Telefônica Vivo vende 1.909 torres por R$ 641 milhões

Telecom Vivo announced on Monday the creation of its first corporate venture capital (CVC) fund to invest R$320 million in startups over the next five years. The amount makes Vivo Ventures one of the largest CVCs in Brazil.

The company plans to invest in 12 to 20 startups, with stakes in the range of R$15 million to R$20 million, in an average allocation of R$60 to R$80 million per year.

“We want to have stakes close to 20%. Therefore, the startup has to be big enough in the pre-money for our check to represent that percentage,” Christian Gebara, Vivo’s CEO, told Pipeline, Valor’s business website. In the average the company projects, the startup should have a price valuation around R$100 million before the investment.

Vivo has begun discussing internally and formatting the fund over the past six months, part of the company’s strategy to “Digitize to Bring Closer”, as its institutional motto states. “This means not only being the connection structure, but also being a digital ecosystem,” says the CEO.

Until now, Vivo’s investments in startups were made through Wayra, the Telefonica group’s innovation hub. Globally, Wayra has already invested the equivalent of R$300 million and, in Brazil, there were about R$25 million in a decade, with 30 startups in the local portfolio.

“Unlike Vivo Ventures, these were pre-seed and seed funding, with an average ticket of R$1.5 million. Now we can enter series A or B rounds of companies that have gone through this seed,” says Mr. Gebara.

One of the attractions for the startups, besides the capital, is the access to Vivo’s ecosystem, emphasizes the CEO — the telecom giant has more than 100 million pageviews in its base, 1,700 stores and 20 million unique users in the app, with an average of 80 million monthly interactions.

This connection has given Wayra’s startups revenues of R$70 million in 2021 with Vivo alone — Gupy, for example, is a recruiting company that was hired by the investor. “Companies can raise money with other funds, but few have this customer base, the volume of channels and the big data that we have,” says Mr. Gebara.

Wayra invests in Gabriel, a security and camera monitoring startup that currently operates indoors — if it begins to operate indoors, it may enter the smart home connection, for example, an issue in which Vivo has been engaged.

Wayra’s team will be responsible for the technical part of CVC and the business flow for the fund, which is interested in solutions in finance, health, education, entertainment, whether B2C or B2B. The company already has initiatives in these areas, such as Vivo Money, a personal credit service, and Vivo V, a health and wellness marketplace.

In Brazil, corporate venture capital funds have already made more than 200 deals in the last 20 years, amounting to $1.3 billion, according to a survey by fintech Distrito — most of this capital has been invested in the last two years. Here in Brazil, almost 70% of the CVCs are focused on the initial phase of startups, and therefore generally have lower volumes.

Sinqia’s CVC, for example, is R$50 million, and CSN’s is R$30 million. Companies that invest in more mature phases also have larger vehicles — BV Bank made R$300 million available to this type of investment in 2018, Via allocated R$200 million last year and Banco do Brasil divided this same amount in two vehicles earlier this year.

In the world, $80 billion were invested by CVCs only in 2021, according to CB Insights.

According to Mr. Gebara, Vivo will continue simultaneously with other strategies, such as partnerships in the model of the joint venture with Ânima Educação and maybe acquisitions. “The investment in startups complements our digital positioning,” he adds.

Source: Valor International

https://valorinternational.globo.com

Embraer will develop flying cars in Latin America- Olhar Digital

Thales, a heavyweight of the global aerospace industry, has joined forces with Eve to help it develop electric vertical take-off and landing vehicles (eVTOLs). Initially, the French multinational and Embraer-controlled company will conduct joint studies for 12 months starting in January, focusing on the aircraft’s systems. But the partnership can be extended to the other components of the urban air mobility ecosystem.

“This is a very promising market, but also a very new one. We will act in co-creation,” said Luciano Macaferri, Thales’s CEO for Brazil. The company, a giant in defense and digital security, already conducted research on eVTOLs, but had not joined a specific project until now.

The partnership also has a financial approach. Eve’s “flying car” or “electric air taxi,” as the eVTOLs have been called, is due to enter service in 2026 and has already secured $549 million in funding, enough to advance to the certification stage. Thales is among the investors that have contributed to the project, but the exact amount is protected by a confidentiality agreement.

According to Eve’s co-CEO Andre Stein, Thales can contribute by way of extensive experience in aircraft parts – aviation, electrical, flight control, navigation, communication and connectivity systems – and in the joint creation of solutions for eVTOL. “Bringing in another company, like Thales, makes the project more robust,” he said.

The multinational was already an important supplier of electronic systems to Embraer, used in commercial and executive jets and the KC-390 Millennium. Eve’s future suppliers are still to be selected, but the fact that Thales is participating in the eVTOL development project puts the company in an advantageous position.

According to the executives, the cooperation is not limited to Thales’s funds in Brazil. In the country, the multinational’s Space Technology Center, in São José dos Campos (São Paulo), and its Aircraft Center, in São Bernardo do Campo (in the same state), will serve as a base for the studies. But engineers in France, Canada and the United States will take part in the effort.

The Thales-Eve partnership also comes in handy from the certification standpoint, the executives note. Eve formalized in February its Type Certificate (TC) request at the National Civil Aviation Agency and will seek certifications in the United States (FAA) and Europe (EASA). The interaction of the multinational with these regulators and the possibility of exchanging information will contribute to the process.

With 1,785 units in the order backlog, Eve estimates that the price of its eVTOL will be $3 million. The electric aircraft aims to offer comfortable, low-noise, zero-carbon transportation. Initially, it will be manned, with capacity for four passengers, and there is still no formal decision on where the aircraft will be produced – what is certain is that the partner, at this stage, will be Embraer.

The listing of Eve on the New York Stock Exchange, after the merger with Zanite Acquisition, is expected to take place this quarter. Initially, the Embraer-controlled company was valued at $2.4 billion.

Source: Valor International

https://valorinternational.globo.com

Como entender a sua conta de luz? Veja 3 passos simples!

Electricity bills will come without any extra charge this year after the improvement in rainfall in the last wet season in Brazil, said Luiz Carlos Ciocchi, the director-general of national grid operator ONS.

This is possible because the reservoirs of the National Interconnected System (SIN) reached a water storage volume of 63.1% at the beginning of this year’s dry period, the best since 2012, compared with 35.3% last year, Mr. Ciocchi said. The official foresees a safer crossing from the wet to the dry period this year than happened in 2021. Hydroelectric power has a prominent role in Brazil’s power generation mix.

Brazil faced the worst drought in nine decades last year, which affected the reservoirs of hydroelectric plants and raised uncertainties about the supply of electricity. As a result, the country took measures including activating thermoelectric plants.

“We will have a very good year, very calm, which will not cause so much headache or cost so much,” the director told reporters. The dry season runs from the end of April to October.

Consumers currently pay R$14.20 for every 100 kWh consumed to cover part of the costs with thermoelectric generation. However, as of April 16, the Brazilian Electricity Regulatory Agency (Aneel) will eliminate the extra charge from electricity bills.

Brazil is expected to have up to 6,000 MW of thermal plants during the year. At the height of the water crisis last year, more than 20,000 MW of thermal plants were activated.

About the emergency contracting of thermal plants made last year until 2025, and that now are no longer necessary due to the improvement in hydrology, the executive defended the maintenance of the contracts, and ONS will tap these plants during the year. “Preserving the legal framework is very important. This brings confidence and stability,” he said.

According to Mr. Ciocchi, the cost of using these plants is unlikely to represent a significant cost for consumers. Next year is expected to be calmer from the standpoint of structure for the supply of electricity since large blocks of renewable power from wind and solar farms are expected to come into operation, although it is still difficult to predict the situation of the reservoirs.

On the other hand, Brazil still has limitations in power transmission from the North-Northeast system to the Southeast region. However, according to him, the integration is moving forward.

“Looking ahead to 2023 is like looking into a crystal ball. We still can’t say much. What we can say is that there is a lot of new generation coming in, a lot of transmission lines, so from the infrastructure standpoint, we will be better off than this year,” he said.

The reservoirs of the Southern subsystem, the only one below average, with about 50% capacity, are still a concern.

Source: Valor International

https://valorinternational.globo.com

Jean Jereissati — Foto: Carol Carquejeiro/Valor
Jean Jereissati — Foto: Carol Carquejeiro/Valor

Ambev, the owner of beer brands Brahma, Skol and Antarctica, is presenting a “new chapter” of its history to investors this Tuesday. “To say we are a beverage company no longer represents us entirely,” CEO Jean Jereissati told Valor. The group wants to be, more and more, a platform, which goes beyond selling beer or soft drinks and includes food and even services, such as credit and renewable power generation.

Ambev has been successful until now with a model of strong expansion, search for efficiencies and inorganic growth. “The company conquered the world,” the executive said. “But when we turned 20 [in 2019], we rethought what the next 20 years would look like, and it became clear that what brought us here was not what would take us there.”

The company now wants to make alliances, like the ones it already has with BRF, M. Dias Branco or Pernod Ricard to sell its customers salami, cookies and vodka.

The Covid-19 pandemic in 2020 has somewhat opened the “technology window” for the company to put into practice what it began discussing as recently as late 2015 and early 2016. “The world went to online retail, it is digital now, and we were prepared when the pandemic came.”

If before only 15% of around 1 million customers were digital, today 80% are. “[The digital channel] was an option before. Now it is our core business. That’s where everything happens.”

Increased digitalization has had a major impact on the operation, speeding up the business. A bar, for example, can place orders through the Bees platform. This has given Ambev’s salesperson more time. Before the pandemic, a salesperson had only seven minutes to talk to a customer – there are 5,000 salespeople for a portfolio of one million customers. With Bees, a bar or restaurant ends up being in contact with the company for 37 minutes.

Digitalization also increased the umbrella of activities and the productivity of the salespeople, now called representatives by the company. The same 5,000 workers that served 750,000 customers in 2019 now deal with 1 million and will serve 1.2 million soon, the executive said.

To do so, a workforce of another 5,000 people has been assembled, with programmers and developers working on improving the several technologies used by Ambev and to creating new products and services. One priority is to improve logistics. The company started using small warehouses as distribution centers and motorcycles to speed up deliveries.

“Our acquisitions now should be more about improving our capabilities, in technology and logistics, and making alliances,” Mr. Jereissati said. The company plans, for example, to develop or buy a company that has created software for managing orders.

In the last three years, the company’s investments, including innovation, totaled R$17.5 billion, or R$7.77 billion last year alone.

In the last two years, the company has launched and managed to consolidate digital services such as the end consumer sales app Zé Delivery and Bees, for sales to bars and restaurants.

The platform Mr. Jereissati puts at the center of his strategy includes offering credit to customers. From the beginning of the pandemic until the end of 2021, the mass of credit offered to small retailers has doubled and is expected to double again this year. Sanitary restrictions, which required the closing of bars and restaurants for months on end, caused a crisis in this segment. For this reason, Mr. Jereissati said, “we were very flexible and rolled over the payments.” Fintech company Bees Bank, formerly called Donus, has 250,000 digital accounts.

This new operating model helped Ambev to sell 180 million hectoliters in 2021, a record level. Net revenue grew 24.8%, to R$72.85 billion. According to him, the year was less about big industry growth and more about market grabbing. “We were very countercyclical in the pandemic.”

Competition became fiercer. Heineken complained to antitrust regulator CADE this year against Ambev’s exclusivity contracts with bars. Mr. Jereissati showed itself to be calm. “It represents very little of our sales.” According to sources heard by Valor, exclusivity contracts account for about 2% of Ambev’s revenue.

Source: Valor International

https://valorinternational.globo.com

Roberto Campos Neto — Foto: Reprodução/YouTube

Central Bank President Roberto Campos Neto downplayed concerns about the sharp acceleration in March inflation, seeking to contain the market’s reaction to the latest reading of the IPCA, Brazil’s official inflation index, unveiled Friday. Inflation was up 1.62% in the month, above the median of 41 projections compiled by Valor Data, of 1.32%.

The financial market followed Monday morning a live-streamed event with Mr. Campos Neto, held by Arko Advice and the Traders Club (TC), in search of signs about a possible extension of the monetary tightening cycle after the news on inflation.

Mr. Campos Neto said that the reading represents a “small” surprise, before explaining that the Central Bank needs to better analyze the data before unveiling its findings.

The central banker had been saying he saw a final interest rate hike in May, to 12.75% per year from the current 11.75%, as the more likely outcome. He did not repeat this message on Monday. But this seemingly does not mean he will tighten further, as he had already failed to repeat the signal in a statement at another event last Thursday, before the latest figure for the IPCA was released.

Mr. Campos Neto tried to soften the bad news in several moments. He said the monetary authority had already been calling attention to the fact that when oil company Petrobras raises fuel prices, the increases hit the pumps more quickly, although in the end the pass-through occurred at an even faster speed. According to him, this faster pass-through in a month means that, in the subsequent period, there will be compensation.

Mr. Campos Neto also said that it wasn’t only in Brazil that there were surprises in the most recent inflation reading, as several other countries faced the same situation. He highlighted the role that the recent appreciation of the real against the dollar may have in avoiding a strong impact of the rise in commodity prices in inflation.

According to him, the stronger real is not completely priced by the financial market, since many analysts are still working with a foreign exchange rate between R$5.25 and R$5.35 to the dollar. “When I look at the estimates I get from the inflation market, some people have already fully considered the [new] exchange rate, while others haven’t yet,” he said.

In other words, Mr. Campos Neto highlighted the exchange rate as a positive factor that could affect the market’s inflation expectations, at a moment when economic analysts are raising their projections in response to faster inflation.

And Mr. Campos Neto also said he was comfortable with the appreciation of the real, saying that it doesn’t demand interventions from the Central Bank. He signaled that he might start selling dollars on the market if there are impacts from the withdrawal of stimulus in the United States.

Mr. Campos Neto was asked if there was any special concern with services inflation. He answered that these prices had been showing the expected behavior during the reopening of the economy. But industrial goods prices failed to drop as expected. “[Service] inflation somewhat reacted in the way we expected,” Mr. Campos Neto said.

Some negative things mentioned by Mr. Campos Neto deserve attention. For example, he cited rising wages for the first time and spoke of high core inflation and the prices of clothing and food away from home, which showed a “surprising increase.”

But overall, he was quite careful to avoid definitive conclusions, claiming more than once that one must carefully study the data. He also recalled that the interest rate hikes made since last year have not yet had time to be seen in the economy.

In other words, Mr. Campos Neto’s entire speech was designed to acknowledge that the IPCA was higher than expected, but that it is undecided whether an additional monetary policy response will be necessary.

Source: Valor International

https://valorinternational.globo.com

Manoel Pires — Foto: Wenderson Araujo/Valor
Manoel Pires — Foto: Wenderson Araujo/Valor

The states started this election with accelerated investments, even with more restrained revenue growth. The combined investments of 26 states and the Federal District totaled R$4.24 billion in the first two months of the year, up 115% year over year.

The data shows, according to experts in public accounts, that these expenditures by states are likely to remain strong after a boost in 2021, when investments closed the year with a real increase of 83.6% compared with the previous year. Financial surpluses from previous years are expected to help this, even though revenue flow has already shown a slowdown at the beginning of the year. State governments ended last year with R$140.2 billion in cash, R$61 billion more than the previous year.

According to data from the fiscal reports of the states, the collection of sales tax ICMS totaled R$85.4 billion in the first two months of the year and is already behind inflation, with a real drop of 3.2% against the same period last year. ICMS is the main tax collected by state governments. Current revenues, which include other taxes and transfers from the federal government, advanced 2% in real terms in the same comparison.

The revenue and expenditure data for the first two months were collected by Valor from the fiscal reports submitted by the states to the National Treasury Secretariat (STN). The expenditures with investments considered the primary capital expenditures. The values for the first two months of 2021 were updated by Brazil’s benchmark inflation index IPCA.

For specialists, even though the situation is heterogeneous among the states, with considerable gains in ICMS collection or in specific revenues in some of them, the picture shows that the generalized and accelerated advance in tax revenues seen last year did not continue into 2022, said Manoel Pires, coordinator of the Fiscal Policy Observatory of Fundação Getulio Vargas’s Brazilian Institute of Economics (Ibre/FGV). For him, the scenario points to the end of a period of “fiscal bonanza.” The growth of current revenues as a whole, he says, should give way during the year and follow more the performance of tax collection.

The collection of revenues during the year is fraught with uncertainty, said Ursula Dias Peres, a professor of public policy at the School of Arts, Sciences and Humanities (EACH) of the University of São Paulo, and a researcher for the Solidarity Research Network. Besides the effects of the economic slowdown, she said, state revenues will still suffer the impacts of tax changes.

Among them, Ms. Peres highlights the change in the calculation of ICMS on fuels as well as the cut by the federal government in the rate of the Industrialized Products Tax (IPI). This tax finances the State Participation Fund (FPE), which is likely to impact the states that have an important source of revenue in the federal constitutional transfers.

Marco Aurelio Cardoso, secretary of finance of Rio Grande do Sul, says that the collection of ICMS in the first quarter of this year grew 9% in nominal terms compared to the same period in 2021, with a small real drop. For him, this is likely to be the trend for the year. “We don’t believe in a real growth of ICMS this year. At most we will restore inflation [in the collection] and probably stay a little below it.”

In Alagoas there is also a slowdown in the tax collection, said George Santoro, the state’s secretary of Finance. From January to March, ICMS revenue was about 1% higher than the same period last year. For 2022, the expectation is for real growth between this same rate and 2%, which, if realized, will represent a great deceleration in relation to the real increase of 10% in 2021 against the previous year, a level of growth “that won’t come back.”

Even with uncertain scenario for revenues, Ms. Peres said, the investments scheduled for the year are likely to be financed by surpluses in 2020 and 2021. In 2020, she recalled, in good part as a result of extraordinary transfers from the federal government as a bailout for states and municipalities to combat the economic effects of the pandemic and, last year, due to the surprising behavior of tax collection.

“The surplus was big,” Mr. Pires said. “As tax collection was much higher than what budgets projected, in which a much more conservative scenario predominated, most states managed to turn tax collection into cash. The primary result last year was at historical peaks.” This, he said, will help many states balance spending this year, including investments that typically grow in election year. “The revenue slowdown becomes an important focal point for next year’s budget.”

Mr. Cardoso says that in Rio Grande do Sul the expectation is to expand investments to around R$3 billion in 2022, compared to R$2.3 billion last year. The state expects to receive a green light to join the Fiscal Recovery Regime (RRF) offered by the federal government until the end of May.

In Alagoas, where investments accelerated in 2021, the forecast is to keep the works at an accelerated pace this year. According to Mr. Santoro, the investment committed in 2022 is expected to reach R$3.1 billion this year. Last year it was R$3.7 billion.

In a statement, São Paulo’s Secretary of Finance says that the forecast for investments in 2022 is R$27.1 billion this year, of which R$20.5 billion from the Treasury and R$5.3 billion from financing. In 2021, the state invested R$25.4 billion, and in 2020, R$11.2 billion.

The ICMS collection forecast in the budget is R$191.4 billion and the Secretary of Finance says that any revisions will be made throughout the year. Fuels represent about 11% of the ICMS collection and the freezing of the reference price until June and the eventual loss will be measured throughout the year. As for diesel, the adoption of the ad rem rate, according to the secretary, is likely to have a neutral effect for São Paulo consumers.

“The collection will not perform as if the ICMS continued to be levied on current market prices,” says the note. According to São Paulo’s secretary of finance, the collection still showed real gains in the first quarter, compared to the same period last year. In the first two months, there was a real advance of 0.3% considering the ICMS data from fiscal reports, updated by the IPCA.

On the expenditure front, the surge in investments compares with other spending categories. Personnel expenses and social taxes fell 0.72% in real terms in the first two months of the year in relation to the same period last year. Current expenses, which besides personnel also include costs, fell 1.64%.

This, however, is a picture that may change during the year, since it still reflects in large part the Complementary Law 173, which restricted adjustments of salaries of public servants until the end of last year, Ms. Peres said.

In the first months of the year, she said, there was pressure for real adjustments and increases, which can make a difference in this expense as of the next months. According to the Superior Electoral Court (TSE), because of the elections this year, real salary increases could be granted to public servants until April 5, but adjustments below inflation have a longer deadline. The increases, the researcher said, can make a difference in personnel expenses in the coming months and become permanent expenses of the states.

Source: Valor International

https://valorinternational.globo.com

Transition of Interest Rate Benchmarks | OCBC Singapore

The March inflation numbers, which came in well above consensus expectations, once again increased the market’s distrust that the Central Bank will be able to meet its goal of ending the cycle of interest rate hikes at the next Monetary Policy Committee (Copom) meeting in May.

The skepticism of financial agents was reflected in the increase in bets that the end-of-cycle interest rate will be higher than the Central Bank had signaled in its last monetary policy meeting, 12.75%. The negative surprise with benchmark inflation index IPCA pushed future rates to price the Selic policy interest rate around 13.25% for the end of 2022.

“In terms of monetary policy, today’s [Friday’s] result strengthens our scenario that the Central Bank will need to revise its inflation projections of 6.3% for 2022 and 3.1% for 2023, and then revise its baseline scenario for monetary policy to interrupt the tightening cycle in May. We maintain our bet that the Central Bank will increase the benchmark interest rate by 100 basis points in May, 75 basis points in June and 50 basis points in August, to 14%,” Credit Suisse professionals wrote in a report.

There are also scenarios of even higher interest rates in Brazil. According to investment bank Haitong’s chief economist for Brazil and professor at the Getúlio Vargas Foundation, Marcos Ross, the widespread price hikes may force the Copom to raise the interest rate beyond 14%.

“Thinking about the balance of risks, there is no way to think that the Central Bank will be comfortable with this data, it is a number that will have an impact on expectations. I believe that reality will impose itself and the Copom will not stop tightening in May,” he says.

After the release of the index, Haitong revised its IPCA estimate for 2022 to 7.4% from 6.8%, and for 2023, to 4.1% from 3.7%. The basic scenario of the bank for the Selic is that the Central Bank should opt, in the end, for making a gradual end of cycle — the monetary authority had been signaling its intention to close the interest rate hike in the next Copom meeting, in May. “We see another 100 basis points hike and a reduction in the pace, from 75 basis points and 50 basis points in August”, says Mr. Ross, citing the bank’s projection of a Selic rate at the end of the cycle of 14%.

In an alternative scenario, Haitong predicts that the lower doses of tightening planned for June and August may increase, in the face of current pressured and widespread inflation. “The risk is, instead of another 75 basis points hike, there will be another 100 basis points hike, and 50 basis points of hike will turn into 75 basis points,” he says. “So I imagine, in an alternative scenario, that the Selic could exceed 14%.”

At Bank of America, the data generated a revision of year-end inflation expectations to 8.0% in 2022 and 4.5% in 2023. “All in all, this corroborates our view that the Central Bank will not be able to interrupt the tightening cycle in May. We expect a final 50 basis points hike in June, raising the Selic to 13.25%, but the risks are up,” write professionals with BofA, in a report signed by the head of economics for Brazil and Latin America strategy, David Beker.

Source: Valor International

https://valorinternational.globo.com

Macro hedge fund Arete Capital eyes shorter duration assets amid rate rise  shift

After investors migrated en masse from riskier strategies to fixed income as interest rates rose, they may now feel they have left money on the table. Those who left the macro hedge funds, funds in which managers base their positions according to the several economic scenarios, will look in the rearview mirror and see average returns of 7.3% in the first quarter, or 304% of the interbank deposit rate (CDI), according to Anbima, the association of securities firms.

With the increased volatility seen in the markets throughout 2021, especially in the second half, many people started this year settling for more conservative strategies, which signaled double-digit-level returns – and, in fact, the Selic, Brazil’s benchmark interest rate, is at 11.75% and may reach 13% with a new adjustment by the Central Bank’s Monetary Policy Committee (Copom). But the CDI, the starting point for most mixed and fixed income portfolios, yielded 2.4% from January to March.

Based on Quantum Axis’s sample, there are at least three dozen portfolios with returns of more than 6% in the first three months of the year, almost half of the current basic rate. On the top end, Vista (27.8%), SPX (25.3%), XP (16%), Capstone (14.6%) and Vinland (14%) funds stand out. Gap, Legacy and Novus had returns above 10%, while Kairós, Ibiuna, Kapitalo, Sparta, Neo and Garde were in the 8% to 9% range. The Verde fund, which had disputed openings during the pandemic, saw gains of 7.13% in the first quarter, after a rare negative year in 2021 (-1.13%).

Looking at short-term performance is not the best math for funds that are recommended for horizons of at least three years. But it is educational to realize that aborting an investment plan and just going with the flow can come at a cost.

“I’m very critical of that move, it was ignorant. They withdrew a big lot, migrated to fixed income, and now they are chasing their tails,” said Felipe Arslan, the partner in charge of investor relations at Vinland Capital. “The question I hear most from investment advisors, after congratulating us for the 2021 performance, is whether the fund will continue to perform well.”

Since the portfolios have performed well over the past three years, Vinland did not feel the R$41 billion outflow from multimarket funds in the first quarter. “We got right the rise in interest rates and will try to the same as it falls. Hedge funds are designed to yield the CDI plus something, and the environment in which it operates is much better when interest rates are at 11%, 12% than when they were at 2%,” he said.

The job of hedge funds is to find out what is or isn’t in the asset prices, not to get the “final details” right, said Caio Santos, the partner in charge of investor relations at Ibiuna. And as the monetary policy rarely stands still, it is at the turning points that most money is made. “If the manager understands interest rates and knows how to operate [according to] inflation, currencies and the stock markets, this translates into other positions,” he said.

Mr. Santos points out that the funds will have worse phases, no manager will get it right all the time, but “there is no point in the investor leaving his ‘asset allocation’ and flying to the 1% [a month of fixed income].” When the Selic was lowered to 2% a year, many risk-averse people revised their portfolios and went to more volatile products. Then the game turned and there was a movement back, the investor may have taken a risk for which he was not prepared. “But it’s medium and long term, there’s no point in looking at the shorter windows.”

Carlos Woelz, founding partner of Kapitalo, recalled that hedge funds are “CDI+” strategies, “for better or worse,” and that there is still a work of financial education to be done with investors and with those who serve the client. “It is not reasonable to look at the returns of past years as a reference and expect the same return when interest rates are at 15% and when they are at 2%,” he said. He rejects the thesis that it is harder to outperform the CDI when the rate is high. “The manager invests the cash in CDI, it makes no difference.” Investing in macro hedge funds because of boom or bust cycles is the wrong motivation, he said. “You have to invest because you believe in the management team.”

Mr. Woelz puts his thesis into Excel and shows that the main hedge funds saw in 2021 average returns of 5.23% (118% of the CDI). In 12 months, the percentage rises to 11.29% (175%). In the first quarter it was 6.61%, or 272% of the rate.

Source: Valor International

https://valorinternational.globo.com

Rhodia/Solvay completa 75 anos de Paulínia | Notícias de Paulínia

Belgian multinational Solvay is expected to receive bids for Coatis in the coming weeks, sources say. The solvents division, which has headquarters and manufacturing activities in Brazil, has drawn interest from investment funds operating in the country, in addition to foreign competitors.

The business is valued at about R$2 billion and is the target of interest of private-equity firm Advent, which has investments in the chemical industry, U.S.-based Altivia and Asian Indorama, which already owns Oxiteno. Lazard, which is advising Solvay, is expected to receive bids by the end of April.

With net sales of €745 million last year, up 58.6% from 2020, Coatis is growing fast, driven by higher chemical prices and increasingly robust demand for green oxygenated solvent Augeo. This family of solvents, obtained from a renewable source (glycerin), replaces petroleum-based products and is used mainly in cleaning products and air fresheners, fragrances and personal care items. Most of the production is exported.

This business division of Solvay, which owns Rhodia, is also one of the world’s largest producers of phenol and polyamide products and intermediates, representing the group’s main business in Latin America.

Coatis is on the block as the group plans to split businesses into two independent, public companies in order to “enhance strategic focus and unlock growth opportunities,” according to the group’s announcement.

Three weeks ago, Solvay said it intends to bring its soda ash, peroxides and silica businesses, as well as Coatis, under the first new company, “EssentialCo.” The second, “SpecialtyCo,” will bring together specialty polymers, high-performance composites and most of the Solutions portfolio, which includes the Novecare, Technology Solutions, Aroma Performance and Oil & Gas units.

The group has been moving out of niche markets for some time now. About five years ago, it began a comprehensive restructuring of its assets and divested different businesses globally, with the aim of concentrating on specialty chemicals and advanced materials.

In the process, it significantly reduced its stake in the PVC business and sold operations in Europe, Asia and Latin America – Brazilian Unipar acquired Solvay Indupa, which produces PVC in Brazil and Argentina. In the following years, it continued to divest assets while struggling with high debt.

The Brazilian petrochemical industry has been going through an internationalization drive in recent months. The main asset of the sector is petrochemical company Braskem, which is up for sale. Controlled by Novonor (formerly known as Odebrecht) and oil giant Petrobras, the company has drawn the interest of the U.S. asset manager Apollo – Brazilian group Unipar and J&F, the holding company of the Batista brothers, owners of meatpacker JBS, are also in the race, as reported by Valor. Furthermore, BTG Pactual is still committed to the proposal of buying Novonor’s debt, which is guaranteed by Braskem shares.

Last week, the Asian Indorama concluded the acquisition of Oxiteno, a chemical division formerly owned by the Brazilian company Ultra. Best known in Brazil for its leadership in the PET resin market, used in plastic bottles, Indorama Ventures disbursed $1.48 billion and reached the top of the ranking among ethylene oxide and surfactants producers in the Americas.

Advent, Lazard and Solvay declined to comment. Altivia did not immediately reply to a request for comment.

Here's how inflation works and what can be done about rising prices | CBC  News

Friday’s disclosure of Brazil’s benchmark inflation index IPCA for March exceeding the ceiling of the projections enhances the signs of a persistent rise in prices, which should require higher levels of interest rates, with a direct effect on the population’s purchasing power. This environment brings more uncertainties to a consumption scenario that is already more unequal and complex for business.

On Friday afternoon, banks and economists began to revise upward projections for inflation and the Selic policy interest rate in 2022 and shares of highly credit-dependent chains closed in sharp decline in the trading session.

Two recently concluded surveys, from research companies GfK Brasil and NielsenIQ, obtained by Valor, which cross-reference income and purchase profile, show the effects of the crisis at the client end. There is a decrease in the participation of the poorest in trade sales, and a greater dependence of industries and retailers on the demand of the richest – a clear sign of increased social inequality. In addition, the percentage of people afraid to spend, even with money in their pockets, is at 45%, almost half of the surveyed sample, and above the global average.

“There is an effect of the current scenario, and also remnants of the previous crises, of 2015 and 2016, which add to the pandemic,” says Jonathas Rosa, retail executive at NielsenIQ.

According to the GfK survey, the upper and upper-middle classes reached a 56% share in the sale of durable goods (TVs, refrigerators, washing machines) from October to December 2021, the highest rate in 12 quarters (three years), the survey’s analysis period. From January to March 2020, with the health crisis in its initial phase, these classes accounted for 51% of purchases and, a year earlier, for 50%.

Those with lower income (low and lower middle classes) participated with 39% of sales at the end of 2021, when the Selic and inflation already weighed on credit costs and purchases, versus 47% at the end of 2020, the period when the emergency aid was paid. According to the survey criteria, low income means families with a monthly income (before taxes) of less than R$1,600; lower middle class, from R$1,601 to R$3,000; upper middle class, from R$3,001 to R$5,200, and in the high class, above R$5,201.

The survey concluded that the “safe” income of employed people (part of them, classes A and B) and pensioners are sustaining the consumption of durable goods. Employed workers accounted for 49% of purchases in the fourth quarter, the highest rate since the beginning of 2020. The unemployed participated with 14%. Between October and December 2020, with emergency aid being distributed, employed people made 44% of purchases, and the unemployed accounted for 18%. Between 10,500 and 11,500 people were surveyed each quarter in questionnaires covering in-store and digital sales.

“There are resources left in the higher income population, but the lower class is in need of more stimuli, which take some time to be reflected in consumption,” says Felipe Mendes, head of GfK Brazil. In the second quarter, he understands that poorer workers will still bear stronger pressure on their expenses, “but it is possible that the increase in the minimum wage, high percentages of collective bargaining and the return of the [cash-transfer program] Auxílio Brasil, in the role of demand stimulators, will improve the situation of this group after May or June.” There will also be the impact of the drop in energy prices, with the change of the flags, and possible retreats in the unemployment rate, but he reminds that there will still be the after-effect of the rising interest rates since 2021. “There are negative and positive factors, and we will have to follow their effects, but it will be a difficult balance.”

Mr. Mendes highlights that when the crisis started, the poorest bought more “survival items”, growing their participation in microwave or stove sales. “With Auxílio Brasil, they took the opportunity to equip their homes, and their participation grew in items in general, until 2021 comes and they lose their position in most products.” The upper class, on the other hand, reduced its participation in sales for a brief period in 2020, but regained its position in total, and today there is a dispute for its income among segments, such as tourism and services.

Data from the Nielsen survey show a higher rate in Brazil (45%), compared to the rest of the world (at 38%), of people who, despite not having been affected by the crisis after 2020, do not feel so confident to buy. “Those people need to be convinced to spend,” says the 64-page study. Those who saved money in the crisis and are even more comfortable with their situation (called “small but powerful group”) are 6% in Brazil, the same global average, by the survey concluded in March, in 16 countries.

There are still the “strugglers”, in financial difficulty until now, (22% in the country and 23% in the world), the “recovered”, who have experienced losses, but have already recovered (19% and 21%, respectively), and the “unchanged”, who have not felt anything (8% and 12%, respectively). According to Mr. Rosa, with NielsenIQ, about 80% of the population is in the range of those most susceptible to the crisis (struggling, cautious and recovered).

“We have been following these groups since 2016 and 2017, when inflation and unemployment also exploded. And these groups have experienced many cyclical processes, many ups and downs, so they entered the pandemic already very weakened,” he says.

As the consumer market is strengthened by the expansion of scale and production, the loss of income in the lower classes compromises investment plans and job creation. This is also why this volatility worries the sector. “The tight retail margin makes it depend on a lot of volume to dilute costs, and if the base starts to flatten, it is a warning sign”, says economist Fabio Bentes, with the National Confederation of Commerce of Goods, Services and Tourism (CNC).

Within this logic, José Jorge do Nascimento Jr., president of Eletros, the electronics industry association, says that part of the sector that sells high value-added items, focused on classes with higher purchasing power, is “well satisfied”. “But in general terms, the market has been bad since October. There are no really relevant new investments and there is also the announcement [in March] of the 10% drop in the import tax for some goods, which brings insecurity to companies,” he says.

“The income of the great mass of consumers is crushed. For example, in 2020 and part of 2021 we sold many robot vacuum cleaners, which cost R$2,000. We sell a certain number of them, but ten times more of conventional vacuum cleaners, which cost R$300, R$400. It is very good to sell the robot, but it is not the one that really generates tax collection and volume,” he adds.

For Mr. Bentes, with CNC, the announcement of an IPCA of 1.62% in March (the highest for the month since 1994), above the ceiling of the projections, adds risk to the scenario in the short term – until December, the association projected a rise of 0.9% in trade sales in 2022, and this year revised it to 0.5% (discounting inflation). However, it says it is necessary to consider “compensatory factors” throughout 2022, with a greater effect in the second half of the year.

“A real appreciated against the dollar helps today, with stocks entering the stores less expensive, and there is still a ‘gap’ between wholesale and retail prices, because the chains have not been passing on all the pressure that comes from the factory floor,” he says. “The wholesale inflation, which has already been 25% in 12 months, until December, in total until February is 20%, and we expect that the retail market will still pass on half of this, due to the macro scenario that is still difficult.”

On Friday, Itaú revised the projection for the IPCA in 2022 to 7.5% from 6.5% and expects the monetary authority to continue raising the Selic to up to 13.75% per year. Also on Friday, Santander Asset raised its IPCA estimate to 7% from 6.5% and sees interest rates at 13.75% for the year – 50 basis points above the previous analysis.

In Friday’s trading session, the shares of Via, Americanas and Magazine Luiza, with business more linked to credit, fell 7.93%, 7.72%, 6.55%, respectively. In the view of the head of equity research at Itaú BBA, Thiago Macruz, this decline needs to be analyzed from the standpoint of the cost of capital, pressured in a scenario of persistent inflation and high interest rates over a longer period. “Retailers more exposed to the C class even tend to have a better second half, but partly because of the comparison base of this easier period over 2021,” he says.

Source: Valor International

https://valorinternational.globo.com