Trade group will present document to presidential candidates
07/06/2022
Infrastructure companies advocate the creation of a floor for public investments, a reindustrialization policy and an integrated development agenda for the country. The proposals were put together by the Brazilian Association of Infrastructure and Basic Industry (Abdib) in a document that will be presented to presidential candidates. Brazil will hold elections in October.
“Since 2016, we have seen important advances in regulation, privatization and governance. But this was not accompanied by public investments, which today are at an unacceptable level,” said Venilton Tadini, head of the association. “We are not against the spending cap, but we are in favor of a floor for investments and a limit for current expenses,” he said.
In its proposals, Abdib emphasizes the privatization agenda, but reinforces the need to resume public works. “There are limits to private-sector participation. The concessions program itself has shown signs of fatigue. Today the interest rate scenario is different from recent years, and costs have increased,” Mr. Tadini said.
For Mr. Tadini, it is necessary to believe in the perspective of quality public investments, unlike what was seen in the past – for example, with the Growth Acceleration Program (PAC), which boosted public investments but ended up generating a series of abandoned projects across the country.
“Abandoned construction works are the result of poorly structured projects. Today we see an advance in governance, the control bodies have learned a lot and there has been an evolution in structuring,” he said.
The view is that, even in the short term, it would already be possible to unlock relevant amounts of investments in infrastructure with quality. “The country is at such a low level that the necessary works are very basic, like road resurfacing, maintenance of structures, simple projects that federal agencies are able to do without problems. Now, for larger structuring projects, new public-private partnerships, it would be another case, it is something that would require planning.”
The transportation and logistics sector is the one with the largest investment deficit in Brazilian infrastructure, according to the document prepared by Abdib. In 2021, the gap reached R$166 billion. In total, R$30.1 billion were invested in the segment, equivalent to 0.35% of GDP. The association says that this level must rise to R$196.2 billion per year (2.26% of GDP) for the country to reduce its bottlenecks in the next decade.
Mr. Tadini also highlights the investment gap in the basic sanitation segment, which reached R$22 billion last year. Although it is a smaller deficit in terms of volume, it has a very high social and environmental impact. “It’s a humanitarian issue,” he said.
Altogether, Abdib argues that the country should invest, per year, 4.3% of its GDP in infrastructure over 10 years.
In its letter of proposals, Abdib also tries to point out ways to guarantee the fiscal space necessary for the expansion of public investments, besides concessions. The association advocates a broad plan for reforms, which could be presented within the first 100 days of the government.
The agenda includes three points: tax and administrative overhauls and a change in the fiscal regime defined by the spending cap rule, to guarantee the drop in current expenses and the increase of investments in infrastructure.
Furthermore, Abdib proposes a reindustrialization policy for the country, with incentives focused on strategic segments.
“There is a lack of dialogue between the infrastructure and industry programs. This causes the country to miss huge opportunities. If there had been dialogue with the industry during the privatization of the telecommunications sector, today we could have global giants capable of exporting technology. Today we see the same situation with basic sanitation; there is no dialogue between the investment policy and the development of national industry,” Mr. Tadini says.
Brazil’s largest asset manager is being structured to sophisticate products
07/06/2022
Aroldo Medeiros — Foto: Silvia Zamboni/Valor
BB DTVM, Banco do Brasil’s asset manager and the largest such company in the country with R$1.5 trillion under management, has always been known for its size, but also for being slower in the process of product sophistication. However, a set of measures is being taken under the management of Aroldo Medeiros, CEO of the asset management firm since December 2020, in the sense of modernization, with the aim of putting BB DTVM at the same level of other large management companies considered to be cutting edge.
“The phase in that the retail investor liked DI [interbank deposit] funds and passive fixed-income funds is over. The small investor is more informed every day and wants different products, and we are following this movement, with new products and an active management,” Mr. Medeiros told Valor Investe. He has been with Banco do Brasil for 38 years and, a year and a half ago, took over as BB DTVM’s CEO, replacing Carlos André, currently the CEO of Santander’s asset manager.
One of the fronts of this modernization drive is the various partnerships being made, both in the management and distribution of funds, as well as in the attraction of clients. In the distribution area, the company is currently selling its funds on 16 investment platforms and has recently closed an agreement with four independent financial advisers with client portfolios specialized in pension funds.
There are also partnerships with international asset managers, with whom BB DTVM has mirror funds, and, according to Mr. Medeiros, new agreements with foreign asset managers are expected to be announced soon. “We want to offer the best to our clients, here in Brazil or abroad, whether they are managed by us or by third parties,” Mr. Medeiros said.
As for management itself, BB DTVM is structuring new areas exactly in order to be able to analyze and, therefore, place increasingly sophisticated assets into the portfolios.
The asset manager has set up an active fixed-income analysis and operations desk with the aim of buying securities that offer returns well above the interbank benchmark rate CDI. And, more recently, it has structured an analysis desk for riskier and more volatile securities (known in the market as high alpha) and another for quantitative analysis, which uses mathematical and statistical models to monitor market behavior and thus identify investment opportunities. Mr. Medeiros says that other important fields for active management and more complex assets are being designed and are expected to be ready soon.
The growing demand from investors for more complex products justifies BB DTVM’s focus on the support structure for analysis and selection of assets that go beyond the basics, both in fixed and variable income.
Mr. Medeiros recalls that the fall of benchmark interest rate Selic to the floor of 2% per year led a good part of the clients to migrate to hedge funds, corporate debt funds, ESG funds, infrastructure funds, cryptocurrency funds, and Fiagro (Investment Funds in Agroindustrial Productive Chains), among others.
However, with the current rise in the Selic rate, which is now 13.25% per year, BB DTVM, as well as assets managers of other large banks, has seen a wave of redemptions of its retail funds. In the year to May, redemptions in BB DTVM’s retail funds totaled R$12 billion, according to Morningstar data.
According to Mr. Medeiros, in general, this money that has been leaving the funds is going to products essentially offered by banks, such as certificates of bank deposit (CDBs), certificate of real-estate receivables (CRIs) and agribusiness receivables certificates (CRAs). He says, however, that these redemptions are very small compared to the stock in retail portfolios now, and that the greater trend of going to more sophisticated products has not been broken.
“The most complex products continue to receive new funds and, at the slightest sign that monetary tightening has come to an end, these investments will once again become relevant, just as they were until the Central Bank had to act with the Selic to tame inflation,” says the executive. “Investors today are much more mature, and the search for more structured assets is here to stay, even with this short-term setback, with the rise in interest rates,” he added.
Contract provides R$129.5m payment to shareholders and direct injection of R$30m
07/05/2022
Vibra Energia intends to achieve the commercialization of its first million cubic meters of biomethane in three years, reaching the mark of 2 million m³/day in the next five years, with the acquisition of 50% of ZEG Biogas. This volume corresponds to 20% of the potential for biomethane production – obtained by purifying biogas – from vinasse, a residue from ethanol production. The expansion of supply aims to meet an avid demand for green products.
The other 50% stake will remain with FFL and ZEG. With the contract signed on Friday, Vibra will disburse R$129.5 million to ZEG Biogas shareholders and will inject R$30 million directly into the company’s cash flow, in addition to the commitment to invest R$412 million for the development of new projects that are in the pipeline, according to the eventual capital needs.
The two companies intend to develop at least seven ZEG Biogas projects, one of them about to start commercial operation in the coming months, in São José dos Campos (São Paulo) – and which already has 100% of its biomethane sold. Four other projects are being negotiated with sugar and alcohol groups, using vinasse, and two other plants are under negotiations with landfill companies.
Marcelo Bragança — Foto: Marcelo Bragança
According to Marcelo Bragança, Vibra’s deputy chief operations officer, the companies are already talking to clients who are waiting for these new projects. The implementation deadlines can range from 12 to 24 months, depending on the origin of the product (whether from landfills or agribusiness waste). In addition to vinasse, there are already evaluations for projects that use the waste from the production of orange juice and palm residues.
“It is an infrastructure project that demands capex, time, and patience,” said Mr. Bragança. “We have our feet on the ground, but we think we are going to move very fast,” added Daniel Rossi, board member at ZEG Biogas. Resources to get the projects up and running, whether own capital or capital market capital, are not a bottleneck, say the executives.
Besides logistical and operational challenges, the biggest one, says Mr. Rossi, with ZEG Biogas, is knowledge about the product, which still requires demystification – something expected as the plants start commercial operation. The executive foresees a biomethane contracting boom by next year, which will ensure the development capacity of the projects.
“The biggest bottleneck today is to produce enough quantity to meet the demand,” said Mr. Rossi, explaining that the development of the supply is a tripartite negotiation. It involves the company that develops the biogas, the one that holds the residue, and the purchasing market.
Mr. Bragança, with Vibra, doesn’t rule out negotiating volumes directly with gas distributors, amid the current moment of market opening, considering them as potential customers, especially because some of them are already promoting public calls for an injection of biomethane into the network.
The acquisition of half the control of ZEG Biogas came at a very favorable time, according to the executives, since the demand is increasingly high for products linked to decarbonization and the ESG agenda, along with the granting of incentives recently by the government in order to accelerate the formation of a market.
Added to this scenario is the current high prices of fossil fuels and natural gas, which benefits new business with biofuel, since the contracts are tied to Brazil’s benchmark inflation index IPCA.
“We can not only provide predictability of the delivery of the molecule, but also the guarantee that [in the case of] any shock in the world energy market, the client will not be impacted in the same proportion,” said Mr. Bragança.
The approximation started in May last year, when the two companies signed a letter of understanding to study the biogas and biomethane market, evolving into a cooperation agreement in August and to talks, at the end of 2021, for the acquisition of the equity stake.
The partnership, according to the companies, may enable the more than 300 ethanol plants that supply Vibra to access an environmentally friendly solution for vinasse.
The synergy, they point out, involves the production capacity and commercialization of biomethane of ZEG Biogas to Vibra’s network with more than 18,000 corporate clients (B2B) that seek, for example, the replacement of LPG or diesel oil, besides a network with 8,300 gas stations.
Production of new 7MW equipment expected to start by 2025
07/05/2022
New wind turbines will initially be made at a manufacturing facility inJaraguá do Sul — Foto: Divulgação/WEG
WEG, the Santa Catarina-based machinery and equipment maker, will invest in the production of Brazil’s largest wind turbine. The 7-megawatt equipment, whose rotor has a diameter of 172 meters, will be tailored to serve other markets as well.
The company is investing in the development, engineering, testing and validation of the technology, and will invest in assets to make and install this equipment as needed.
The manufacturing of the new wind turbines will initially take place in Brazil, at the manufacturing facility in Jaraguá do Sul (Santa Catarina), where the company already produces wind turbines and has a wind operations center to control, monitor and analyze equipment in operation across the country.
The prototype of the new wind turbine is expected to go into operation in early 2024, with the start of serial production in the following year.
Unlike the 4.2 MW platform currently manufactured by WEG, which stands out for its focus on the specific wind and weather conditions in Brazil, the new wind turbine has characteristics adapted to serve other markets as well.
Today the company holds 10% of the domestic market and competes in the segment with Vestas, GE, Siemens Gamesa, Nordex Acciona and Wobben. João Paulo Gualberto da Silva, WEG’s energy managing director, explains that the company intends to grow in the wind power generation business and the initial strategy is to reallocate the funds currently invested in the manufacture of the 4.2 MW wind turbine to this new model.
“We will need to make some adjustments and, possibly, expansions. However, the priority is to make the most of the existing manufacturing structure. We will continue to take advantage of our capacity to produce many components internally, such as generators, motors, electronics, and even paints, thus obtaining important cost and quality advantages,” the executive told Valor.
As with all the platforms developed, WEG says it takes into consideration the weather conditions in Brazil, but intends to market this equipment in other geographies, taking advantage of the regions where the company already has a commercial and manufacturing presence.
“We have had success with our 2.1 MW platform, which totals 650 MW in operation, exceeding availability commitments, as well as with our current 4.2 MW platform, of which we have already commercialized over 1,000 MW.”
Santiago Chamorro rejects hybrid car idea, says country’s turn will come when cost falls
07/05/2022
Santiago Chamorro — Foto: Ana Paula Paiva/Valor
Some automakers are preparing to produce hybrid cars in Brazil. This group understands that the vehicle with two engines (one combustion and one electric) is the best way for Brazil to join the global transition to electrification. And to also save its large industrial park, since fully electric cars, which require plug-in charging, are not yet manufactured in the country due to the high cost of this technology. This is not, however, what the management of General Motors thinks. For Santiago Chamorro, GM’s CEO for South America, Brazil does not need an intermediate phase and can, when the technology is more accessible, have an electric car industry of its own.
Mr. Chamorro says he is convinced, from what global studies show, that the fully electric car is superior to the hybrid one in terms of environmental gain. “The other technologies become transient, temporary,” he said.
Fully electric vehicles still represent a very small portion of vehicle sales in Brazil. And they are all imported. The share of this type of car represented 0.1% of sales in 2021 and 0.3% until May this year. Although still small, the share of hybrids in sales was larger – 1.6% and 2%, respectively.
“Volumes are still low; but everything starts this way,” Mr. Chamorro said. The executive points to the premium category, with more expensive models and where sales of fully electric cars are concentrated today, as the gateway to transformation. Consumers in this range, the “early adopters,” as they are called in the United States, are willing to pay for technology that allows driving to be “more fun” and quieter, among other things, the executive said.
“But in the future, cars will be electric in all segments where we have a presence,” he said. When will this be? He replies, with good humor, that this is a topic “for a future conversation.” GM also does not breaks down its electrification schedule per region to achieve the global goal of being carbon neutral by 2040. In Brazil alone, the company has three vehicle plants and one engine plant.
“We produce where we sell,” Mr. Chamorro said, highlighting the vocation of Brazil, ninth largest producer of vehicles in the world and seventh largest market, besides other countries with car assembling in the region, such as Colombia and Ecuador.
With the electric car, the processes will change. “There will be a manufacturing transformation; our employees will have other skills and use other tools,” he said. “The transition will not be immediate, and by then we will have combustion cars with less polluting engines.”
To those who ask him if the electric car technology is not too expensive to be produced in the region, Mr. Chamorro replies with some facts. Besides Brazil being a source of renewable energies in expansion, such as solar and wind power, he recalled that South America offers mineral reserves, such as cobalt and nickel, which favor the development of the vehicles of the future.
Furthermore, he says, the cost of the technology tends to fall. GM has developed a modular platform, with battery packs that can be assembled in various formats for use in different types of vehicles. The flexibility of this platform, called Ultium, allows to meet the needs of those who seek a more affordable car and also of those who want a more luxurious one, with battery packs for longer or shorter range.
Recently, GM and Honda signed a global agreement that will use new generations of this platform to develop economical cars. The companies expect that, in the next generations of electric cars, the cost will be the same of a combustion car.
Mr. Chamorro points out that in the urban environment, the owner of a car used for day-to-day routine travels on average 45 kilometers a day. One charge a week, in this case, would be enough. And for those who think that no farmer is interested in an electric pickup truck, Mr. Chamorro says that today farmers invest in solar and wind power sources. “Many report difficulties in getting to a gas station,” he said.
For Mr. Chamorro, there is no reason to be afraid of the electric car. “If we asked anyone a century ago if they would like to exchange their horse for an automobile, surely many would say they would rather have a second horse. Big changes involve strong emotions.”
Mr. Chamorro points to the expansion of private investment in public charging stations. For him, this market will continue to attract investors as the demand for electric cars grows.
GM plans to invest $35 billion to launch 30 new electric vehicles by 2025. Three of them will come to the Brazilian market. The three models – Bolt EUV, Blazer EV, and Equinoix EV – were presented a few weeks ago on Youtube by Mr. Chamorro. The audience, he says, has already hit 6 million people. “The consumer is curious,” he said.
Mr. Chamorro does not directly criticize competitors that show interest in hybrid cars and defend the use of ethanol in these engines. But he indicates that the subject generates dissent in the sector. “While other companies see this as a small matter, we see it as a central issue,” he says in relation to fully electric cars.
GM’s direct competitors, such as Volkswagen and Stellantis, intend to go this way. Toyota already produces this type of vehicle, and two Chinese brands – CAOA Chery and Great Wall – have already announced they will produce ethanol hybrids in Brazil.
The electric car is, however, only a part of the vehicle transformation process. Mr. Chamorro talks about GM’s autonomous car tests in San Francisco and says that taking the driver out of the wheel will be one of the ways to put an end to traffic accidents.
Connectivity is another part of the transformation. Mr. Chamorro envisions the expansion of the car’s communication with people’s lives. GM is already collecting picturesque moments with its Onstar, a subscription-based communication service for navigation and emergencies. This service has helped, for example, in the rescue of stolen vehicles.
But one of the cases that moved Mr. Chamorro happened in the U.S. The emergency service was called by the mother of a woman about to give birth inside the vehicle. Trained for this too, the operators assisted in bringing the baby into the world. “There is a wave of possibilities coming,” says Mr. Chamorro.
Managers look for companies with good fundamentals to invest in
07/05/2022
Prevailing view is that investors must identify potential opportunities to join top-notch, resilient assets trading at a heavy discount — Foto: Divulgação
Companies with strong economic fundamentals trading at a discount are being analyzed by investment funds looking for opportunities on the Brazilian exchange B3. Despite the high interest rates, fast inflation and strong volatility, a scenario that increases risk aversion, these firms have been studying whether to buy into businesses, purchase shares of listed companies, or increase their stakes in companies with good growth history that have been affected by the crisis.
“It is cheaper to buy [shares of] companies on the stock exchange than to inject capital in unlisted companies,” said Rafael Furlanetti, institutional managing partner at XP Investimentos. “With the current prices on the stock exchange, private equity funds [which buy shares in companies] and long-term investors evaluate opportunities to become shareholders of companies that have strong fundamentals that will certainly weather this crisis,” he said.
Although it is still a restricted phenomenon, the prevailing view is that investors must identify potential opportunities to join top-notch, resilient assets trading at a heavy discount throughout the year, sources say.
The Brazilian cloud computing platform Locaweb has recently gained a major shareholder – the asset management company General Atlantic (GA), which has in its portfolio the pharmaceutical retail company Pague Menos and several technology companies. GA’s strategy is to gradually buy shares in companies, sources say. Today, the company holds a 10.7% stake in Locaweb – in March, the fund acquired a 4.9% stake in the stock market. The company is down 54,8% on the stock market this year, and lost 77,8% in 12 months. From January to March, the company’s net revenue rose 55% year over year, while profit advanced 154%.
Petz, a pet products retailer, has drawn funds like Mubadala, which historically allocates capital in infrastructure and real estate around the world, sources say. The Abu Dhabi sovereign wealth fund raised $322 million earlier this year to invest in Brazilian companies. According to a source in the financial market, the fund mulls acquiring a stake in the fast-food chain Burger King, now called Zamp in Brazil.
Petz already has a major investor. The sovereign wealth fund GIC built a 5.2% stake in the chain at the end of 2021, increased it to 5.4% in May, then reduced it to 4.87% in June. But the fund is willing to raise the stake above 5% again in the near term, a source familiar with the retailer’s strategy said.
“Both Petz and Locaweb are companies seen as having good fundamentals that are being affected by broader factors,” a source in the financial market said. “Other retail companies, such as Assaí and Grupo Mateus, have drawn more attention from investors,” an investment banker based in São Paulo said.
“What we see are different timings,” said an asset manager with investments in education and consumption. “With more aggressive interest rate hikes in the U.S., the markets are pricing a stronger deceleration, but these foreign private-equity funds look very long term, they think five, 10 years in advance. It’s different from the public market, which works with a one-year horizon, joins and leaves stocks all the time, and follow the short-term situation.”
Dynamo, one of the most traditional asset management companies in the country, mulls increasing stakes in companies from its portfolio, a source within the firm told Valor. Car rental company Localiza (which merged with Unidas), cosmetic maker Natura, energy company Eneva, retailer Lojas Renner, sugar and energy company Cosan and energy company Vibra are in the current portfolio. “There are a lot of cheap stocks and there will be a lot of opportunities. We are definitely looking at what is attractive,” a source linked to Vinci said.
Verde Asset also remains long in Brazilian listed companies and sees cheap stocks, according to the asset management company’s financial results, unveiled last week.
Carlos Carvalho Jr., managing director of Kínitro Capital, says that there have been some interesting deals by private-equity funds in recent months in Brazil because investors are starting to see valuations that justify strategic buying. “According to these funds’ calculations, there are, to some extent, more depreciated assets among the publicly-traded ones than among the privately held ones.”
A Valor’s analysis of 25 purchase and sale transactions of positions at B3 in 15 companies (from traditional companies in their sectors to newcomers to the stock market) shows a greater appetite from investors in general to increase their stakes in certain businesses. The analysis includes deals involving long-term funds and asset management companies focused on the short term – in both cases, without the objective of changing control or its management structure.
According to the survey, from January to June, one-third of the 25 deals were aimed at increasing stakes, while two-thirds reduced positions. In the previous six months, more than 70% were aimed at reducing stakes.
In order to have a broader volume of companies evaluated, consolidated deals in their markets, such as Renner, Raia Drogasil (drugstores) and Iguatemi (shopping malls), as well as recently listed companies in a growth phase, such as Petz and Quero-Quero (retailer), and groups that went public after 2020, such as Westwing (retailer), Track&Field (retailer) and Multilaser (technology), were considered in the analysis. The deals are filed with the CVM.
The U.S. asset management company Wishbone Management had already increased its position in Quero-Quero to 10.68% in April from 6.67%. Now, according to data from June, it holds 14.14%. Itaú Unibanco, however, reduced its stake in the retailer to 4.98% in June from 8.11% in March. The retailer has lost almost 43% of its market capitalization this year, with sales up 24% from January to March. Wasatch Advisors, an asset manager with an appetite for small-caps, increased its stake in Petz to 5.51% in June from 4.99%.
In the list of assets with stronger fundamentals, Raia Drogasil and Renner reported to the market that J.P. Morgan increased its shares in the companies – in the latter, to 5% in March from 4.6%.
Mr. Carvalho, with Kínitro Capital, sees Brazil a little ahead in terms of capital market recovery, which can be beneficial. “There are three main phases in these periods of acute crisis: the devaluation of company multiples, the revision of stock profits, and the capitulation, which is basically total lack of positive expectations, with investors surrendering to a very negative perception. Our market is in this third phase and the U.S. market, in the second phase, so we are ahead in this process of exiting this cycle. Obviously, if we don’t have a drastic worsening of the scenario again,” he said.
In June, up to the 27th, foreign investors bought R$252.2 billion in stocks on the B3 and sold R$250.9 billion, which means a net injection R$1.3 billion. In 2022, the balance is positive by about R$53 billion. A survey carried out by Valor Data shows that only 19 companies from the IBRx Index saw their shares rise over the last 12 months. The index is made up by the most liquid companies of B3.
Sergio Spinelli, with law firm Spinelli Advogados, says that companies that do not have “poison pill” clauses are becoming the target of asset management companies that invest in public companies. These clauses are protection mechanisms for shareholders of public companies against hostile takeover attempts by another investor. Each company has defined in its bylaws when the clause, which forced the investor to extend the offer to the other shareholders, can be triggered.
“The funds, when they allocate capital in these companies by building positions, need to see liquidity,” Mr. Spinelli said. “It is natural to look for companies without poison-pill clauses because it is one less limiting factor.” He still sees room for a further drop in the value of stocks driven by high interest rates.
Otávio Yazbek, with Yazbek Advogados, said that this clause started to gain relevance in Brazil after the IPO boom in 2006-2007. “This mechanism is very common in the United States, with companies’ moves to have a dispersed control. In Brazil, however, it guarantees that the controlling shareholder remains in control.”
With the recent IPO drives – in 2020 and 2021 –, Mr. Yazbek has seen that corporate disputes are beginning to emerge, since funds have increased stakes in companies. “New disputes have started to arise, also because funds, some with a more activist profile, are gaining a greater weight in recent stock offerings. The context is different than in previous booms.”
Assaí, Burger King (Zamp) and Mateus declined to comment. Petz said it does not comment on market moves that have not been disclosed to the market. Mubadala also said that it does not comment on market rumors. GIC did not immediately reply to a request for comment.
Chinese company wants to turn country into gateway for neighbors in South, Central America
07/04/2022
Marcelo Barella — Foto: Divulgação
Brazilians going to Qatar to watch the FIFA World Cup in November have a good chance of going to and from the stadiums in one of the 1,800 electric buses that China’s Higer sent to the host country to transport the fans of the 32 national teams. Those who will stay in Brazil, on the other hand, may also have the opportunity to know the vehicle — if government programs to electrify bus fleets move forward. This is expected to materialize quickly in some cities, especially in São Paulo.
The Chinese manufacturer has set up a business plan to hit the streets in Brazil and make the country the gateway to its neighbors in South and Central America, such as Peru and Colombia. The company intends to compete for space with big brands that dominate the Brazilian market, some of which have been operating in the country for more than 60 years.
Founded in 1998, Higer has four plants in China and grossed $5.5 billion last year. It is a young company when compared to competitors, especially the European ones. “We already have 50,000 electric buses in the streets – mostly in China, but also in Europe,” said Marcelo Barella, Higer’s head for Latin America. In Brazil, the Chinese company will operate with TEVx Motors, which will import and distribute the vehicles.
The company has put together a business plan where the operators of the transportation system, whether private or public, will not need to buy the vehicles nor worry about the charging infrastructure. Everything will be leased. The electric bus is 2.5 times more expensive than a diesel-powered one. “A combustion bus costs around R$900,000. The electric one reaches R$2.6 million,” Mr. Barella said.
Higer signed an agreement with Enel in order to compete for the supply of electric buses in São Paulo, which is Brazil’s largest market – and the perfect place to debut in the country, in the Chinese company’s view. The Italian power company holds the power distribution concession in São Paulo’s capital city and 22 other cities in the metropolitan region around it. Enel will compete in biddings for the supply of the vehicles. If it wins, Enel will buy the vehicles from Higer, assemble the charging infrastructure, and lease the whole package to the operators. Higer will run bus maintenance and driver training, which includes having its own personnel inside the operators’ garages.
“The rental system allows the fleet to be changed as quickly as possible. If operators had to buy an electric bus, I’m not sure if they would get the credit for that,” Mr. Barella said. He recalled that São Paulo has 14,000 buses and plans to reach 12,000 electric buses by 2028. Of this total, 2,600 would be running by 2024 and 600 between 2022 and 2023.
The company plans to gain space in São Paulo, as it is one of the most complex urban transportation systems in the world. If it is able to meet the standards of SPTrans, which manages the city’s system, the company will be able to serve any other city in the country, in the executive’s view. Higer invested $10 million to adapt the buses to Brazilian standards. “We have all the tooling ready. If I have an order for a thousand buses, I am able to meet the demand.”
If Higer’s plans go as expected, the company estimates to have 300 employees in 2023 and 500 by 2024. There would be eight to 10 employees in each garage.
At first, the battery-powered vehicles will be imported in one piece, but the company is negotiating with the government of Ceará an area in the port of Suape to install an assembly line, with an estimated investment of $20 million. With the local unit, the idea is to import the buses in a PKD (Partial Knock-Down) system. “The structure of the car comes ready and here we put the windows, seats and engine,” the executive said.
In a second moment, the SKD (Semi Knock-Down) system would be adopted, with higher added value. Mr. Barella explains that a good part of the vehicle maker’s suppliers in China are already in Brazil and could meet Higer’s needs in Ceará. They are global suppliers, such as Siemens and Dana, for engines; ZF for suspension; Bosch for steering gears; or Wabco for brakes. The batteries are from CATL, which has signed an agreement with the Brazilian battery manufacturer Moura for post-sale services. The unit in Ceará will also be the export base for the region.
The choice of Ceará reveals the next step in the automaker’s strategy for Brazil: hydrogen buses. The state has a large supply of clean energy and several projects for green hydrogen production in the medium term. Higer already has 400 hydrogen buses running in China. But it is a longer-term project in Brazil.
Well before the use of hydrogen, the Asian group plans to enter the segment of passenger and cargo electric vans and trucks in Brazil. The vans are expected to arrive later this year and will require a dealer network. On the other hand, Mr. Barella acknowledged that competition for trucks is likely to be fierce. The executive, who has worked for Higer since 2004 in several countries, knows that the heavy truck segment has its leaders, but as seen in the 2018 World Cup, when underdog Korea disqualified world champion Germany, favoritism is only confirmed at the end of the game.
Companies, schools are joining forces across country
07/04/2022
Ana Inoue — Foto: Carol Carquejeiro/Valor
The partnership between the public and private sector, which specialists see as key for the expansion of vocational education, is starting to accelerate and deepen in Brazil in strategic fields like information technology and renewable energy. Experiments conducted in Araripina (Pernambuco) and in the state of São Paulo show programs that bring together companies and public schools in projects for training more in line with reality, curricula that can be replicated across the country, or programs that establish seamless transition between vocational and higher education.
Technology, creative economy and sustainability, including innovation in the power generation mix, are among the priority fields for which it is necessary to train young people with the ability to create and think, said Ana Inoue, head of Itaú Educação e Trabalho, the education and work initiative led by the Brazilian bank’s foundation.
She sees vocational education as a way to generate labor capable of meeting demands. Policies and programs involving public schools, which account for 88% of high school enrollments, are key, Ms. Inoue said. Partnerships with the productive sector, she said, can provide not only greater opportunity for professional practice and supply of updated and state-of-the-art equipment for teaching, but also constant dialogue with public bodies to create curricular articulation that involves training more in line with the reality of each school and region.
With a population estimated by the Brazilian Institute of Geography and Statistics (IBGE) at 85,000 people, Araripina, in the northwestern region of Pernambuco, joined in 2020 the map of cities with more partnerships between the public and private sectors for the development of vocational education.
Carla Chiamareli, knowledge management manager at Itaú Educação e Trabalho, said that the program developed at Pedro Muniz Falcão, a full secondary school in Araripina, considered the strong regional inclination to wind and solar power, in a project that started with a dialogue between representatives of the state government. The Votorantim Institute, currently linked to the Auren group, continued with the entry of Schneider Electric, and now draws other companies in several forms of partnership.
The program, Ms. Chiamareli said, involved the joint construction of a curriculum in the field with the concern of generating vocational training for the entire renewable power production chain. The implementation of the curriculum also considers employability not only in generation companies, but also in user companies, paving the way for entrepreneurship as well, with the formation of professionals qualified to work in the supply of goods and services.
The project stood out for having a curriculum put together from the demands of the productive sector, which meant a change in relation to a model of vocational education often disassociated from the labor market, said Ricardo Marques Jacó, the school’s principal. Currently there are four classes of about 45 students each – two in the first year and two in the second year – in the renewable energy vocational course, which also includes high school. The school, he says, took advantage of the framework developed to also offer an evening vocational course for those who have already completed high school. Currently, there are three classes with about 30 students each.
Born in Araripina, Mr. Jacó expects that the new courses will contribute to change the profile of the labor force that works in the productive chain generated by wind and solar power, increasing the generation of jobs for the local population. Today, most of the professionals come from other regions, he said.
According to Rômulo Marçal, corporate director at Auren, there is a great opportunity in the sector in the region of Araripina, where the company runs a wind farm. He said that public information sources indicate that within a radius of 200 kilometers from the Pernambuco city there are about 1,800 renewable power projects – mainly solar and wind.
Mr. Jacó recalled that there are job opportunities not only among generation companies and manufacturers of power equipment, but also in user companies in several industries. The use of renewable power has been expanding in the region, he said, and many companies – among them those in the city’s plaster industry and food industry – have been investing in their own plants, which will also demand more professionals in the field.
The training resulting from the vocational course is expected to generate better pay for the population. In 2020, the average monthly wage in the municipality was 1.6 minimum wages, which put it in 93rd place among the 185 cities of Pernambuco and in the 4,400th position among 5,570 municipalities in the country, according to IBGE. The proportion of employed people in relation to the total population was 9.4%, also two years ago.
Mr. Marçal highlights Auren’s contribution for the creation of a curriculum for the renewable power course. Fifteen volunteers from the company took part with the concern to create a course that connects to digital technology and that can also develop the necessary skills for the corporate world.
The objective of adopting the curriculum is to develop general skills, such as the ability to solve problems, initiative, creativity, logical reasoning, flexibility and adaptability, said Mr. Chiamareli, with Itaú Educação e Trabalho. Another concern was to create a comprehensive renewable power curriculum that, besides wind and solar energy, also reaches other sources, such as hydro and biomass. “The idea is to give scale to the curriculum so that it can be put in place in all states.” At least six states have already shown interest, she said.
In order for vocational education to be expanded with the capacity to meet existing demands, Ana Inoue points out, it is necessary to transform the way vocational education is seen. It is necessary, she added, to leave behind the “last century” vision. “Vocational education was created as something for the poor and underprivileged, and was less comprehensive, less emancipatory, and more restricted.” It was education aimed at those who would not have the opportunity to go to university, Ms. Inoue said. Vocational training does not have to be “definitive in the young person’s life.” Instead, it must pave the way for “a new development process that needs to take place.”
In this sense, she said, it is necessary to create public policies and programs in a way that encourage vocational education students to move forward with that in higher education, and even adding value to the student’s previous training.
The Multiplatform Development Technologist course currently offered by 12 Technology Colleges (Fatecs) in São Paulo seeks to achieve this. Brasscom, an association that brings together 86 business groups in the fields of digital technologies and Information and Communication Technology, also took part in the formulation of curriculum of this course, which is the result of a partnership between Itaú Educação e Trabalho and Centro Paula Souza (CPS) – an autonomous body that coordinates São Paulo’s public vocational schools and Fatecs.
Cacau Lopes, implementation and development manager at Itaú Educação e Trabalho, points out that the work with Brasscom also involved the review of career paths for vocational education. Working with an association has allowed the curricula to reflect the various companies that operate in the technology sector with different focuses and languages, and often competing with each other.
Monetary policy slows GDP from July, but new fiscal stimuli kick in
07/04/2022
After positive surprises with activity in the first half of the year, the Brazilian economy enters the second half of 2022 under low visibility. Since the data from the beginning of the year started coming in better than expected, analysts expected that starting in July activity would start to feel the monetary tightening in a more relevant way, slowing down. This view holds, but with the strong recovery in the labor market and the forecast of further fiscal stimuli by the government, projections of GDP contraction at the margin have been pushed from the third quarter to the fourth quarter or even to 2023.
The turn of 2021 to 2022 was marked by a general drop in projections for GDP this year, notes Santander, recalling that the median reported in the Focus survey reached 0.25% on January 20. The perception was that real interest rates had entered the restrictive field, imposing tepid activity in the first half, still sustained by the recovery of services and records in agriculture, but contractions from then on.
Since then, figures for the agricultural sector have been revised downwards, but in services, even though the omicron variant wave has postponed consolidation, expectations have even been exceeded. The sector’s contribution to GDP in the first half of the year is strong, especially in those segments most dependent on the normalization of mobility.
But even assets-related areas, such as industry and retail sales, brought positive surprises, economists note. For Santander, the continued increase in household consumption has reflected spending of savings accumulated during the worst moments of the health crisis, the expansion of the real total wage bill – in the wake of the recovery in the labor market, and the increase in government transfers – and the support for credit concession.
Santander projects 0.2% growth for the second-quarter GDP, after a 1% rise in the first quarter, but the bank’s monitor indicates that this number is higher, around 0.5%, “which implies upside risks to our annual projection,” say economists Lucas Maynard and Gabriel Couto. Santander, which was already on a more optimistic side by estimating a 0.7% growth for the GDP in 2022, now expects 1.2%.
Débora Nogueira, the chief economist at Tenax Capital, recently adjusted her projection for the GDP in the second quarter to 0.7% from 0.4%, because she says she continues “to see strong data at the end”. For her, the numbers from the labor market in April, when the quarterly unemployment rate dropped to 10.5% (it is now at 9.8%), were “a great watershed”. In addition, she mentions the resilience of credit, especially to individuals, and the fiscal stimuli of the period.
“The question was how the shock, positive for Brazil, of the terms of trade [ratio between prices of exports and imports] was going to impact the economy, how this wealth would spread. It is being by the fiscal way,” she says. The authorization to withdraw money from Workers’ Severance Fund (FGTS) accounts alone, for example, added 0.3 percentage points to its projection for the year’s GDP, now at 2.2%.
The increase in disposable income in the second quarter also made BRCG Consultoria raise its GDP forecast for the period and the year, which went to 1.1%. But the second semester “is complicated,” says Livio Ribeiro, partner at BRCG.
The consumption of goods and services should decelerate in the second half of the year, while the total wage bill should “drift sideways,” says Santander. “If, on the one hand, employment performed better than we expected, on the other hand, inflationary surprises eroded real income even more than our scenario initially considered,” Messrs. Maynard and Couto point out. What can give support to the economy, they say, are less cyclical sectors linked to commodities and longer cycle sectors, which take longer to feel the rise in interest rates, such as construction.
Santander estimated that the upward shock in commodity prices due to the war in Ukraine pushed the risk of contraction of the Brazilian economy from the third to the fourth quarter. The bank’s respective projections are for a stable GDP and then a 0.4% contraction, versus the previous estimate of two 0.3% declines.
Tenax does not expect GDP contraction in any quarter of the second half, but highs of 0.3%. “Before, we had the fourth quarter negative. Now, we think that, with the fiscal environment and the carryover on the labor market, it will no longer be so,” says Ms. Nogueira.
Marcelo Toledo — Foto: Ana Paula Paiva/Valor
Even if the GDP slows down in the second semester and the creation of job openings follows this movement, the unemployment rate will probably continue to fall in the period, says Marcelo Toledo, chief economist at Bradesco Asset Management (Bram).
In addition, according to him, the fiscal impulses under discussion at the moment – such as tax cuts and an increase in the cash-transfer program Auxílio Brasil – naturally lead to an upward revision of activity in the second half of the year.
“You have to wait for the outcome, but the drop in [sales tax] ICMS represents an increase in disposable income,” he exemplifies. Bram had projections of quarterly GDP closer to stability in the second half of the year; now, a slight growth is possible, according to Ms. Toledo. “We still see an upward bias in this projection of 1.9% for 2022,” he says.
On the other hand, in the second semester, the “post-pandemic” reopening effects on the activity may be practically exhausted, at the same time that the world, which had a positive contribution to Brazil’s growth in the first semester, may operate in neutrality, Mr. Toledo points out.
As of 2024, Mexican group will produce more 500,000 tonnes of steel/year in Pindamonhangaba unit
07/01/2022
Jaime Moncada Ramos — Foto: Claudio Belli/Valor
The Mexican group Simec, the third-largest long steel producer in Brazil, unveiled Thursday an investment of $300 million to increase twofold its steel mill located in Pindamonhangaba, 140 kilometers far from São Paulo.
The company has just received the preliminary permit from São Paulo state’s environmental body Cetesb, which allows it to start the construction works.
The expansion is expected to be ready by mid-2024, with construction and assembly works starting in the second half of the year, said Jaime Moncada Ramos, the company’s chief executive in Brazil. The investment consists of a new electric steel mill and a new rolling mill, with state-of-the-art German technology. The equipment will be shipped from China in July.
With the duplication, the installed capacity of the steel mill in Pindamonhangaba will increase to 1 million tonnes of crude steel (billets) per year. Currently, the capacity is 500,000 tonnes a year. The Mexican group began producing steel in Brazil at the end of 2015 after investing the same amount ($300 million) in a greenfield project in the country.
The Pindamonhangaba unit will expand the supply to the market of straight and rolled rebar – a product used for civil construction and real estate projects – and wire rods, for several industrial applications, such as wires and nails.
According to Mr. Moncada, much of the infrastructure for expansion already exists at the site, next to the current production line, facilitating the installation of the new plant. The location, near Presidente Dutra highway, in the São Paulo-Rio de Janeiro region, is a logistical advantage for the acquisition of iron and steel scrap and for the distribution of products to the market.
In Brazil, Guadalajara-based Simec already serves the markets of the Southeast, South, Central-West and part of the Northeast regions, through steel mills located in São Paulo, Minas Gerais and Espírito Santo.
According to the executive, 1,200 jobs will be generated during the construction work, and 450 employees will be hired to operate the new line in Pindamonhangaba. The generation of jobs and additional taxes is part of the São Paulo state government’s program to encourage new investments in the state.
Three years after starting production in Brazil, Simec became the third-largest manufacturer of long steel (rebar, wire rod, bars and profiles) in the Brazilian market. It is behind the leader ArcelorMittal and Gerdau. It also competes with AVB (Aço Verde), Sinobras and CSN’s long steel business.
This leap, in May 2018, was the result of the acquisition of two steel units of ArcelorMittal (one in Cariacica and another in Itaúna, Minas Gerais) by imposition of CADE, the country’s antitrust body, due to the purchase of Votorantim Siderurgia’s assets in Brazil.
As a result, Simec increased its production capacity of crude steel to 1.1 million tonnes a year at that time, and of rolled products to 1.05 million tonnes.
The project in the city of Cariacica is expected to reach 800,000 tonnes of crude steel, with the expansion of the furnace capacity. New rolling lines for bars, profiles and others are also planned. The investment in the unit is estimated at $80 million to $100 million.
The environmental permit for the project is expected to be issued by IEMA, the state environmental body, in August.
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