IBM sees Brazil as worth investing in

Global corporate spending on cloud services reached $55bn in the second quarter, according to data from Synergy Research Group

08/17/2022

Howard Boville — Foto: Divulgação/IBM

Howard Boville — Foto: Divulgação/IBM

IBM, one of the largest technology companies in the world, is trying to increase its share of the cloud computing market and has Brazil, especially banks, as a niche worth investing in.

Lenders are long-time clients of the company both for the acquisition of mainframe computers, which are the large ones capable of processing a massive volume of information, and cloud computing, a model in which clients pay for using technology resources via the Internet.

For the banking segment, IBM advocates the adoption of a hybrid cloud by companies, which comprises the private cloud, service and on-demand processing allocated within the company’s technology infrastructure, and the public cloud, based on the structure of cloud service providers.

Banks of all sizes are migrating part or all of their technology infrastructure to cloud computing. Itaú Unibanco, for example, should migrate 45% to 50% of its infrastructure to the cloud by the end of the year – currently, 30% of its applications are in the cloud provided by AWS, sources say. AWS, the leader in the global cloud market, is controlled by Amazon.

The offer of hybrid cloud services is IBM’s strategy to gain ground against competitors. In the second quarter, the company known as Big Blue was in the fifth position in the ranking of cloud services and infrastructure in all segments, with a 4% share. AWS leads the pack with 34% of the market, followed by Microsoft (21%), Google (10%), and Alibaba (5%).

Global corporate spending on cloud services reached $55 billion in the second quarter, according to data from Synergy Research Group. “Despite turbulence in currency markets and a much strengthened U.S. dollar, that still represents 29% growth from last year,” the consultancy said.

Banks are also accelerating their cloud investments against a difficult macroeconomic backdrop compounded by the risk of recession in the United States, said Howard Boville, senior vice president and head of IBM Cloud Platform. “All global institutions will do whatever it takes to preserve their margins. And that will include looking more closely at the projects that are bringing value to them,” the executive, also a former chief technology officer at Bank of America, told Valor.

Mr. Boville, who came to Brazil to participate in a panel at the Febraban Tech event last week, sees the migration of applications from Brazilian banks to cloud computing services as more advanced compared to other countries. “A lot of the work being done with Brazilian regulators is paving the way around data privacy and cybersecurity,” he said.

Marcelo Braga, IBM’s CEO for Brazil, agrees with the accelerated migration to the cloud among Brazilian banks and notes that this is not happening across the infrastructure. Mobile banking and internet banking are the first segments banks are moving to the cloud, he said.

Among structural systems, mainframes, which IBM provides, are still dominant among large banks, Mr. Braga said. “This connection [between mainframe and cloud] is what makes products faster in terms of innovation and opens up new opportunities,” he said.

Mr. Boville, who also created a technology best practices council, currently with 120 participating banks worldwide, notes that the advance of “open banking” here and in other markets still worries the industry about the security of smaller lenders.

“If you’re sharing consumer data, it allows you to have open banking and therefore more competition in the market,” he said. “That could mean that small companies that want to enter the market could put consumer data or technology operations at risk to the standard expected of a large lender,” he said.

According to Mr. Boville, who specializes in offering cloud computing tied to regulatory issues, especially in the financial industry, IBM’s proposal is to eliminate this risk with a turnkey cloud offering. “Whether you’re a big bank or a fintech, you inherit the cybersecurity controls, technology operations controls, and all the laws, rules, and regulations that you need to comply with and that the biggest banks operate,” Mr. Boville said.

In the second quarter, IBM reported a net profit of $1.5 billion, up 81% year-over-year, while revenues were up 9% to $15.5 billion. The hybrid cloud services represented 38.1% of total revenue, equivalent to R$5.9 billion in the quarter, up 24% year-over-year. The infrastructure division, which includes mainframes, invoiced $4.2 billion in the period, up 19% year-over-year. Revenue with mainframes increased 69% in the period, according to the company.

*By Daniela Braun — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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As 5G coverage spreads, cellphone prices plummet

According to GfK, customers are paying more than 30% less for a device than in January

08/17/2022

5G networks were activated on Tuesday in Curitiba, Goiânia, and Salvador — Foto: Pixabay License

5G networks were activated on Tuesday in Curitiba, Goiânia, and Salvador — Foto: Pixabay License

The progress of the 5G coverage in Brazil — followed by the expansion of the supply of mid-range smartphones compatible with the technology — has driven retail sales, especially in recent weeks.

Between the first week of January and the beginning of this month, the average price of 5G cellphones fell 30.9%, according to data from market research company GfK. In the same period, the share of 5G models in total smartphone sales increased to 17.5% from 6.7% in volume. As these are products with a higher unit price, their share participation in the market’s sales in the first week of August was higher, at 33%.

The 5G networks were activated on Tuesday in Curitiba, Goiânia, and Salvador. Since July 6, when high-speed mobile internet debuted in Brasília, it has so far been present in certain neighborhoods of eight Brazilian capitals.

“We have noticed a 40% higher demand for 5G devices in cities that already have the signal, compared to the beginning of the year,” said Fabio Gabaldo, chief commercial and technology officer at Magazine Luiza.

The expansion of the mix of mid-range 5G models, in addition to the more expensive ones, contributed to a slight drop in the average price of the devices sold by the retailer, to R$2,800 from R$3,000 between July last year and the same month this year, Mr. Gabaldo said.

Fernando Baialuna, GfK’s chief retail officer, said the arrival of 5G networks is a stimulus for consumers to change 4G devices for more expensive mid-range models, in a mature smartphone market such as the Brazilian one — but it is a move “that still has a long way to go.”

In June, Brazil reported 259 million active mobile devices, being 207.7 million (80.2%) from individuals.

At retailer Fast Shop, the sales of 5G smartphones doubled in the second quarter compared with the same period last year and intensified with the arrival of 5G technology in São Paulo on the 4th of this month, while Mercado Libre reported having sold 10 times more 5G smartphones between January and July this year than in the whole of last year.

After the special offer of 5G devices for Father’s Day (second Sunday of August), Fast Shop informed that it would run two seasonal campaigns this month, including smartphones with 5G technology. In one campaign, which went live on Monday and runs until the 24th, the retailer highlighted the lines most wanted by consumers, giving discounts of 33.5% on Apple’s 128-gigabyte iPhone 12, and of 34.7% on Samsung’s Galaxy M23 5G for cash purchases with Brazil’s instant-payment system Pix. The next campaign will take place between August 25 and 31.

The greater interest for televisions in the fourth quarter of the year, because of FIFA World Cup, in November, can be another stimulus for smartphone sales promotions, said Mr. Baialuna, with Gfk.

“This year, the phenomenon of the second screen to watch the World Cup gains more strength since there are options of smartphones with better screen resolution and higher speed access to mobile networks,” said Mr. Baialuna. According to him, retailers begin to bring forward the supply of TV sets to September because of the World Cup and smartphones with discount are expected to follow this movement.

*By Daniela Braun — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Brazilian imports of fertilizers grew by 14.7% in 2022

The main exporter was Russia, accounting for 24% of the total

08/16/2022

Fertilizer handling at Paranagua port — Foto: Divulgação

Fertilizer handling at Paranagua port — Foto: Divulgação

Brazilian fertilizer imports grew 14.7% in the first seven months of the year and reached 21.8 million tonnes, a report by the consultancy Agro, of bank Itaú BBA, highlighted on Monday. Despite the war in Eastern Europe, Russia was the main source of purchases, with a 24% share in the total volume.

The product from Russia continues to arrive in the country “normally,” and in July alone the country sent 828,000 tonnes to Brazil, 10% more than in the same month in 2021. The purchases originated in Belarus, an important global exporter of potash, totaled 26,000 tonnes last month, 90% less than a year earlier (306,000 tonnes).

“As industries have been accelerating fertilizer imports since the beginning of the Russia-Ukraine war, fertilizers have been arriving in Brazil in volume even above 2021, which mitigates concerns about product availability,” the bank’s analysts say.

With the recent drop in fertilizer prices, they note, Brazilian farmers may have postponed the purchases of the input, contributing to the increase in the volume stored in ports. Agro informed that there are reports of high stocks, which may concentrate the delivery period and reduce the monthly import volume until the end of the year.

Earlier this month, Anda, an industry association, said that fertilizer deliveries between January and May increased only 1.7% compared to the first five months of 2021, to 14.6 million tonnes. In May, 3.2 million tonnes were delivered, a decrease of almost 5% compared to the same month last year.

*By Erica Polo — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Cheaper gasoline may reduce inflation to less than 7% a year

The index can go to lowest annual level since 2020, also because of fear of global recession

08/16/2022

André Braz — Foto: Leo Pinheiro/Valor

André Braz — Foto: Leo Pinheiro/Valor

The 4.85% drop in gasoline prices at the distributors, announced Monday by Petrobras, may lead the country’s official inflation to a rate below 7% this year, said André Braz, an economist at Fundação Getulio Vargas (FGV). “This is already starting to become more probable [the rate below 7%],” he said, recalling that the market’s previous projection was between 7% and 7.2%. If confirmed, it could be the lowest annual inflation level since 2020 (4.52%). Brazil’s benchmark inflation index IPCA ended 2021 up 10.06%. The impact of cheaper gasoline, he added, will not be restricted to the annual rate: he said that the monthly IPCA for August may end the month with a decrease of around 0.3% — the projections for the rate were around a 0.2% deflation.

In practice, he pondered, the announced decrease reflects a wider phenomenon: the fear of global recession, lowering the price of commodities in the international market, such as petroleum — with an effect on its products, such as gasoline. With this in mind, he did not rule out new price changes in fuel by Petrobras, by the end of the year.

When talking about the decline, the specialist stressed the strong weight of gasoline in the formation of inflation by the indicator. The product has a weight of 6.5% in the IPCA. “But this drop of 4.85% will not be passed on in full [to retail],” he said.

The specialist’s calculations point out that at least half of this decrease may reach the pumps. Therefore, considering the product’s weight in the indicator, as well as the portion of the drop that may be passed on, the total impact on the IPCA will be a decrease of 0.15 percentage points “for 30 days,” he said.

Therefore, as the decrease in fuel prices will come into effect this Tuesday, the specialist projects a drop of around 0.07 percentage points (p.p.) in the August IPCA; and around 0.07 p.p. in the September IPCA.

Mr. Braz added that the decrease in gasoline prices has a greater impact on the IPCA than the 4% drop in diesel prices announced by Petrobras last week. “Diesel weighs only 0.3% in the IPCA, and this drop is likely to have an impact, a decrease of 0.01 percentage point on the indicator in 30 days [from the effective date on August 12],” he said.

However, for the specialist, both gasoline and diesel have the potential for new price decreases in the domestic market. This is because the baseline scenario abroad is increasingly one of a global recession.

The economist recalled the inflation rise in the United States, which led the U.S. to a new round of interest rate increases — which, in turn, hinders consumption and, consequently, the growth pace of the American economy. At the same time, China’s real estate market, strongly linked to China’s GDP, is showing difficulties at the moment, which “may bring new surprises in the field of commodities,” he said, without ruling out new price slowdowns, or even downturns, in this type of product.

Another aspect cited by Mr. Braz is the fact that the signs of deceleration are not only from China and the United States. Other regions, such as Australia and Europe, are also showing signs of the same phenomenon. “The major economies are showing signs of deceleration,” he warned, reiterating that this, in practice, helps to bring down oil prices — and therefore reduce the price of oil products in Brazil.

*By Alessandra Saraiva — Rio de Janeiro

Source: Valor International

https://valorinternational.globo.com/
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Extension of handouts to truckers, taxi drivers doomed to fail

Economic experts say there is no fiscal space for further cash transfers

08/16/2022

Proposal will compete for the narrow fiscal space of the 2023 budget with other demands — Foto: Marcello Casal Jr./Agência Brasil

Proposal will compete for the narrow fiscal space of the 2023 budget with other demands — Foto: Marcello Casal Jr./Agência Brasil

The idea of extending the handouts for taxi and truck drivers beyond December, set in motion on Monday by Labor Minister José Carlos Oliveira, has little chance of moving ahead, as far as the government’s economic team is concerned.

If it leaves the field of ideas to be discussed concretely, the proposal will compete for the narrow fiscal space of the 2023 budget with other demands: the maintenance of the cash-transfer program Auxílio Brasil at R$600 (in theory, the value returns to R$400 next year), pay raises for civil servants, the adjustment of the Individual Income Tax (IRPF) by inflation, and the extension of the cut of federal taxes on fuel.

It is an expensive program that will consume up to R$7.4 billion with payments in the second half of this year alone. This is more than the amount earmarked for investments in the Ministry of Infrastructure during the whole year.

The announcement Monday of a new cut in gasoline prices and the recent reductions in diesel prices make it hard to justify, from the economic and social standpoints, the maintenance of this benefit, a source said. Constitutional Amendment 123, which created this aid and allowed its payment on the eve of elections, is based on an emergency framework created by the Russia-Ukraine war.

Despite the decline in fuel prices, the idea of extending the tax exemption is still under analysis. According to officials, however, it would not be just like today, with costs around R$50 billion a year. Instead, there would be a version more focused on poor families. If the tax cut is kept only for diesel, biodiesel, and cooking gas, as advocated by Economy Minister Paulo Guedes, the bill will be about R$18 billion.

When saying that he “takes kindly” to the perpetuation of the benefits to taxi drivers and truckers, the Minister of Labor praised Mr. Guedes’ work in controlling the creation of new programs. He recalled, on the other hand, that the payment of benefits to the most vulnerable has been done by several countries.

When questioned, he also evaluated that the “price context” still requires government support for both work categories.

*By Lu Aiko Otta — Brasília

https://valorinternational.globo.com/
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INC wins Belo Horizonte beltway, targets new auctions

This is the group’s first investment in Brazil; company now plans to take part in new projects in the country

08/15/2022

The Italian group INC, which won the auction of the public-private partnership (PPP) of the Belo Horizonte beltway on Friday, makes its debut as a highway concessionaire in Brazil. The company now plans to take part in new projects in the country, said Nicola Trovato, the company’s representative.

“We are studying other bids, but I cannot say which ones,” he said after the victory. The company currently operates roads and railways.

INC has been trying to join Brazil’s infrastructure market since 2019. That year, the company even studied the PPP of the Salvador-Itaparica bridge, but ended up not participating in the auction, which was won by a consortium made up of the Chinese groups CRCC and CCCC. “After that, we stopped activities due to the Covid pandemic. Now we put our efforts into trying to win [the Belo Horizonte beltway PPP] and we succeeded,” he said.

The group, which is based in Turin and controlled by the Dogliani family, operates as a construction company, but also runs two important road concessions in Italy.

Among analysts, the entry of a new foreign operator into the Brazilian market was being pointed out as unlikely given the challenging economic scenario and the election year. “A foreigner coming to Brazil at this moment is surprising, but the project is very strong. It has contractual characteristics that provide financial support,” said Massami Uyeda Junior, a partner at Arap, Nishi & Uyeda Advogados, which supported INC in the auction.

In the auction, the company made an offer of a 12.14% discount over the amount that the state will pay. As a result, it defeated the bids of its only competitor, China Railway Construction Corporation (CRCC) group, which offered a discount of 10.2%.

With the discount, the Minas Gerais government will have to disburse R$2.4 billion. This discount applies to the consideration (R$91.1 million) to be paid in the first three years, and the initial contribution for the work (R$2.1 billion). In addition, an additional payment of R$211 million will be made, which will be directed to a contingency account for the project. Part of the money comes from the compensation agreement signed between the state government and mining company Vale linked to the damage caused by the Brumadinho tragedy.

With the victory, INC will have to move forward with the beltway project from scratch. Initially, the project will be 70-kilometer long and require investments of R$4.1 billion considering the construction work and the necessary expropriations.

Fernando Marcato — Foto: Silvia Zamboni/Valor

Fernando Marcato — Foto: Silvia Zamboni/Valor

The construction is expected to start in 2024, according to Fernando Marcato, the state’s infrastructure secretary. The contract with INC is expected to be signed in a month and a half, and the environmental permit and executive plan stage is likely to take at least a year and a half.

In total, the beltway is likely to be 100-kilometer long. The remaining 30 kilometers needed to complete the project may still be added to the contract upon economic rebalancing. For this, an additional contribution from the state will probably be necessary, which could come from the new compensation agreement the Minas Gerais government is negotiating with Vale, related to the Mariana tragedy, Mr. Marcato said. An additional contribution of R$2.1 billion is likely to be required.

*By Taís Hirata — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Hybrid, plug-in, or electric: Which car will Brazilians drive?

Automakers’ failure to make a decision about local production reveals a divided industry and government’s omission in the debate

08/15/2022

Caoa Chery’s plant: carmaker is betting on ethanol hybrid car — Foto: Reprodução

Caoa Chery’s plant: carmaker is betting on ethanol hybrid car — Foto: Reprodução

Carmakers have very clear global decarbonization targets. Most of them already have a date when they will stop producing internal combustion engine cars, and the electrification of cars is becoming increasingly common in many parts of the world. In Brazil, however, every time executives refer to the subject, the details and deadlines are unclear.

Of the 13 car manufacturers with plants in Brazil, two – Toyota and CAOA Chery – already produce hybrids locally. CAOA Chery, one of the smallest in the country, made the decision quite recent. Two others, precisely the largest ones in the sector – Volkswagen and Stellantis – have unveiled their intention to produce ethanol hybrid cars in the country, but they have not yet set dates.

General Motors is completely against hybrid cars but does not reveal future plans to decarbonize the local production, which, according to the U.S.-based company’s view, should follow the trend of fully electric cars. Currently, all fully electric cars sold in Brazil are imported.

The issue is even less solved in other automakers. What prevails, for the most part, is the discourse around global targets, which makes it difficult to predict what will happen in Brazil. In other words, the leaders of the automakers avoid the obvious question: how long will they resist, in Brazil, producing only combustion cars?

Both hybrid and electric cars have the capacity to draw consumer interest. But since the prices of these vehicles are still high for the Brazilian standard, the companies that most explore this market are those that only sell imported models.

Luxury brands, such as Porsche and Volvo, have firmly entered the hybrid, plug-in hybrid, and electric segments. And they offer affluent customers the latest launches from Europe. In this range, especially the fully electric ones, prices start at R$300,000. CAOA Chery and Renault have more affordable compact electric cars, starting at R$145,000.

Although hybrid and electric cars coexist in harmony in the Brazilian market, behind the scenes in the sector a kind of fight between one and the other has arisen. Hybrid cars have two engines – a combustion engine helps power the electric one. The country already has production, although still low, of hybrid cars powered by ethanol.

Those who advocate the production of this type of vehicle in Brazil say this is the best way for the country to navigate the intermediate phase without jolts before entering fully electrification. This wing of the automotive sector also argues that this is the only way to save the industrial park that automakers and auto parts makers have built in the country over the past 60 years, and the jobs in the plants. In addition, with these vehicles, they say, Brazil’s ethanol could gain a prominent position on the global decarbonization map.

Engineering and product development teams at Stellantis – the super automaker that since the beginning of 2021 has brought together Fiat, Chrysler, Peugeot, and Citroën – around the world have been working to find solutions to meet the company’s goal of reducing CO2 emissions by 50% by 2030. As recently revealed by Antonio Filosa, the company’s CEO for Latin America, the Brazilian team had the mission of developing the ethanol hybrid car. “We are, in the world, the most capable for that,” he said.

On the opposite end, the CEO of General Motors in South America, Santiago Chamorro, is one of the strongest advocates of fully electric cars. This type of car is made with far fewer parts than a combustion car, and batteries are charged in sockets.

Mr. Chamorro believes that Brazil should follow the path of developed countries. “The other technologies are transient,” he told Valor recently. In his view, Brazil will be able to produce electric cars when the price of the batteries is more accessible. Until then, the industry will continue to make cheaper cars with internal combustion engines. This decision has already been made by GM.

Some brands, especially the luxury ones, have invested in installing charging stations in urban centers and some Brazilian highways. Meanwhile, around the world, the development of hydrogen fuel cell vehicles is moving forward, a technology through which electric power is generated in the vehicle itself, without the need for plug-in charging.

The hybrid-versus-electric debate also involves discussions about which of the two offers the greatest advantage in terms of CO2 emissions. Proponents of the ethanol hybrid car claim that the proper measurement is the so-called well-to-wheel system. That is, the calculation must include the carbon footprint from fuel production (the sugar cane plantation in the case of ethanol), refining, and transportation to the vehicle’s exhaust emissions.

This, however, will be a matter for the next federal administration. Cássio Pagliarini, a consultant with Bright Consulting, recalled that the current Brazilian emissions legislation only takes into account the gases that come out of the vehicle’s exhaust.

But starting next year, the Rota 2030 automotive program will establish the need for a new stage of measurements, both in vehicle safety and emissions. This may favor those who advocate the well-to-wheel model. “It is also necessary to measure what causes the greenhouse effect, global warming,” Mr. Pagliarini said.

The automakers that intend to develop ethanol-powered hybrid cars have taken the discussion to the technical staff of the Industry Development Secretariat, which has already given a positive nod in this direction.

Whatever the decision may be, the next federal administration will have to definitely enter this discussion, since in all the countries that have made their choices, the change in the power generation mix for vehicles has been decided by public authorities. The same should happen in Brazil.

*By Marli Olmos — São Paulo

Source: Valor International

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Neighboring countries become escape valve for exports

Country’s balance with South America grows amid decline of total balance of trade

08/15/2022

José Augusto de Castro — Foto: Leo Pinheiro/Valor

José Augusto de Castro — Foto: Leo Pinheiro/Valor

After recovering in 2021 the pre-pandemic level, Brazilian exports to South American countries have advanced this year at a faster pace than the total average and also in relation to imports, in contrast to what happens in the country’s trade balance. As a consequence, the trade surplus in exchanges with neighboring countries reached $7.97 billion from January to July this year, more than double the $3.68 billion seen in the same period in 2021. The country’s total balance of trade fell 10% over the same period.

As a result, the surplus with South American countries from January to July this year equals to 20% of the total, compared with 8.3% in the same months last year, according to data from the Foreign Trade Secretariat (Secex/ME). The sales of Brazilian products to the region totaled $24.85 billion this year and grew by 39.4%. The country’s total shipments increased by 20.1%. The difference was also clear in how fast imports increased – trade with neighbors is up 19.4%, while total foreign purchases climbed 31.6% between January and July.

Brazilian exports to South America fell in 2020 with the outbreak of the Covid-19 pandemic. That year, from January to July, the country exported to neighboring countries $12.02 billion, down 27.2% from $16.5 billion in 2019. In 2021, with the economic recovery in the region, exports totaled $17.82 billion between January and July. The performance of shipments contributed to a surplus slightly above the $7.92 billion of the same period of 2018, which used to be the peak since 1997 (considering the period of the first seven months of the year).

José Augusto de Castro, head of the Brazilian Foreign Trade Association (AEB), said that the recovery of foreign sales to the South American market is key because the region is typically a consumer of Brazilian manufactured goods, although oil exports to countries like Chile have also driven shipments and the trade surplus in regional trade. A third of the $5.18 billion that Chile absorbed from January to July in Brazilian products was oil, followed by automobiles, which had a 7% share. As for Brazilian imports of South American products, says Mr. Castro, commodities or products with little processing predominate.

Secex data show that of the five main items shipped to neighbors from January to July four were manufactured, all linked to automotive or transportation. Oil led the list, with $9.4 billion, practically tied with the $9.03 billion in cars. The two items were followed by car parts and accessories, vehicles for transporting goods, and tractors. The five products accounted for 28% of Brazil’s exports to other South American countries.

Lia Valls, a researcher at the Brazilian Institute of Economics of Fundação Getulio Vargas (FGV/Ibre), says that the increase in the value of Brazilian exports has been accompanied by an increase in the quantities shipped. According to data collected in the Foreign Trade Indicator (Icomex), the volume exported to Argentina rose 14% from January to July this year compared with the same period last year. Imports dropped 0.7% in volume. Exports to other South American countries increased by 14.3% in volume, while the total imported fell 7.5%, Ms. Valls said.

The main explanation for the increase in exports, said Mr. Castro, with AEB, is that most countries in this region are exporters of commodities, items that saw strong price rises, which generates additional foreign exchange. This, he says, provided these countries with new opportunities to import Brazilian manufactured goods.

At a time of logistical hurdles in global trade, he points out, Brazil’s geographical proximity, the logistical cost adapted to the region, the availability of containers, and the viability of land transport are among the main reasons why trade in the region has been favored.

Mr. Castro says that this is not something homogeneous. According to Secex data, considering trade with all the other countries in the region, Brazil had a deficit with three countries from January to July. The negative balance is explained mainly by the supply of energy-related products. There was a deficit with Bolivia, from which Brazil imports gas, with Paraguay, which supplies electricity, and with Guyana, because of oil. The Guyanese practically appeared on the Brazilian import map this year. Brazil imported $313 million from them from January to July, almost all of it in oil.

Argentina also has a different and specific situation, said Welber Barral, a partner at BMJ Consultoria. Exports of $8.89 billion from January to July this year to Argentina represent a recovery, with an increase of 34% against the same period last year. With a still difficult external situation, however, says Mr. Barral, the country does not have enough available hard currency to allow a very unfavorable trade balance, which may again impact Brazil. Recently, Argentina’s central bank issued new measures that have already been felt by some sectors in which the exporters are smaller and more pulverized, says Mr. Barral.

Abicalçados, which gathers Brazilian manufacturers of the footwear sector, has already spoken about difficulties faced by companies in shipments to Argentina, but the effect of this has not yet appeared clearly in the figures of the two-way trade, the organization says.

The restrictions imposed by the Mercosur partner on Brazilian exports are not something new in the two-way trade, Mr. Barral said. They grew with the import licenses put in place while Cristina Kirchner was the president (2007-2015). And even before the pandemic, he says, Brazilian shipments to Argentina also fell due to the economic crisis in the neighboring country, which still faces high inflation this year.

For Mr. Castro, the more positive scenario of trade with neighbors is likely to provide a surplus with South Americans of $41 billion in 2022. Last year, the positive balance was $34.1 billion. The expected expansion with this group of countries compared with what AEB projects for the total Brazilian balance. After the record surplus of $61.22 billion last year, Mr. Castro estimates a surplus of $54.13 billion at the end of this year.

There is uncertainty, however, about the sustainability of trade performance with the neighborhood in the longer term, he points out. The data and scenarios show that Brazil can occupy more space in the markets of different South American countries. “That depends more on whether Brazil wants to increase its exports and less on whether companies in these countries want to expand their imports.” Despite the good results achieved, one cannot consider this neighboring market as captive, he recalled, because China, to mention the main example, is occupying spaces and displacing Brazil as the main supplier in some countries.

Ms. Valls points out that, in 2022, the positive performance of Brazilian exports to South American neighbors is due to the economic recovery in most countries. Future trade depends on this and other factors, such as the role of trade agreements with some partners and political alignment. The result of the elections in Brazil, she said, can also impact regional foreign policy. In the shorter term, says Ms. Valls, the concern is with the possible economic slowdown ahead.

According to the consensus projections of the August report of the FocusEconomics consulting firm, Colombia’s GDP is estimated to grow 5.8% in 2022 after expanding 10.7% last year. In 2023, a 2.6% increase is projected. Chile’s economy is expected to grow 2% this year after expanding 11.7% in 2021. Next year, it is seen as growing 0.2%.

Mr. Barral recalled that the disruption of international trade, under the impact of the pandemic and then the Russia-Ukraine war, brought common challenges to all Latin American countries, such as price pressure. In the medium term, however, the international context may favor trade with Argentina and the other South American countries. The region, he points out, is one of the few in the world where there is no arms race, which makes it a supplier considered reliable from a political point of view. The movement of reallocation of productive resources in the largest economies is an opportunity for the region in attracting industries, Mr. Barral said.

*By Marta Watanabe — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Cogna in talks to sell stake in medical school arm

Company’s revenue from medical school grew 32% in the second quarter

08/12/2022

Cogna is in talks with investors to sell a minority stake in its medical school arm in order to boost growth, as Ânima did. The rival received an injection of R$1 billion from the private-equity firm DNA Capital for 25% of the education company’s medical school arm last year.

“We have just spun off the medical school arm. The idea is to find a partner for a capital injection and invest in growth. We are talking to several financial groups,” Cogna CEO Roberto Valério said. In the second quarter of 2022, the company’s revenue from the medical school grew 32%.

The company expects that, by the end of this year, the net revenue from the medical school will total R$482 million, and the EBITDA will total R$224 million. “In the first half of the year, we reached 55.5% of the revenue and 53.8% of the EBITDA projected for the year,” Mr. Valério said.

Cogna reported in the second quarter EBITDA of R$355 million, up 11.4% year-over-year. The margin rose 3.1 percentage points, to 30.7%. “It is the fifth consecutive quarter of growth in EBITDA. There is no silver bullet. Results come little by little and are the fruit of our restructuring in 2020 and 2021,” Mr. Valério said, referring to a restructuring that included closing 25% of in-person units to focus on online programs.

The company calculated an adjusted loss of R$36.6 million, compared with an adjusted net profit of R$20 million in the same period of 2021. The group adjusted the indicator in the bottom line due to the sale of the schools division, approved in October last year. The accounting loss reached R$101 million, up 148.5%.

Cash generation after capex rose 309.5% to R$112.5 million.

The revenue was stable at R$1.15 billion. The company ended the first half with 929,300 undergraduate students, up 12% year-over-year. The increase was driven by those programs with more online classes, which closed the period with 592,000 enrolled students, up 13.9%. The group also managed to reduce the dropout rate by 0.3 percentage points and increase enrollment renewals by 12%.

Mr. Valério points out that this performance in the student base is due to the strategy of granting occasional discounts, but not in a generalized way. It is common for students to enter college attracted by the discounted tuition in the first months, and then become defaulters when the full tuition is charged. By drawing students who are not only attracted by discounts, they are less likely to drop out, and the chances of default fall.

Vasta, the group’s basic education arm, which struggled in the first year of the pandemic, also contributed to the result as EBITDA grew 67% in the first half.

*By Beth Koike — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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CBA develops alloy to coat electric vehicle batteries

Benefiting from higher metal prices, company reported operational record in 2Q

08/12/2022

Ricardo Carvalho — Foto: Ana Paula Paiva/Valor

Ricardo Carvalho — Foto: Ana Paula Paiva/Valor

Benefiting from higher prices, Companhia Brasileira de Alumínio (CBA) exceeded analysts’ expectations and reported a record operating result in the second quarter, despite the lower sales volume. One of the major producers of primary aluminum in the country, the company continues to expand capacity and is working on the development of a new alloy, to be used in the coating of electric vehicle batteries.

“Aluminum is in every application in the low-carbon world. It is one of the three metals that are most present in the applications of a greener, more sustainable world,” CBA CEO Ricardo Carvalho said. The name of the client for whom the alloy is being developed and the project schedule were not revealed. But the executive indicated that the challenge is to reach an aluminum sheet with mechanical characteristics suitable for use as a casing for lithium-ion batteries, for electric buses in this case.

For analysts, the convergence of the aluminum business with the low carbon economy is one of the company’s trump cards in the long term. BTG Pactual says that the recent hike in the metal prices will continue to pressure CBA in the stock market, but in the long term, the company still benefits from the energy transition, which will stimulate aluminum consumption.

From April to June, the company reported EBITDA of R$641 million, the highest ever and 73% stronger than a year earlier, and a net income of R$ 511 million, the second-highest ever.

The unprecedented result was sustained mainly by the increase in prices and premiums practiced by the company, which offset by far the advance in costs in the period. “Despite the volatility of aluminum, prices were 20% higher in the year-over-year comparison,” said Mr. Carvalho.

In a report, analysts with Itaú BBA pointed out that EBITDA was 12% above the bank’s estimate and the market consensus, in the wake of the better performance in the cost line and the stronger EBITDA in the energy unit.

As prices advanced to an average of $2,875 per tonne on the LME and premiums were higher in face of higher logistics costs and a tighter market, CBA’s net revenue grew 22% in the quarter, to R$2.33 billion.

According to Mr. Carvalho, the primary aluminum import quota in 2023, established by the government after calculations by the Brazilian industry, is expected to undergo a significant reduction with the resumption of production at Alumar and the increase in the company’s capacity.

“The quota reduction will certainly take place. The number is still to be determined in a work coordinated by Abal [which represents the industry], but the prospect is that there will be a relevant cut,” he said.

Brazil imports about 300,000 tonnes per year of primary aluminum and the resumption of production at Alumar alone practically covers this volume, Mr. Carvalho said, indicating that the quota could even be eliminated next year.

In this scenario, supply and demand are expected to balance in the domestic market. “There may be a need for small imports or exports, but the market will be more balanced,” he added.

According to CBA’s chief financial officer, Luciano Alves, the demand for aluminum in the Brazilian market continues to be affected by the reduction in purchases by the self-build and consumer goods industries, which last year benefited the most from the emergency aid paid by the government. “Home construction activity and consumer goods are still below expectations and, in our view, there will be no significant change,” he said.

As CBA’s production resumption was carried out earlier than expected in all the furnaces of line 3, which may reach full capacity at the beginning of 2023, the aluminum production will reach 380,000 tonnes per year, 30,000 tonnes more than the current volume.

More 50,000 tonnes of primary aluminum will be added in 2025, with the recently approved restart of the furnaces of line 1. This way, the company will reach an annual production capacity of 430,000 tonnes of aluminum, in addition to the more than 120,000 tonnes of recycled material used to obtain final products.

*By Stella Fontes — São Paulo

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

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