Group says adoption would be “monumental setback for human rights”
06/23/2022
A group of independent experts from the United Nations released a statement in Geneva on Wednesday urging the Brazilian Senate to reject a bill on pesticides, warning that its adoption will mean a “monumental setback for human rights in the country.”
The experts are Marcos A. Orellana, special rapporteur on the implications for human rights of the environmentally sound management and disposal of hazardous substances and wastes; Melissa Upreti (chair/rapporteur), Dorothy Estrada Tanck (vice-chair), Elizabeth Broderick, Ivana Radačić, and Meskerem Geset Techane, with the Working Group on discrimination against women and girls; Michael Fakhri, special rapporteur on the right to food; Francisco Cali Tzay, special rapporteur on the rights of indigenous peoples; and Claudia Mahler, independent expert on the enjoyment of all human rights by older persons.
Ahead of the key Senate hearings on the bill PL 6,299/2002, which the report says is better known as the “poison package,” these experts warned that if the legislation is adopted, it will weaken regulations governing pesticide use in Brazil and expose people of all ages, including farmers, workers, indigenous peoples and peasant communities to hazardous substances with potentially devastating consequences for their health and well-being.
For them, it will mean a step backward in environmental regulations in the country. And they say they are alarmed by the bill’s provisions “that would allow the use of carcinogenic pesticides and those that carry a greater risk of reproductive and hormonal problems, and malformations in babies.”
In the statement, these experts call it a “myth” that pesticides are necessary to feed the world. “Pesticides present serious risks for human health and environment at a local and global scale,” they say.
The experts consider that the approval of the bill would aggravate the serious human rights issues in Brazil related to pesticides and call on the Brazilian government to approve and effectively enforce measures including a ban on aerial spraying and on the use of pesticides near housing, schools, water resources and other protected areas.
“Without further measures to ensure businesses respect human rights and the environment, abuses will continue to proliferate if this draft bill is adopted,” they said. The statement said these experts are in dialogue with the Bolsonaro administration on the issue.
The special rapporteurs, independent experts and working groups are part of what is known as the Special Procedures of the Human Rights Council. Special Procedures, the largest body of independent experts in the UN Human Rights system, is the general name of the independent fact-finding and monitoring mechanisms that address either specific country situations or thematic issues in all parts of the world.
The United Nations explains that the Special Procedures’ experts work on a voluntary basis; they are not UN staff and do not receive a salary for their work. They are independent of any government or organization and serve in their individual capacity.
Lawsuit is against Norwegian Norsk Hydro for pollution in Pará
06/23/2022
Tailings treatment system at the Hydro Alunorte mining facility that caused a spill in Barcarena, Pará — Foto: Igor Brandão/Agência Pará via AgênciaBrasil
The courts in the Netherlands will decide this Friday whether to accept the lawsuit filed by quilombolas and indigenous people from the municipality of Barcarena, in Pará state, against Norwegian aluminum manufacturer Norsk Hydro.
In the lawsuit, a group of nine people and the Association of Caboclos, Indigenous, and Quilombolas of the Amazon (Cainquiama) — which represents 11,000 people — allege that the toxic waste pollution from the aluminum manufacturer’s operations in Barcarena has caused health problems for the inhabitants, besides economic losses.
The litigants are seeking compensation for the damage caused. The victims are represented by PGMBM, a firm specializing in collective environmental litigation, the Brazilian law firm Ismael Morais Advocacia, and the Dutch law firm Lemstra van der Korst.
In the petition, Norsk Hydro is accused of being responsible for at least 10 environmental disasters caused by its mining and aluminum production activities. The company operates a refinery, a smelting plant and a bauxite mine in Pará.
The most recent disaster, in February 2018, caused toxic sludge to spill into the reservoirs of the Alunorte and Albrás operations, turning the rivers red. Brazilian authorities investigated the case and discovered three covert pipelines that dispensed toxic waste in the environment, according to the petition.
“Until now, those affected have had no voice in the current actions in Brazil. We want to change that to ensure they are protected and receive the justice they deserve. It is clear that Norsk Hydro carried out risky contaminating activities in a vulnerable region of Brazil, in a way that violated the law and caused catastrophic effects for the nature and the people who live there,” said Pedro Martins, partner and founder of PGMBM, in a statement.
Norsk Hydro said in a statement that the allegations are already being discussed in Brazilian courts. The opening of the lawsuit in the Netherlands generates a risk of duplication of actions and incompatible decisions. “We believe that these issues should be addressed locally and request that the Dutch court suspend the matter until a final decision is reached in the Brazilian cases. The Brazilian judicial system is robust and accessible, backed by constitutional guarantees of full right to defense and due process of law. Furthermore, Brazilian court orders can be executed in the Netherlands,” it added.
Norsk Hydro also stated that the public agencies have carried out more than 90 inspections and audits that attested that there was no transshipment of the waste deposits at Alunorte. Other allegations, according to the company, are unfounded and there is no evidence of contamination in communities caused by Alunorte, related to the February 2018 rain.
The company also said that its operations in Brazil “are in full compliance with the environmental permits required by law.” And it adds: “In addition, our operations have international management certifications, proving excellence in socio-environmental management. Therefore, Alunorte, Albras, and Hydro will continue to provide facts and clarifications necessary for the trial of the allegations, which they consider that should happen in Brazil.”
Talks have also begun to increase emergency aid, plans are underway to increase gas voucher
06/23/2022
Rodrigo Pacheco — Foto: Roque de Sá/Agência Senado
Pressured by the crisis of high fuel prices and the preventive detention, on Wednesday, of former Education Minister Milton Ribeiro on suspicion of corruption, the federal government and the governing coalition in Congress have accelerated the formulation of vote-getting measures. Behind the scenes, the trucker voucher had its value raised to R$600 from R$400. Furthermore, talks have begun to increase the emergency aid and plans are also underway to increase the gas voucher.
The plan is to include all these measures in the constitutional amendment proposal (PEC) 16, which is being analyzed by the Senate. In its current version, the PEC authorizes the federal government to pay up to R$29.6 billion to states that reduce to zero the sales tax ICMS rate on diesel and cooking gas and sets a 12% rate for ethanol.
These negotiations are seen with concern by the economic team, given their impact on public accounts. The R$600 trucker voucher will cost R$3 billion; doubling the value or range of the gas voucher would cost nearly R$2 billion. The idea of raising the emergency aid surprise the government’s technical staff, although the political team never gave up the plan of raising the value to R$600.
All these additional expenses go in the opposite direction of the goal of closing the public sector accounts in the black and setting a downward trajectory for the public debt.
In relief to the economic team, Senate President Rodrigo Pacheco (Social Democratic Party, PSD, of Minas Gerais) said Wednesday that it is necessary to have responsibility with the spending cap. “Issues related to the fuel PEC must be preceded by impact studies and election-related barriers,” he added.
Behind the scenes there is a discussion about the feasibility of launching these aid measures, because of the electoral legislation. One hypothesis raised would be the decree of a new state of calamity. There is, however, no consensus on this. Economy Minister Paulo Guedes has been fighting this idea in recent months.
Ítalo Franca, with Santander’s team of economists, pointed out that “there is some doubt about the legal possibility” of implementing aid to truck drivers this year “even through a PEC, because electoral legislation restricts the creation of new benefits,” he said.
Gabriel Leal de Barros, a partner and chief economist at Ryo Asset, has a similar view. The trucker voucher would cost R$1.8 billion from July to December of this year if it were fixed at R$400 and R$2.7 billion if it were R$600, according to his calculations.
Mr. Barros says he has “reservations” about the proposal. “It doesn’t make economic sense to subsidize fossil fuel and still allocate taxpayer money that don’t benefit the poorest,” he said, also citing “the risk of loss of control” over spending during the analysis of the proposal, especially in an election year.
He also says that it is “very negative” the fact that “we are amending the Constitution every six months,” since the aid would be implemented by means of a PEC. “This is not good for the fiscal framework and for the predictability needed by economic agents,” he said.
The R$400 voucher was called “alms” and a “joke” by truck drivers’ leader Wallace “Chorão” Landim. The same comment had been made by him and other unionists last October, when the idea was unveiled by President Jair Bolsonaro.
By Renan Truffi, Lu Aiko Otta, Estevão Taiar, Raphael Di Cunto — Brasília
Consistent delivery of business jets during Covid-19 pandemic, increasing use of fleet contributed to decision
06/22/2022
In the next three years, 150 new workers are expected to join the center’s current 150 employees — Foto: Celso Doni/Valor
Embraer, the world’s third-largest commercial plane maker, doubled the useful floor area of its service center in Sorocaba, São Paulo, in order to follow the advance of business aviation in Brazil. The expansion required investments of R$10 million.
“It is a natural growth, especially because of the business jet sales growth,” said Johann Bordais, CEO of Embraer Serviços e Suporte. The consistent delivery of business jets during the Covid-19 pandemic and the increasing use of the fleet contributed to the decision of moving forward with the project, the executive said.
The center, which started operating eight years ago and is 100 kilometers far from São Paulo, now has 40,000 square meters of useful floor area and four hangars, three of which focused on maintenance, repair and overhaul of components for Embraer planes. The fourth hangar is focused on supporting fixed-base operation.
Considering the services provided in Gavião Peixoto (São Paulo) as well, the company executes around 600 maintenance procedures a year. These procedures are expected to grow 5% to 10% a year. After the expansion, the service center in Sorocaba is now able to handle future demand and receive larger aircraft, including KC-390 Millennium.
Embraer’s center in Sorocaba offers from maintenance and overhaul services to airport services through workshops authorized for different aircraft components. The facility is also able to modify jets, including the conversion of Legacy 450s into Praetor 500s.
In the next three years, 150 new workers are expected to join the center’s current 150 employees.
In the three first months of the year, the segment of support and services contributed with revenues of R$1.4 billion, almost 46% of Embraer’s net revenues – the slice was so representative partly because commercial aviation has not resumed the pre-pandemic levels yet.
Still, this division, which currently accounts for 25% of revenues on average, is expected to gain more prominence, Mr. Bordais said. “This reflects our focus on supporting our clients.” The company expects this business to grow 10% to 15% a year around the world.
Policymakers seem to hope that situation will improve to the point of making additional hike unnecessary
06/21/2022
Central Bank’s building in Brasília — Foto: Jorge William/Agência O Globo
Central Bank’s Monetary Policy Committee (Copom) is now considering the possibility of maintaining interest rates at a high level for longer to meet the inflation target. This would complement or replace the previous strategy of raising the Selic, Brazil’s benchmark interest rate, to even higher levels in the final leg of the monetary tightening cycle.
In the minutes of last week’s meeting unveiled Tuesday, the policymakers say they analyzed this possibility. They have also discussed which message to send about monetary policy for the next meeting, to be held in August.
As the inflation environment has deteriorated, the Copom decided that it was about time to raise the interest rate even more last week, to 13.25% a year from 12.75% a year. The policymakers have also signaled that they will keep interest rates at a high level for longer than the markets have been expecting in order to complement the necessary tightening dose. “The strategy of convergence around the target requires a more contractionary interest rate than that used in the reference scenario for the entire relevant horizon,” the minutes say.
In last week’s meeting, the reference scenario provided for an interest rate of 13.25% at the end of 2022, 10% at the end of 2023 and 8.5% at the end of 2024. This way, considering what the minutes say, the Copom seemingly believes that the interest rates must be above each of these percentages at the end of each year.
The minutes could not make it clear how a higher interest rate at the end of 2023 or 2024 will help to meet the inflation target on the relevant horizon, which is 18 months ahead. The interest rates in 2023 will impact inflation more in 2024 than in the current monetary policy horizon.
The alternatives between raising the interest rate to a higher level now or keeping the rate higher for longer were also analyzed when the Copom discussed future monetary policy signals for the next meeting, in August.
Here again, the Copom concluded that keeping interest rates high for longer will not be enough to meet the inflation target. As a result, the chosen strategy was to signal a 50-basis-points hike or a 25-basis-points hike, depending on the inflation rates until there.
In a very important point to consider regarding future signals of monetary policy, the Copom said the perspective of maintaining the Selic rate for a sufficiently long period would not assure, “at this moment,” the convergence of inflation around the target in the relevant horizon.
It has been a while since the Copom used this phrase when talking about future steps – the intention, historically, has been to highlight that any signal is reliant on the evolution of the economic scenario. If the committee considered it better to include the expression “at this moment” now, it probably sees chances of positive evolution of this scenario by August, in a way that allows meeting the target by only keeping the interest rates at the current level, of 13.25% a year.
On the other hand, the Central Bank made a point of reinforcing, as it had already done in May, that the outlook is very uncertain, so it requires caution. When they presented their inflation projections, the policymakers said that uncertainty “has increased since the previous meeting.” Caution, in this case, is related to the risk of setting a higher-than-necessary dose of interest rate.
The debate about the Copom’s decision started with the directors saying they have already done a lot. “It was emphasized that the current monetary tightening cycle was quite intense and timely and that, due to monetary policy lags, much of the expected contractionary effect and its impact on current inflation are still to be seen.”
All things considered, the Copom is moving to stop raising interest rates and to keep them high for a sufficiently long period. It signaled a new hike for August, but it seems to hope that the situation will improve to the point of making an additional hike unnecessary.
Will the Central Bank be able to stop raising the interest rates? The Copom has been signaling the end of the cycle since March, but it was not possible. This time, the policymakers decided to keep raising the rates because the “Copom observed deterioration in both the short-term inflationary dynamics and the longer-term projections.” The reaction function still seems to be in place: if more negative surprises come, the Central Bank will keep raising the interest rates.
Indicator was up 0.3% in comparison to Marchand 1.8%
06/21/2022
The Brazilian economy grew 0.3% in April compared to March, with increases of 1.8% in the quarter ending in April compared to the previous quarter, and of 2.8% compared to the same period in 2021, according to the GDP Monitor reading, announced on Monday by Fundação Getulio Vargas (FGV).
According to FGV economist Claudio Considera, in charge of the indicator, the good results were driven by strong increases in household consumption and demand for services. But, for him, the intense increases in these sectors are not very sustainable because they are influenced by effects that will not last over the long term, such as repressed demand for services, which was low during the two years of the pandemic; and by additional income, which is concentrated in the second quarter. So, for the specialist, the GDP growth in 2022 is heading for a rate of up to 2% in comparison to 2021. Last year, GDP was up 4.6% in relation to 2020.
When detailing the behavior of the economy outlined by the April GDP Monitor, Mr. Considera pondered that the numbers show a clear reaction, both in household consumption and in services, compared to the same month in 2021. In April this year, household consumption grew 7.6% compared to March, the best result since May 2021 (12%). In the same period, service activities advanced 4.1%. In the quarter ending in April, compared to the same period in 2021, the advances in these two topics in the indicator were 4.8% and 4.1%, respectively.
He recalled that in April people were more inclined to face-to-face activities as well as social circulation when compared to the same period last year. The progress of vaccination against Covid-19 since then has allowed the rate of deaths from the disease to decrease and, with it, people’s fear of going back to the streets. This favors an increase in the consumption of services, such as bars and restaurants, which could not be accessed at a high rate last year, due to a worse scenario in the pandemic compared to the one observed today.
At the same time, April saw the beginning of the payment of the R$1,000 withdrawal from the Workers’ Severance Fund (FGTS) accounts, as well as the early payment of the 13th salary, a year-end bonus, for retired workers and pensioners, actions adopted by the government to boost the economy. This generated greater family consumption in the month, he noted.
However, when asked about the sustainability of the economy’s high pace, Mr. Considera was cautious. He commented that both FGTS withdrawals and 13th salary early payments will not continue to happen throughout the year. At the same time, he does not see a continuation, in the same magnitude, of the demand for services until the end of 2022. There are limits to the impact of repressed demand for services, in consumer access to this activity, he noted.
“Those things run out, those extra sales. And we also have a reduction in the purchasing power of families with the rise of inflation,” he recalled.
Another important aspect in the activity mentioned by him is the behavior of investments in the economy, still on a weak trajectory. Investments are a great inducer of jobs, as well as a sustainable pace in the GDP growth rhythm, he recalled. The indicator announced on Monday shows that the Gross Fixed Capital Formation (GFCF), which represents investments in the economy, fell 4.6% in April year-on-year, the fifth consecutive drop in that comparison. “The machinery and equipment industry is very bad,” he said. In the FGV’s GDP Monitor, the volume of machinery and equipment fell 10.7% in the quarter ending in April, compared to the same period in 2021.
Mr. Considera said that, in his analysis and with the information so far, the projections for GDP growth for 2022 would be more between 0.9%, 1%, possibly reaching 2% — but not exceeding 2%. “It should not go beyond that,” he reiterated.
Operation may suffer new setback as Mitsui rejects format proposed for deal
06/22/2022
On the eve of decision of the antitrust regulator CADE on the acquisition of Petrobras’s 51% stake in Gaspetro by Cosan’s Compass, the R$2 billion operation may suffer new setbacks.
Valor has learned that Mitsui Gás e Energia, the state-owned company’s partner in Gaspetro, rejects the most recent format proposed for the deal. Compass would sell up to 12 of the 18 distribution companies in which Gaspetro holds a minority stake. Mitsui has also indicated that it is likely to exercise its right of first refusal.
Compass informed in March that it would not keep all the distributors, in a move to seek the approval of the CADE. In the same month, the General Superintendence of the antitrust body approved the deal without restrictions. According to a source familiar with the group, the company has already committed to sell seven distributors to one group and five to another.
In addition to Mitsui, local distributors have also signaled that they may exercise this right in relation to Gaspetro’s stake, should Compass decides to sell it after the acquisition.
Mitsui informed the antitrust agency that it had no interest in buying the Petrobras stake in August last year. However, after the change in the proposal of Compass, it appealed to the rapporteur of the case in CADE, Luiz Hoffman, asking that the right of first refusal can be evoked because the deal was modified. Under the new format, it jeopardizes its business strategy, the company said.
In the e-mail message, which is public but contains restricted excerpts, Mitsui asks that this right can be exercised by any partner of the local distribution companies. “At that time [of the option not to exercise the right of first refusal], it was unthinkable that the sale by Petrobras of its equity interest in Gaspetro to a third party — in this case, to Compass — could/would hinder the investments made by Mitsui Gás over the years,” it says.
If the CADE approves the deals, Compass would hold 80% of the natural gas distribution market, which increases market concentration, sources say. In addition to Gaspetro, the company owned by Cosan bought Sulgás, a gas distributor in Rio Grande do Sul, in a privatization auction held in October, for R$927.79 million.
Mitsui has direct participation of 41.5% in eight distributors: Algás (Alagoas), Bahiagás (Bahia), Cegás (Ceará), SCGás (Santa Catarina), Copergás (Pernambuco), PBGás (Paraíba) and Sergás (Sergipe), besides other participations. According to one source, in case Mitsui exercises its preference right, the result will be market concentration, giving rise to a monopoly in natural gas distribution.
Last week, Mitsui Gás CEO Tadaharu Shiroyama met distributors in Ceará and Pernambuco to talk about investments, which reinforced the perception that the Japanese partner would be willing to keep Gaspetro’s slice.
Mitsui Gás e Energia did not immediately reply to a request for comment. Compass and Petrobras declined to comment.
For those who follow the matter, the fact that Mitsui Gas will take Petrobras’s share in Gaspetro instead of Compass would be a “lesser evil,” since the Japanese company has business only in gas distribution while Cosan’s subsidiary has verticalized operations, and is no longer independent as recommended by the term of cessation of conduct signed between the CADE and Petrobras. Compass operates in the gas trading market, import infrastructure, with a liquefied natural gas (LNG) terminal under implementation, and transportation.
Compass faces resistance from associations of sectors with direct operations in the natural gas market, which intend to convince the CADE that the approval could pave the way for the formation of a monopoly in natural gas distribution.
Associations interested in the matter filed appeals against the deal. This was the case of the Brazilian Association of Large Industrial Energy Consumers and Free Consumers (Abrace), the Association of Gas Pipeline Transportation Companies (Atgás), the Brazilian Association of Oil and Gas Exploration and Production Companies (Abep) and the Brazilian Glass Industries Association (Abividro). On Tuesday, the Brazilian Association of Independent Oil and Gas Producers (ABPIP) filed a manifesto with the CADE against the acquisition by Compass, aligning itself to the other associations.
Even the National Petroleum Agency (ANP) appealed at the end of March against the deal. In the appeal, the agency said Compass would become the controlling shareholder of Gaspetro, inheriting all the prerogatives that previously belonged to the oil company, including the appointment of commercial directors of the distributors, from the respective shareholders’ agreements – a situation that would imply open conflicts of interest.
Despite the effort, the purchase must be approved with “cosmetic restrictions,” according to the evaluation of sources that follow the case, with a pessimistic tone in relation to the outcome of the deal. For these sources, who spoke on the condition of anonymity, the assessment is that any restriction imposed by the CADE will not mitigate the effects of the deal. The sale of the participation in Gaspetro, inclusive, is part of the agreement signed between the CADE and Petrobras to encourage competition in the natural gas market, which would no longer occur since then.
“It is a discussion contrary to the one taken in the past [by the CADE]. It ends with the integrated gas market,” says one of the executives heard by Valor. For another executive, who acts as one of the stakeholders in the issue, with the approval of the purchase, the country “will begin to see unbridled unregulated capitalism” in the gas market.
In its defense, Compass alleged to the antitrust agency that the operation is “unable to replicate the previous scenario, of Petrobras’s transversal dominance,” in particular because “it does not and will not operate in the structuring links of the natural gas chain (production and transportation), which represent the main barriers to the sector’s development.”
Another point to be observed, points out another source, is that the current president of CADE, Alexandre Cordeiro Macedo, should declare himself disqualified from judging the issue because he actively participated in the formulation of the agency’s term of commitment with Petrobras, an initiative from which the oil company made divestments in several fronts, including natural gas. In addition, when he led the agency, Mr. Macedo authorized the participation of the Cosan group in the Gaspetro auction.
*By Fábio Couto, Stella Fontes, Robson Rodrigues — Rio de Janeiro, São Paulo
Investments will be directed to expansion of areas for refrigerated cargo,purchase of cranes
06/21/2022
Terminal de Contêineres de Paranaguá (TCP), controlled by China Merchants Port, will start an investment plan of nearly R$370 million, which will be injected by the end of 2023. The goal is to increase capacity, both for storage and cargo handling.
Part of the funds will be used to purchase 11 RTG cranes, which are used to move containers. The investment was already part of the obligations of the concession, but the decision to acquire them at this time was due to the tax exemption window opened with the extension of Reporto, a tax regime that suspends the collection of federal taxes on imports of equipment in the industry, until the end of 2023.
The company’s goal is to expand its cargo-handling capacity by 15%.
The investment plan also includes a 43% expansion of the area destined for reefer containers, which will reach 5,178 sockets. One of TCP’s main cargoes is frozen meats – in 2021 the terminal accounted for 35.4% of Brazil’s chicken exports.
The container yard will also be expanded, by 20,000 square meters. This will be possible through the optimization of the terminal’s structures, which currently occupy 480,000 square meters.
The need for expansion emerged, in part, from the logistical chaos generated by the pandemic. In late 2019, just before the health crisis, TCP completed investments that expanded its area by 150,000 square meters. At the time, the expansion was seen as being enough to meet the demand of the next decades, said Thomas Lima, the company’s chief commercial and institutional officer. “With the pandemic, we had our capacity taken right away. All the parameters changed,” he said.
During the Covid-19 crisis, global logistics chains went through complete disorganization amid port closures, interruptions in production lines and delays in clearance. The effects seen since 2020 include clogged ports, container shortages and crammed warehouses.
In addition to the pressure generated by the pandemic, cargo handling is up. The volume of full containers handled by TCP grew 5.9% in 2021 compared with the previous year. In the first quarter of this year, it rose again – by 2.3%.
In the executive’s view, the perspectives are positive. “The Port of Paranaguá is very focused on agribusiness, which is a growing industry, despite the country’s GDP. The world is consuming more meat, and this tends to boost cargo-handling operations.”
Mr. Lima acknowledges that the pandemic still impacts operations. Recent lockdown measures in China have reduced the number of empty reefer containers coming into the country. This could create a bottleneck for meat exports, which need the equipment. “Exporters have their warehouses full because slaughtering has not stopped,” he said.
The executive considers that it is complex to foresee when the situation will be normalized. However, for him, the trade flow between Asia and Brazil is expected to normalize at the end of this year if China refrains from imposing new Covid lockdown measures.
Law update to end restrictions seen as positive by specialists
06/21/2022
The Bolsonaro administration is betting on a bill being considered by the Chamber of Deputies to update the law on forest concessions and unlock the auction of nine areas this year. The proposal, authored by an oppositionist federal deputy, has already been approved by two committees and allows the use of these forests for the carbon market, which is growing rapidly worldwide.
The current legislation prohibits forests under a concession from being used in the carbon market (in which interested companies pay to maintain the vegetation of a place and, by doing so, offset their own emissions). The bill ends with this restriction, a move specialists understand as positive to draw interest in the sustainable exploration of these forest areas.
Jaqueline Ferreira, a portfolio manager at Instituto Escolhas, says that countries like Peru and Bolivia already explore the carbon market in the Amazon and that Brazil “is lagging behind.” “These are areas that need revenue to maintain themselves and the concessionaires themselves need diversification of income sources to maintain them,” she said. A study by the institute shows that in the region there are 37 areas with the potential to generate R$125 million per year in this market – revenue that, according to the project, will be shared with the federal government.
She regrets, however, that the Environment Committee in the Chamber of Deputies has removed from the blueprint the possibility of periodic review of the contracts. “One of the main problems of the concessions is precisely price volatility. Today the main activity is the sustainable management of wood and there is a lot of competition with the illegal market. The possibility of reviewing the amounts paid, logically with rules, would be an important gain,” she said.
One author of the project, Deputy Rodrigo Agostinho (Brazilian Socialist Party, PSB, of São Paulo) defends that concessions are the best model to protect forests against illegal logging and deforestation. “I know that it will be criticized by environmentalists who think that this means selling the forests, but today there are two very efficient strategies in the world to keep forests standing: payment for environmental services, in the case of private areas, and concessions, in the case of public areas,” said Mr. Agostinho, part of the opposition to the government.
For Mr. Agostinho, the current law is very bad and has slowed down these operations. He points out that the government estimates that it is possible to grant 43 million hectares to the private sector, an area larger than the entire territory of Germany, but that only 1 million hectares have been granted after more than a decade. “And these contracts are very focused on the extraction of wood, which suffers with the illegal market. In the world, what has been working well are concessions for tourism, for the production of medicines and cosmetics or forest agriculture, like heart of palm, chocolate and açaí,” he highlighted.
The proposal modernizes the rules for the bidding and environmental licensing of these areas. One of the main changes is to invert the order of the bidding process. Today, the documents of each company are analyzed, with possible contestations, before the proposals are checked. If the project is approved, only the winning company would have its documents checked.
In addition, the project transforms the forest allocation plan prepared by the government from annual to multi-year, every four years. The objective is to allow the employees of the Brazilian Forest Service (SFB) dedicated to this task to be free to take care of other functions, such as the inspection of the concessions.
The Finance and Taxation Commission approved the bill last week, with Deputy Sanderson (Liberal Party, PL, of Rio Grande do Sul) as rapporteur. The federal government put the matter on its list of priorities for the year and even accepted, in order to approve it, the voting of other proposals with which it disagreed, such as updating the revenue ceiling for companies included in the Simples Nacional, a simplified tax regime for small businesses. “The government is very interested in speeding up this project to attract private-sector companies to a business that, with the current legislation, is prohibitive. There are areas waiting for this to go to auction,” Mr. Sanderson said.
The Bolsonaro administration included 22 projects in the Investment Partnerships Program (PPI) in 2020, but so far only four areas have been tendered and contracted. According to PPI data, the 18 contracts signed so far had yielded R$70 million in grant payments and helped preserve forests with sustainable management.
The bill’s consideration in Congress is not yet fully defined. Two ways are being discussed: to vote in the Constitution and Justice Commission (CCJ), where the blueprint would have conclusive approval, without needing to go through the plenary; or to present an urgent request to take it directly to the plenary, which Chamber of Deputies Speaker Arthur Lira (Progressive Party, PP, of Alagoas) has already signaled he agrees with if there is a consensus among the parties.
The Steinbruch family’s CSN group, which aims to become a global iron mining giant, is preparing a plan that may solve the imbroglio that the judicial reorganization of Samarco Mineração has become. The iron ore pellet producer reported more than R$50 billion in debts when it filed for protection from creditors on April 9, 2021.
The idea is to meet the interests of shareholders – Vale and BHP Billiton – and the company’s creditors, sources say. The two sides failed to reach an agreement on the recovery plan drawn up by Samarco and its owners. As a result, it was rejected at the creditors’ meeting on April 18.
CSN hired Ricardo Knoepfelmacher’s consulting firm, which is specialized in corporate restructuring and complex cases involving corporate and creditor disputes like Samarco’s. Any deal between the parties is better than litigation – to where the case is heading if there is no agreement, according to a source.
Preliminary talks have already been made with Samarco’s shareholders and representatives of the financial creditors – 17 foreign distressed funds. Among these are Oaktree, Goldentree, Solus, Monarch and Silverpoint.
The group holds more than R$23 billion in bonds issued by the company. These bonds refer to loans made by Samarco before 2015. These creditors did not agree with the terms of the company’s plan and submitted to the judge an alternative plan, which is being analyzed.
The group’s plan includes, among several points, a capital injection of 38% of the debt in the form of bonds, which removes Vale and BHP from the group that controls the mining company. The plan is referred to as “Nova Samarco” and one goal is to seek, soon after, a strategic investor. In other words, a company that operates in the mining industry. This means an opportunity for CSN.
Vale and BHP supported a second, alternative plan – much less radical than the one from the financial creditors – from two workers’ unions from Minas Gerais and Espírito Santo. Basically, they made some improvements to the recovery plan made by Samarco.
Both plans were submitted on May 17 to the judge in Belo Horizonte in charge of the suit, but according to a source familiar with the case, any ruling could still take 45 to 60 days. A conciliation hearing for shareholders and creditors with the judge has been scheduled for this Tuesday. At the first moment, the meeting is aimed at defining whether there will be mediation, according to information provided to Valor.
CSN has a difficult task ahead – mainly to convince Vale to listen to its proposal. The mining company is unwilling to do so. The others seem more open to listening to what it has to offer. If the funds’ plan is accepted, the two shareholders will be trounced in the clash and will go to court, a source said.
If it succeeds with an attractive proposal, it will be a great opportunity for CSN to take control of Samarco. CSN’s owner, Benjamin Steinbruch, famously avoids entering a business if he will not be able to be the controlling shareholder.
Samarco is in the condition of being again the large producer of iron pellets it was before 2015, when it sank together with the tailings from the collapse of the Fundão dam. The company, which can handle 30 million tonnes a year, resumed operations at the end of 2020 with only 26% of its capacity.
Pellets, as they are known, are a premium product in the international iron ore market.
CSN Mineração, which went public in February 2021 and already produces around 33 million tonnes of fine ore per year, will start making a superfine material known as pellet-feed, which is used as a raw material in the manufacture of pellets. This way, it would integrate its production – as Vale, which has several pellet plants in the country, already does.
BHP and Vale prepared a joint note. “BHP Brasil and Vale inform that Samarco is not for sale and affirm their support for the restructuring plan filed by Samarco’s worker unions and other creditors on May 18. Both shareholders are focused on preparations for the conciliation hearing tomorrow [Tuesday] and on ensuring Samarco’s sustainability and its responsibility to the remediation efforts, which are not addressed by the creditors’ plan.”
Ricardo Knoepfelmacher, CSN and the creditors did not immediately reply to the requests for comment.
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