Amazon can be recovered, generate income, experts say

They suggest the use of agroforestry occupation to generate economic activity in degraded areas

06/06/2022

Beto Verissimo and Juliano Assunção — Foto: Leo Pinheiro/Valor

Beto Verissimo and Juliano Assunção — Foto: Leo Pinheiro/Valor

The historical process of occupation of the Amazon has created enormous forest loss, but the stock of deforested areas can be recovered and used for the production of items that generate development and income, agronomist Beto Veríssimo and economist Juliano Assunção say. They are the coordinators of the Amazônia 2030 project, which seeks to make a diagnosis of the region’s problems and point out solutions, encouraging the formulation of state policies for the Amazon.

In a live-streamed interview with Valor on Friday, Mr. Veríssimo said that over the last 40 years 83 million hectares have been deforested in the region, which is equivalent to the area of Minas Gerais and São Paulo states. Of this total, only 10% is used in agronomic terms, mainly soybeans. Another 60% are underused areas, generally with low productivity cattle raising, while 30% are abandoned spots.

“There is a myth that it is necessary to deforest to develop. The analyses are absolutely conclusive that it is not necessary. Too much has already been deforested,” added Mr. Veríssimo, who is also a senior researcher and cofounder of the Institute for Man and the Environment of the Amazon (Imazon). “So there’s a long job of making good use of the areas that have already been opened up.”

Mr. Assunção said there is no need to cut down the forest to increase agriculture. “If you look at FAO [Food and Agriculture Organization of the United Nations] data, food production since the early 1960s has been growing at a very constant rate. But if we look at what is happening in terms of area, in the last 20 years, it hasn’t increased,” said the associate professor at the Catholic University of Rio de Janeiro (PUC-Rio) and executive director of the Climate Policy Initiative (CPI) Brazil.

He explained that the Amazon territory was allegedly occupied to “integrate” the country, which made sense in the past, but the goal was not to extract value from the forest. “If this brought us a deforestation of 20% of the Amazon, which is something dramatic from the environmental point of view, today we have in our hands, when we look ahead, a stock of area that no country has to expand its agricultural production,” he said.

Mr. Veríssimo affirmed that reforestation can be used to promote the paper and pulp industry: “The expansion of this sector has to take place in the Amazon, but not over the forest. The specialist points out the important role of agroforestry systems, which combine the preservation of the standing forest and the cultivation of species to generate income, such as cocoa and açaí.

According to Mr. Assunção, the sector of products compatible with the Amazon ecosystem has more than 60 quality items for export, but they account for only 0.17% of the world market share. The Brazilian Amazon represents one-third of the world’s tropical forests.

Both specialists also emphasized that it is necessary to have a land title regularization policy for the region, provided it does not promote flexibility for the illegal advance on preserved areas, which, according to them, has been happening in recent years.

Mr. Veríssimo said that the Amazon is experiencing “a perfect storm of problems”, which include, deforestation, youth unemployment, poverty, and violence. While the region covers 59% of the country, it produces only 8% of the GDP.

For Mr. Assunção, there is a “paradox” in the region, which, with a population of 28 million people, is going through a demographic moment that is expected to be favorable. “The working-age population is growing in comparison with the population of dependents, a process that is likely to come to an end around 2030,” he said.

However, those people have few opportunities. “The labor market is very fragile, mostly with informal labor contracts, and the private sector has difficulty in dynamically establishing itself,” he said. Among young people between the ages of 18 and 25, 42% are outside the labor market.

Source: Valor International

https://valorinternational.globo.com/
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Unipar to invest R$130m in new plant in Bahia

New plant with capacity to produce 10,000 tonnes of chlorine a year will be built at the Petrochemical Complex of Camaçari

06/06/2022

Mauricio Russomanno — Foto: Silvia Zamboni/Valor

Mauricio Russomanno — Foto: Silvia Zamboni/Valor

Unipar, the largest producer of chlorine and caustic soda and one of the main PVC manufacturers in South America, will invest R$130 million in a new plant, in Bahia. This raises to R$230 million the disbursements unveiled since the end of last year by the company to expand capacity.

The new plant, with a capacity to produce 10,000 tonnes of chlorine a year, will be built at the Petrochemical Complex of Camaçari (Bahia) and is expected to start operating in the first half of 2024. It will meet the growing demand for hydrochloric acid, sodium hypochlorite and caustic soda driven by the new basic sanitation legal framework.

“We believe in the sanitation framework as one growth driver for the market. There have already been several approvals [of projects] and auctions, and there will be more,” CEO Mauricio Russomanno told Valor.

In chlorine, the company’s installed capacity will jump to 715,000 from 680,000 tonnes/year with two expansions – in Santo André (Greater São Paulo), with an investment of R$100 million, the production of chlorine, caustic soda and hydrochloric acid will be increased by 15% as from the second half of 2023.

With the new injections, the company starts to shape a new growth cycle supported by the perspective of increasing demand for chlorine and its products driven by the new legal framework for basic sanitation in Brazil. The plant in Bahia is the first greenfield project within the company’s geographic expansion strategy, whose last major leap was taken at the end of 2016, with the purchase of the PVC plants of the Solvay group (Indupa) in Brazil and Argentina.

The company had already signaled the intention to have a plant in the Northeast region, in the wake of the high investments necessary for the region to reach the levels of universal access to water and sewage services by 2033 foreseen in the framework.

Bahia is the first step in the region, Mr. Russomanno said. “We are looking at Pernambuco and the north of the region, at states such as Rio Grande do Norte and Maranhão,” he said.

The construction of new plants and potential acquisitions, possibly branching into adjacent businesses, are on the company’s radar.

As Valor reported, Unipar studied the purchase of the chloralkali plant of Compass Minerals in Igarassu, Pernambuco, formerly Produquímica, in the first half of last year, but the deal fell apart. Compass Minerals ended up selling the plant, in addition to the chemical units for water treatment in Marechal Deodoro (Alagoas) and Suzano (São Paulo), to Cape Participações for R$236 million. These units will be operated by Chlorum Solutions.

According to Mr. Russomanno, Unipar may seek financing to execute the project in Bahia, but it has enough funds on hand to build the new plant. At the end of March, the company had more cash and cash equivalents than gross debt, with a positive balance (net cash) of R$432.9 million.

Source: Valor International

https://valorinternational.globo.com/
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Sinqia has R$200m for growth plans

Strategy now is to invest in front office solutions

06/06/2022

Even after spending R$420 million on the purchase of NewCon in December and R$79.5 million on Lote45 in January, Sinqia continues to seek new acquisition opportunities to expand the range of software services it offers to financial firms. The focus now, however, is on repositioning the business toward front-office solutions, directly linked to the user interface.

“We want to move out of the kitchen and go to the restaurant window,” said Luciano Camargo, co-founder of Sinqia, who will step down as chief operating officer and take over as chairman. “We will focus more on services such as onboarding, digital signature and digital billing, which are directly related to the financial firm’s relationship with the customer.”

According to the company’s executives, there is still R$200 million in cash for new acquisitions, which will probably be made in the second half of the year. The first half, according to CEO Bernardo Gomes, was the moment to consolidate recent acquisitions, integrating new operations and focusing on increasing revenues.

“This first semester was very much about digesting the acquisitions we made, about understanding how the market looks. We have cash to make another round [of acquisitions] in the second half and continue at this pace. If the moment calls for it, we may also consider making an acquisition in the future,” he added.

Mr. Camargo points out that Sinqia is currently in talks with 200 companies that may potentially be bought. “When we see market trends, we speed up or slow down the conversation with this or that company. It is not a guarantee that it will always work, but it has worked so far.”

To make this strategic repositioning towards front office, the company hired Ricardo Pacheco, a former executive at Itaú, who intends to bring the experience of those who were on the other side of the counter to help Sinqia understand the main needs of banks in a much more competitive environment and in which offering a good digital experience has become a basic necessity for the sustainability of the business.

“We are still scratching the surface, taking advantage of opportunities within the verticals we already work in. The next step is to integrate those solutions. Now it is about generating more value than each company separately,” he said.

Sinqia currently has four main verticals of service: banking, consórcio (buyer’s club), funds and pension plans. Some of its best-known solutions are related to enabling operations, automation of operational processes, accounting controls and interconnection with settlement institutions.

Mr. Gomes comments that there are three main reasons that lead them to make an acquisition. The first is to enter segments in which Sinqia does not yet operate. The second is to gain market share in segments in which it already operates. And the third is to seek companies that offer solutions capable of “horizontalizing” the business that the company already has, integrating the different existing solutions.

“If I take the pipeline of companies we are in contact with, 30% are new segments, 30% mean gaining market share in the segments we already have, and 40% are horizontal opportunities,” he said, revealing that the next acquisition has greater chances of being in this third group.

Besides the integration of solutions, one concern of the executives is to keep their attention focused on fashionable technologies to avoid being left behind in the future. Mr. Pacheco, for example, says he has experience with technologies such as artificial intelligence and blockchain, which are on Sinqia’s radar to expand its portfolio of solutions. In the case of artificial intelligence, the first move in that direction was made by buying Simply in March 2021.

“It does facial recognition and onboarding to ensure that people signing up are who they say they are, keeping all profile data so to reduce risk of fraud. All of this today is already done with artificial intelligence. I hope that in the future we can help the client not only with a report about what has already happened, but also about what is going to happen,” he said.

Regarding blockchain, on the other hand, the company does not have specific advanced initiatives yet, but the executives emphasize that they are monitoring startups working with the technology to prospect opportunities. Sinqia has a Corporate Venture Capital (CVC) program called Torq, in which it looks for startups with business models that complement its products to invest in.

In the first quarter, Sinqia reported net revenue of R$138.9 million, up 103.5% year over year. It was a record number for the company, which means R$555.4 million in annualized values. The adjusted EBITDA advanced 191.7% to R$36.2 million. Net income was R$9.7 million, a 12.4 times expansion in the annual comparison.

Mr. Gomes recalled that in 2013 the company, formerly called Senior Solution, held an IPO with revenues of R$40 million, which seemed very low for a company that wanted to be traded on B3. “Today we have almost R$600 million in annualized revenue with EBITDA of R$144.9 million,” he said.

For the next two years, the cofounder and CEO predicts that the company could double in size. “What we are talking about is to be capable of doubling again in two years in terms of revenue, just as we did in the past, when we increased threefold our size from 2019 to 2021.” Mr. Camargo believes that the 10% market share that Sinqia has today guarantees a “giant” potential for expansion from now on.

Sinqia’s average compound annual growth since 2015 has been around 30% per year.

Source: Valor International

https://valorinternational.globo.com/
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ArcelorMittal expands capacity to serve automotive market, industry

Investment in Brazil totals R$7.8bn after new injection

06/02/2022

ArcelorMittal’s Sabará unit — Foto: Divulgação/ArcelorMittal/Nitro Histórias Visuais

ArcelorMittal’s Sabará unit — Foto: Divulgação/ArcelorMittal/Nitro Histórias Visuais

ArcelorMittal, the steelmaker focused on the automotive and industrial sectors, will expand investments in Brazil by R$144 million, totaling R$7.8 billion. The company has been unveiling new capital injections since early last year.

The new investment unveiled Tuesday will target a production unit in Sabará, in the metropolitan region of Belo Horizonte. This plant started operating in 1917, giving rise to Companhia Siderúrgica Belgo-Mineira. The unit was acquired in the 1990s by the then Arcelor.

According to ArcelorMittal’s statement on Wednesday, the R$144 million investment is aimed at increasing the plant’s production capacity by 35%. The company seeks to offer “high value-added solutions for the automotive and industrial sectors.”

The funds will be used mainly for the acquisition of two new pieces of automated equipment for wire drawing. The company targets the market segment of springs, shock absorbers, screws, fasteners and other industrial products.

“The investment strengthens our position in the Brazilian market and increases the company’s competitiveness in the automotive and industrial sectors. Nine of the 10 best-selling vehicles in Brazil use steel produced at the Sabará unit,” said Jefferson De Paula, CEO of ArcelorMittal Brasil and Aços Longos e Mineração LATAM.

The new products, in the case of the automotive sector, will be used both for entry-level cars and SUVs, the company said.

Mr. De Paula stressed that the increase in the mix of products and solutions will follow the growth of the automotive, tooling and railroad markets, expanding the company’s businesses in this market. Production will be primarily geared to the domestic market. The investment is expected to be concluded by 2024.

The Brazilian subsidiary says that, with the new investment, capital injections in Brazil total R$7.8 billion. Of this total, R$4.5 billion are earmarked to expand Minas Gerais operations.

In Santa Catarina, the company will inject funds to expand the cold and galvanized steel rolling mill. The company is also investing to modernize and improve its portfolio and capacity in the steelmaker in Barra Mansa, Rio de Janeiro.

ArcelorMittal is the largest steel producer in Brazil and makes long and flat steel. Next comes Gerdau, its biggest competitor in long steel for construction and industry. Other competitors are Mexico’s Simec, AVB and Sinobrás (in long steel), Usiminas and CSN (in flat-rolled steel) and Ternium and CSP (in the slab market).

Source: https://valorinternational.globo.com/

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Petrobras hires Bradesco BBI to sell fertilizer plant

State-owned oil company highlights recently launched National Fertilizer Plan, growth of agricultural sector as attractions

06/02/2022

Petrobras's fertilizer plant in Três Lagoas — Foto: Divulgação

Petrobras’s fertilizer plant in Três Lagoas — Foto: Divulgação

Petrobras hired Bradesco BBI as the exclusive financial advisor to sell nitrogen fertilizer unit UFN-3, in Três Lagoas, Mato Grosso do Sul.

In February, the then-minister of Agriculture, Tereza Cristina, announced the sale of the plant to the Russian group Acron for an undisclosed amount. But the deal was canceled due to a lack of governmental approvals, as informed by Petrobras in April.

Among the terms of the deal disclosed Tuesday by Petrobras is the “mandatory and non-negotiable” commitment that the UFN-3 construction works be completed by the buyer.

The document highlights the recently launched National Fertilizer Plan and the growth of the agricultural sector as attractions for the unit. The plant has a projected capacity of 3,600 tonnes of urea and 2,200 tonnes of ammonia a day, with a consumption of 2.2 million cubic meters/day of natural gas.

“The urea production capacity would represent nearly 20% of Brazil’s apparent consumption of urea in 2020,” Petrobras said. Last week, Mato Grosso do Sul Governor Reinaldo Azambuja told TV show Globo Rural that three companies are interested in buying the fertilizer plant, without revealing names. One is said to be Unigel, which already operates in the Northeast region.

Petrobras will also offer a contract to supply natural gas for fertilizer production at the plant as part of the deal, but the item will be optional. UFN-3 is located near the Gasbol gas pipeline, with an interconnection of nearly 4 kilometers already completed.

Petrobras seeks a buyer with equity greater than $300 million or net revenues equal to or greater than $750 million. If it is a financial player, the interested buyer must have assets under management above $300 million. A joint offer may also be accepted, in the form of a consortium of interested buyers.

The construction works began in September 2011 but were halted in December 2014. Construction is 81% complete.

Source: https://valorinternational.globo.com/

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Softys takes over Carta Fabril, becomes leader in Brazilian market

R$1.14bn acquisition was unveiled in October and concluded after approval by antitrust regulator CADE

02/06/2022

Softys, a subsidiary of Chilean group CMPC, took over Carta Fabril, owner of the brands Cotton and Coquetel, on Wednesday and overtook Santher, becoming the leader in the Brazilian market of toilet paper, with a market share close to 30%.

The R$1.14 billion acquisition was announced in October and concluded after approval by antitrust regulator CADE, 15 days ago.

With the deal, the third acquisition by the Chilean group in the tissue paper sector in the country since 2009, Softys Brasil now has 4,000 employees and a production capacity of 370,000 tonnes per year of tissue paper and almost 6 billion units of personal care products in five plants.

Carta Fabril operates two plants, in Goiás and Rio de Janeiro, with a production capacity of 100,000 tonnes per year. The unit in Rio, according to the chief executive of Softys Brazil, Luis Delfim, is today the most modern among the 23 factories of the Chilean group. “This asset was one reason why we decided to make the purchase offer,” he told Valor.

Gonzalo Darraidou — Foto: Silvia Zamboni/Valor

Gonzalo Darraidou — Foto: Silvia Zamboni/Valor

According to the chief executive of Softys, Gonzalo Darraidou, another factor taken into consideration was the possibility of expansion in the two Carta Fabril factories. The projects are already underway and will require about $30 million in investments.

“The idea is to maintain certain [Carta Fabril] brands and enhance Softys brands,” he added, referring to the portfolio analysis that is underway. It is already certain, however, that the Cotton brand of toilet paper will be maintained, given its strength in the Rio de Janeiro market.

According to Mr. Darraidou, efforts are now focused on integrating operations and capturing the relevant synergies that have already been identified. Therefore, today, Softys says it is not evaluating new acquisitions. Despite that, the company has been named as one of the potential buyers of Kimberly-Clark assets to be put up for sale in Latin America.

Softys owns the brands Elite, Kitchen, Sublime, Babysec, and Ladysoft, among others. With the acquisition, plus investments in expansion, it will increase its diaper production capacity to 2.5 billion units per year, similar to that of leaders Procter & Gamble (P&G) and Kimberly-Clark in Brazil.

Source: https://valorinternational.globo.com/

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Spic buys control of Canadian’s farms in bet on solar power

Companies will invest more than R$2 billion in two projects with total capacity of 738 MWp

06/02/2022

Adriana Waltrick — Foto: Silvia Zamboni/Valor

Adriana Waltrick — Foto: Silvia Zamboni/Valor

The Chinese interest in the Brazilian power industry is confirmed with yet another acquisition by Spic Brasil, a subsidiary of the state-owned State Power Investment Corporation of China (Spic), this time in the solar segment. The company bought controlling stakes of 70% in two greenfield solar projects from Canadian Solar and will invest more than R$2 billion. The acquisition is subject to approval by the antitrust regulator CADE.

The plants have a generating capacity of 738 megawatts of power. The largest project, Marangatu, is located in Brasileira (Piauí) and will have an installed capacity of 446 MW. The smaller one, Panati-Sitiá, in Jaguaretama (Ceará), will have 292 MWp of installed capacity.

The plants will be able to generate electricity equivalent to the annual consumption of more than 900,000 homes. Spic operates in thermal, hydro, and wind generation, and this is the company’s first foray into the solar segment in Brazil. Worldwide, the group has extensive experience in the sector. For Canadian, the sale is expected to monetize 2.3 GW of power in scaled solar projects in Brazil.

CEO Adriana Waltrick told Valor that the company intends to be among the three main private-sector players in power generation, with about 10 GW installed by 2025 and growth in renewable sources.

If everything goes right, operations are expected to begin by the end of 2023, increasing net operating revenue by 12% and jumping to almost 4 GW of capacity from the current 3.1 GW, in addition to 1.7 GW of wind and solar in the pipeline.

“Brazil has a great potential in solar and wind. However, we have several goals in Brazil and worldwide to reduce fossil fuels. As a group, we have several goals to neutralize our carbon footprint by 2030,” Ms. Waltrick said.

Of the amount invested, Spic intends to fund 60% with project finance and 40% with equity, split between Spic (70%) and Canadian Solar (30%). The executive understands the current situation of high-interest rate and capital cost increase but considers that this is a long-term investment in a temporary context.

“All the funding is being contracted. We expect to close the deal in the next 90 days, so all funding and equity structures will be advanced”, Ms. Waltrick said.

The strategic partnership between the companies marks Spic’s entry into the solar segment and will lead to a joint venture in the future, the executive said. She knows that at the current moment the production chains of the solar segment are under pressure due to intermittent operations in Asian factories, lockdown measures in China, and the escalating cost of international freight, which can make capital expenditures oscillate.

“The economic situation is challenging in all global logistics and supply chains, and for the power industry as well. But we have brought one of the world’s largest solar implementers, and we are the world’s largest solar operators.”

Because these are centralized generation plants, that is, large, she believes that scale makes the difference in the acquisition of equipment. The choice of technology has not been defined but is in the final phase.

The bet of the Chinese on this asset shows that even in adverse issues, the electric sector is still the crown jewel. Since the purchase of Pacific Hydro, controlled by the government of China, it owns the wind farms Millennium and Vale dos Ventos (Paraíba). In 2017 it bought the São Simão plant for R$7.18 billion. And in 2020 it bought a slice of the thermoelectric projects GNA I and GNA II, in addition to participation in future expansion projects GNA III and GNA IV.

There are many assets in the market for sale — such as hydroelectric plants of EDP, Ibitu, and Rio Energy, among others — and Ms. Waltrick does not deny that she is mulling over new mergers or acquisitions. However, she does not reveal what she is considering. “We are ambitious. We want to look at the sector very carefully.”

Source: https://valorinternational.globo.com/

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Employment picks up again as pandemic pressure eases

Unemployment rate falls to 10.5% in April, to 11.3m people

06/01/2022

The labor market continued to surprise analysts in April. Even though the projections foresee a worsening in the second half of the year, in line with the deceleration of the wider economy, the better-than-expected numbers have already led some to place a positive bias towards unemployment at the end of the year.

According to data from the Continuous National Household Sample Survey (Pnad Contínua), it fell to 10.5% in April from 11.1% in the quarter ending in March, reported the Brazilian Institute of Geography and Statistics (IBGE). Thus, 11.349 million Brazilians are still unemployed in the country.

The result was below the projections compiled by Valor Data, which ranged from 10.7% to 11.2%, with a median of 11.9%.

Compared to the previous quarter, the number of unemployed fell by 5.8% to 11.349 million. This is the lowest level since early 2016. The employed population advanced 1.1%, to 96.5 million people, the highest since records began, in 2012.

Adriana Beringuy, coordinator of IBGE’s Household Sample Survey, pointed out that the growth of the employed population has been spreading among the different economic activities and remained high in the first months of the year, contradicting the expected seasonality.

In her assessment, this shows that the economy is somewhat closer to normality, with less effect of the pandemic. “Information technology activities provided the necessary infrastructure for the economy in this more virtual environment. Now, especially in the second half, other activities have signs in the occupation, such as services,” she said.

Despite the improvement, the occupation level (the proportion of employed people within the working-age population) is still at 55.8%, a far cry from the levels of 57% in 2015 and 58% in 2014.

Caio Napoleão, an economist at MCM Consultores, highlights the fact that the unemployment rate fell despite a rapid recovery in the labor market participation rate. “This drop in the unemployment rate had been occurring very much at the expense of a labor force that remained stable, as well as a participation rate that had been stuck near 62% since the third quarter of last year, seasonally adjusted, one point below the pre-pandemic level,” he said. “Only there was a sharp correction last month, the participation rate came back to 62.7%. Even so, the employed population grew to the point of more than compensating for this,” he points out.

According to Mr. Napoleão, one factor that may have helped the participation rate jump in the month was the return to in-person classes, which led mothers who previously ended up staying at home to care for their children to the labor market. “That is a strong hypothesis, because the participation rate was more lagging for women than men,” he notes.

For Tiago Barreira, an economist at iDados, the market improvement still has some room to grow, given that the labor force has not yet resumed its pre-Covid crisis levels. Still, this trend is expected to lose some strength, given that the participation rate is already close to that seen at the pre-pandemic level – 62.4% currently, compared to 63.7% at the end of 2019.

Mr. Barreira also recalls that the participation rate may stabilize above the levels seen before the pandemic, since, because of issues such as the Social Security reform, which encouraged people to stay longer in the labor market, the participation rate may be on a structural upward trend.

In Santander’s calculations, the monthly unemployment rate fell to 9.4% in April, seasonally adjusted. This is the first time the indicator falls below double-digit levels since December 2015. And, despite predicting a slowdown in job generation in the second half, because of issues such as the monetary tightening conducted by the Central Bank, the April result puts a positive bias to the bank’s projection for the Brazilian labor market. At the moment, the average rate for 2022 is at 12.7%, but already under revision.

The same happens with MCM’s estimate, currently at 10.2%. “These are numbers that still can change, given that recent data signal something better,” Mr. Napoleão said.

On the other end, Tendências understands that the improvement observed in the last few months is “fruit of a return to normality,” and not a change in market dynamics. In a report to clients, economist Lucas Assis considered that the rise in interest rates, as well as domestic political uncertainties and the global slowdown expected in the second half of the year should reverse the current trend, causing the unemployment rate to reach 10.8% by December.

Source: https://valorinternational.globo.com/economy

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EU unwilling to ease control on Brazilian chicken

Official tells Valor measure is about wrongdoings, not deforestation

06/01/2022

Five years after imposing stricter controls on the sales of Brazilian chicken meat, the European Union has signaled that it has no plans in sight to suspend the measure, despite persistent demands from the Brazilian side.

In Brazil, the complaint is that the EU’s Directorate General of Health (DG Health) is, in practice, linking sanitary and phytosanitary measures (SPS) to deforestation issues, delaying the search for a solution to the problem, which affects millions of dollars in business.

To Valor, the EU said that “this is not correct”. According to a senior European official, “the current measures [of strengthened control over meat] are related to cases of fraud involving authorities and to the results of successive audits that have identified repeated deficiencies that demonstrate the unreliability of the Brazilian certification system.”

The official recalled that the strengthened control — 100% documents and 20% through physical and laboratory inspection (in Brazil and the EU), something unusual — was adopted in 2017 after the operations “Carne Fraca” and “Trapaça” in Brazil, which had negative results in the EC audits in the segments of meat and fish.

The source noted that while the fraud scandals involved officials at the Agriculture Ministry in illegally exporting cargoes to the EU and other countries, the 2017 audits showed “that the deficiencies identified by previous audits had not been corrected, despite the promises made.”

According to the EU, “in these circumstances the protective measures cannot be lifted and the authorization of additional sellers (re-authorizing the pre-listing procedure), additional products (pork, dairy, eggs) or additional production areas (for export) cannot be considered until a follow-up audit shows that corrective measures have been implemented to rectify the deficiencies and prevent fraudulent export practices.”

“For the EU, only a favorable outcome of an audit in Brazil will allow the European Commission to propose to the 27 member states to lift the current control on Brazilian chicken meat.” The commission has included an audit in Brazil in its work program for 2022. However, it has already warned that the feasibility of doing it “will depend on the evolution of the audit backlog caused by the pandemic and the need to ensure the safety of auditors in the current epidemiological situation of Covid-19.”

The strengthened control causes an additional cost that is ultimately discounted from the price of chicken. The EU mentions this “lack of confidence” in the Brazilian sanitary certification system (and despite all the controls), but also has Brazil as the supplier of 20% of all the chicken meat it imports.

Between January and April this year, the block imported 71,700 tonnes of Brazilian chicken meat, 27.8% more than in the same period last year, according to the Brazilian Association of Animal Protein (ABPA).

The finding, both in Brazil and in Europe, is that there has been a deterioration of the dialogue with DG Health of the EU. The situation has worsened since November, when Brazil denounced the EU at the World Trade Organization (WTO) because of “discriminatory sanitary controls for the detection of salmonella in salted chicken and turkey meat with pepper.”

There has been a “gigantic logjam” in bilateral talks ever since, deepening the sanitary mess started under the previous administration. In 2017, soon after the announcement of “Carne Fraca”, the EU sent an audit team to Brazil, with Irish veterinary inspectors, despite all the pressure that European producers were putting in the opposite direction.

The Europeans inspected several businesses and returned with a good impression. A draft of a positive report was ready when “Trapaça” broke out, involving food processing giant BRF and third parties laboratories that controlled the exported chicken meat.

The Irish vets felt betrayed, as they were not informed that this additional Federal Police operation was underway. Officials from the Ministry of Agriculture knew, as they were following the Federal Police, but apparently were forbidden to inform them. The Irish inspectors were left with their reputation threatened, since they advocated a return to normal relations with Brazil.

The situation was made worse when the then Minister of Agriculture, Blairo Maggi, did not remove BRF from the list of exporters even after the scandal involving the company. This forced the EU to issue a specific regulation removing all the company’s units, and a few others, from the list of exporters to the European market, which is unusual. Normally, Brussels suggests the blockade and the exporting country itself removes the meat packing plant from the list, which makes it easier to return.

After this, BRF, which has long ensured that there were no wrongdoings in its products, filed a complaint at the EU court disputing the regulation that barred its sales. It failed and was banned from exporting for human consumption, while entering in the radar zone of European surveillance. On top of that, the Europeans don’t even want to schedule meetings to talk about the suspension of the strengthened control.

Source: https://valorinternational.globo.com/agribusiness

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Crypto brokers will be regulated, Central Bank president says

Roberto Campos Neto said new bill will improve proposals already in Congress

06/01/2022

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

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

Central Bank President Roberto Campos Neto highlighted the regulatory challenges regarding crypto-assets and said the monetary authority will regulate brokerages in the segment. “We like the bill [making its way] in the Chamber [of Deputies] and the Senate. We will have a third [bill] to improve it,” he said during a public hearing at the Chamber on Tuesday.

Mr. Campos Neto pointed out that “crypto-assets came with blockchain” and that he expects “great gain from this technology.”

The Central Bank is working on developing its own digital currency with encrypted technology, which will be able to combine functionalities similar to those of cryptocurrencies. The digital real project is in its initial testing phase. Before the new version of the Brazilian currency is issued, the monetary authority hopes to have formal authorization to use the new technology.

Regarding monetary policy, the president of the Central Bank stated that “raising interest rates is always bad” and “we end up having to restrain the economy and affect an important part of productivity,” but pondered that living with high inflation can generate a greater dose of monetary tightening later.

“Our job is always to do our best to bring inflation to the target, but with the minimum of destruction to the productive fabric of the economy,” he said. Mr. Campos Neto pointed out that the monetary authority can make two mistakes: go too high or too low. In the second case, according to him, inflation tends to get out of control, which then needs to be corrected. “The last two times this happened, Brazil had to go into recession to correct this,” he said.

Mr. Campos Neto also spoke about discussions regarding the possible change in the inflation target in Brazil but emphasized that the monetary authority’s mandate is to pursue the percentage defined by the National Monetary Council (CMN). “There is a provocation in the sense that inflation in the world is higher, so would it not be necessary to change the target [in the country]? It’s a CMN issue, the Central Bank is one vote of three, our mandate is to follow the target.”

According to him, the current regime brings credibility to the monetary policy. “The target is decided at the CMN. When we see next year’s target, Brazil is closer than other countries. One element of price formation is based on expectations,” he said. Earlier, Mr. Campos Neto had cited a “new literature” on the subject but refused to comment.

In his presentation, Mr. Campos reinforced that more volatile products, such as food and fuel, which are less sensitive to monetary policy, ended up contaminating other items within inflation, which led the Central Bank to respond more forcefully, raising interest rates more. “In the core [of inflation] we take out what is volatile, and when it is high, it means that the volatile items have contaminated extensively. Today the cores run at 10%, we see several chains with contamination.”

Mr. Campos Neto also pointed out that the food and commodities shock, worsened by the war between Russia and Ukraine, is positive for the country, which is an exporter of these products but creates a social problem. About economic activity, he said he expects the projections for this year’s GDP growth to be revised upwards.

Source: Valor International – https://valorinternational.globo.com

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