At the beginning of the second half, the conversion line focused on local production will start operating, replacing the current import operation from Colombia. The product will be made in the Mogi das Cruzes plant. The local output is expected to grow 40% in the first year of operation.

The expansion plan also includes the use of local raw materials, a strategy that gained prominence after global supply chain disruptions caused by the pandemic. Almost all the inputs are Brazilian or imported by local suppliers, the executive said. “Verticalization and local production become more important and necessary, besides being a competitive advantage versus imports,” he said, citing advantages like the more guaranteed supply and the reduction of freight costs.

The Colombian executive believes that the moment is one of rearrangement of the global industry – not only for Kimberly-Clark. “It is an opportunity for Brazil to export even more to Latin America and the world. This is also happening in Mexico and Colombia. Latin American markets must take advantage of this trend.”

Source: Valor International

https://valorinternational.globo.com

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