The idea Brazil is discussing is that emergency corridors should be established to ensure flow of food and raw materials — Foto: FecoAgro/RS
Brazil has launched the idea of a major worldwide commitment for countries to let agricultural products flow in global markets, despite international sanctions against Russia and problems caused by lockdown measures in China, in discussions at the World Trade Organization (WTO).
The situation has become much more complicated, blocking the free flow of food, and could result in a new crisis. Many companies fear their ships will suffer from explosions in the Black Sea, insurance is more expensive, the lack of containers has increased with the situation in China as well and inflation is still rising in different parts of the world.
The idea Brazil is discussing with several other countries is that, just as humanitarian corridors exist, emergency corridors should be established to ensure the continuous flow of food and essential raw materials and inputs for cross-border food and agriculture production, including fertilizers.
With these corridors, it would then be possible to move certain commodities from Ukraine and Russia, for example. And countries like Brazil, which need fertilizers, will have the input to produce surpluses and help feed the world, as one source notes.
Ukraine and Russia account for less than 3% of world merchandise trade, but are important in certain sectors, such as food. About 30% of the world’s wheat and 73% of sunflower oil comes from the two countries, along with a lot of barley, corn and other grains.
Several regions of the world are heavily dependent on the Black Sea region. In Africa, 35 countries import food from Russia and Ukraine. The United Nations Conference on Trade and Development (UNCTAD) has warned that the new price spike is collateral damage from the war in Ukraine, which could undermine political stability and food security anywhere in the world.
The idea of emergency food corridors was mentioned today by Alexandre Parola, the Brazilian ambassador and permanent representative to the WTO, during the General Council of the organization.
For the Brazilian representative, food security will be the most important issue during the conference of trade ministers of the 164 member countries, scheduled for June in Geneva.
In Brazil’s view, this will be an opportunity to address the issue of agricultural reform in the near future, recognizing that the availability of and access to food necessarily requires international trade of agricultural products. The discussion also involves poorer countries, particularly affected by the rising bill for food imports.
For Brazil, in the face of the current emergency, it will also be necessary for countries in the WTO to reach an agreement to avoid the banning or restriction of food exports normally purchased for humanitarian reasons. One problem is the resistance of India, which is more focused on ensuring more flexibility on how to release its food stocks to the international market.
After the June ministerial conference, Brazil advocates that the WTO Committee on Agriculture discuss texts to structurally strengthen food security and sustainable development. In Brasília’s view, the effects of the recent crises and the current context have made it more urgent to negotiate disciplines that can help improve food security, in accordance with the obligation of Article 20 of the WTO Agriculture Agreement to agree on “substantial progressive reductions in support and protection.”
CEO José Mauro Coelho said results between January and March reflect a “healthy company” — Foto: Leo Pinheiro/Valor
Oil prices, higher export volumes, lower costs in liquefied natural gas (LNG) imports and higher margins in diesel oil sales made Petrobras’s profit grow 38 times – or 3,718% – in the first quarter, to R$44.56 billion, compared with R$1.17 billion in the same period of 2021.
In a message delivered with the results, CEO José Mauro Coelho said the results between January and March reflect a “healthy company.” He also recalled that the company paid taxes to the federal government, states and municipalities equivalent to one and a half times the value of its net profit.
The company also highlighted, in a statement about the quarter’s results, that it disbursed almost R$70 billion in taxes, royalties and other payments to the federal government, states and municipalities in the first three months of the year.
The board of Petrobras approved, in a meeting held Thursday, the distribution of dividends in the amount of R$3.7155 per preferred and common share in circulation. According to the company, the total value is around R$48.5 billion.
Of the total, R$3.1387 are interim dividends referring to the remuneration paid in advance to the shareholders relative to the fiscal year 2022.
In addition, R$0.5767 per share will be paid as retained earnings included in the 2021 earnings report.
The dividends will be paid in two installments of R$1.8577, on June 20 and July 20. Shareholders who were listed on May 23 at B3 will be entitled to the dividend.
In the case of holders of depositary receipts (ADRs) on the New York Stock Exchange, the installments will be paid on June 27 and July 27. As of May 24, the shares in both markets will be negotiated without the right to the dividend.
Petrobras says that the dividend is in line with its remuneration policy, which establishes that the company can distribute 60% of the difference between operating cash flow and investments if gross debt is less than $65 billion.
The number of agreements reached by companies and individuals with the federal government for payment of tax debts reached 1.1 million in April — totaling R$263 billion in negotiated amounts. Taxpayers have been taking advantage of the so-called “tax transaction,” which allows the Attorney General’s Office of the National Treasury (PGFN) to grant discounts and installment plans.
This modality has existed for a little over two years. It was instituted in February 2020, through Law 13,988. Since then, the tax authorities are allowed to meet and negotiate — including very high debts.
The Candido Mendes University, for example, closed a deal a few days ago to settle a R$1.25 billion liability. It was the highest amount negotiated by the PGFN in the region that covers the states of Rio de Janeiro and Espírito Santo.
In São Paulo, multi-billion cases have been filed since last year. The Grupo Ruas, which operates in urban transportation, closed an agreement to pay R$3.12 billion in July. Inepar, which operates in the infrastructure industry, formalized the renegotiation of R$2.6 billion in tax debts in December.
It works differently from what was seen in the installment programs for tax debts Refis, which provided a single model for discounts and installment plans. In other words, a single calculation for all taxpayers in the country who wanted to join the program.
In the tax transactions, the agreements are customized for a specific group of taxpayers or individually. The discount and the value of the down payment and installments, in these cases, vary according to cash flow and payment capacity.
“The transaction considers the taxpayer’s actual economic situation. It is the only public policy capable of allowing regularization while respecting the principles of equality, justice, and free competition,” says attorney João Grognet, general coordinator of PGFN’s credit recovery strategies.
There are more than 10 modalities. In one, named individual transaction, the tax authorities and the taxpayer sit down to negotiate. It is designed for those who have debts of more than R$15 million. This was the model used by Candido Mendes, Grupo Ruas and Inepar.
The discounts, as a general rule, are up to 50% and the debt can be paid in installments over a maximum period of 84 months. Companies under judicial reorganization – the case of Inepar and Candido Mendes – have more advantages. Discounts can reach 70% and the payment term goes up to 120 months.
Individuals, micro and small companies, non-profit institutions, and educational institutions are even more favored. They fit into the highest percentage, 70%, and can pay their debts in up to 145 months.
The Candido Mendes University, besides being under protection from creditors, meets the requirements to take advantage of the best payment conditions. The original debt, of R$ 1.25 billion, was reduced to about R$400 million. The debt will be paid in 145 months.
The other modalities of transaction available to taxpayers have conditions established beforehand in a public notice or ordinance. In this case, the taxpayer decides to join. This week, for example, the PGFN opened discussions on goodwill amortization in the administrative or judicial sphere.
This litigation, according to the Secretariat of Federal Revenue, involves around R$150 billion. Whoever opts for the agreement must give up the lawsuit. There are discounts of up to 50% and the joining period ends on July 29.
Before that, on June 30th, there are other transactions that are expected to close. Among them, two pioneering ones were instituted during the pandemic. The one called extraordinary allows the payment of the debt with a down payment in three installments and the remainder in 81 installments, for companies — or 142 in case of individuals.
The other, called exceptional, allows the debt to be paid in 84 installments, or 145 for individuals, with a reduced down payment spread over 12 months and discounts of up to 70% on fines and interests.
The individual transaction — aimed at taxpayers who have large debts — has no deadline for agreements to be proposed. And they work in a more customized way.
Tiago Voss dos Reis — Foto: Divulgação
“We are able to adjust them according to the economic condition of each debtor,” said Tiago Voss dos Reis, chief prosecutor of the region that covers Rio de Janeiro and Espírito Santo. He and attorney Andréa Borges Araújo were in charge of the negotiations with Candido Mendes.
The university will pay smaller monthly installments in the first two years, for example. It was agreed this way to reconcile the payments to the federal government with the commitments made in the judicial reorganization.
In the third year of the agreement, with a less uncomfortable cash flow, the value of the installments will increase — in a customized format: there will be 11 ordinary installments, representing 0.5% of the debt, and an extraordinary one, corresponding to 7%. This high value installment is called the “balloon installment” – it serves to strengthen the payment.
These high-value installments are related to the sale of the university’s real estate. Candido Mendes has an ongoing divestment plan, and the sales are expected to take place before the agreed maturity dates. If it doesn’t, however, it will have to pay the amount anyway.
The university has offered other properties and assets as a guarantee for payment. And, in addition, two managers are listed as guarantors of the debt. If Candido Mendes does not comply with the agreement, they will have to respond with their personal assets.
There were tax and social security debts accumulated since the 1980s. “It had been monitored for a long time by the attorney general’s office. With the settlement, besides the prospect of payment, we reduced litigation,” attorney Andréa Borges Araújo said.
Celso Viana, legal prorector at Cândido Mendes, sees the transaction as a great achievement. The university is in the process of corporate restructuring, to become a company — today it responds as a non-profit company — and the tax agreements, he says, solidifies this process. “It brings total security for potential investor partners,” he says.
Candido Mendes’ recovery process is led by retired judge Luiz Roberto Ayoub, one of the leading lawyers in bankruptcy. He is currently a partner at the law firm Galdino & Coelho.
For him, the negotiation of tax liabilities consolidates the viability of the recovery process and “proves the full capacity of the institution to pay all its debts.” The negotiations with PGFN were headed by tax attorney Gustavo Brigagão.
Only debts related to the Workers’ Severance Fund (FGTS) were left out of the agreement. This issue is being discussed in court. Candido Mendes closed a payment agreement with the workers in the judicial reorganization process. The PGFN, however, filed an appeal because the agreed discounts were above the limit allowed by the resolution of the Board of Trustees of the FGTS. Today, the decision of the court-ordered reorganization judge in favor of Candido Mendes is valid.
Negotiation phase will now begin on the terms and conditions for the potential acquisition of Petrobras’s stakes — Foto: Leo Pinheiro/Valor
Oil operator PetroRecôncavo and power generation company Eneva announced Wednesday they have been invited by Petrobras to continue negotiations for the acquisition of the state-run company’s stake in the Bahia-Terra cluster. The consortium formed by the two companies now enters the negotiations as “selected binding offeror.”
In March, the duo had submitted a binding offer for the set of assets.
The negotiation phase will now begin on the terms and conditions for the potential acquisition of Petrobras’s stakes in a set of concessions for onshore E&P fields and associated facilities in the Recôncavo and Tucano basins, in Bahia, the consortium said in a note.
In Wednesday’s note, the companies made it clear, without revealing values, that they have submitted a joint offer — with 40% participation by Eneva and 60% by PetroRecôncavo, the latter being the operator of the assets.
The statement confirms previous report by Brazil Journal citing sources close to the negotiations. The consortium offered $1.35 billion for the asset, according to the news outlet.
The conclusion of the deal, as well as its terms and conditions and the amount involved are still subject to the acceptance of the offer by Petrobras, the negotiation and execution of the contract, the competent legal and regulatory approvals, as well as the fulfillment of certain conditions precedent, in particular the approval of the antitrust watchdog Cade and the National Petroleum Agency (ANP).
Nubank is currently facing its toughest governance test since it went public — Foto: Divulgação
Nubank is currently facing its toughest governance test since it went public, with pomp, in December. In addition to the controversy of more than R$800 million in compensation for the management team, the lock-up period on the trading of shares sold in the IPO was set to end earlier than expected. The result is reflected in the fintech’s market capitalization, which was $24.6 billion on Wednesday, 40.7% lower than when it went public.
Earlier this week, the digital bank changed the date for the end of the lock-up period. The deadline was shortened by about a month, to May 17, the day after the release of first-quarter results.
As Nubank signaled that it did not intend to slow down in credit despite rising interest rates, the measure led some investors to wonder if this was not a sign of bad results to come. The suspicion was greater because it was compounded by the uneasiness with the compensation package planned for the management team this year, a whopping R$804 million. The number, which appears in official Nubank documents, caused a furor in social networks last week after it was reported by Valor.
Days later, Nubank released a statement to the market to explain itself to investors: 84% of this remuneration goes to David Vélez, cofounder and CEO of the fintech, who will only receive it if ambitious goals are met, and that the banker is committed to donating his fortune in life.
It wasn’t enough to calm things down. First, the total amount continues to differ from what other banks and companies pay. Second, the clarification took a long time – the statement to the Securities and Exchange Commission (SEC) was made five days after the news went viral, an eternity in times of social networks.
Stocks are a snapshot and do not always say much about the quality of a company, but they are the most important signal of the perception that investors have of it. Therefore, Nubank will have to learn how to deal with them. In this sense, transparency always goes down well – even more so at a time when the cost of money is rising and shortening the tolerance of technology investors.
The second quarter is still expected to be marked by sluggish activity on the domestic market, although a “slight” upturn in demand for paper packaging has already been perceived, due to more favorable seasonality, says Klabin CEO Cristiano Teixeira. International trade, on the other hand, is likely to remain firm.
“The domestic market is still likely to go slowly because of the inflation scenario,” he said in a conference call with analysts. In the first quarter, the company’s sales to the Brazilian market represented 55% of the 900,000 tonnes sold in total, against 56% in the fourth quarter and 61% in the same period of 2021.
At the beginning of the year, Klabin benefited mainly from price increases realized in recent quarters and from the reallocation of volumes to the overseas market, which offset the greater pressure of costs and the seasonally weaker consumption of cardboard boxes in the country. As a result, net revenue rose 28%, to R$4.42 billion, and the EBITDA advanced 35%, to R$1.73 billion.
According to the company’s head of the pulp business unit, Alexandre Nicolini, the readjustments announced for hardwood pulp as of May 1, in China, the United States and Europe, have already been applied. In the Chinese market, the increase announced by the company was $30, to $810 per tonne.
Traditionally, Suzano, the world’s largest producer of eucalyptus pulp, used to lead the movement of readjustments by South American producers in the different regions. In recent months, however, Klabin has taken the lead. “The company had a vision of the difference between the resale price and the market price in China and, therefore, there was room for a new increase,” Mr. Nicolini justified.
In Europe, mentioned Mr. Nicolini, an increase of $50 per tonne was applied for May and there is a new increase, of $50 per tonne, announced for June. “The market remains quite resilient, although the situation in China is a little more delicate, because of the lockdowns. Even so, Klabin does not feel any reduction in the demand for its products,” he said.
According to the executive, the company anticipated a higher pressure on pulp prices in China compared to other regions and, last year, decided to increase the volumes for the other markets, including Brazil. The strategy proved to be right, and the realized prices were above the industry average.
In the corrugated cardboard business, said head of packaging Douglas Dalmasi, Klabin opted to forgo volume and concentrate on prices during the first quarter. “We don’t look at specific market share. Our vision is more medium-term. We underperformed the market in terms of volume, but prices were above the sector’s average because we favor profitability,” he said.
In the kraftliner market, Flavio Deganutti, head of the paper business, declared it is possible to see the first signs of a resumption in U.S. exports of this type of paper, but a major announcement of capacity closures contributes to maintaining the fairer relationship between global supply and demand. “We don’t see any major movement [of change in this scenario] in the coming months,” he added.
The rise in diesel prices and the weakening of the real against the dollar in the last few weeks have accentuated concerns about the gap between fuel prices defined by Petrobras and the international parity. The state-run company has not adjusted the prices of diesel and gasoline in Brazil for 55 days, which has hindered imports by other agents. The scenario leads to discussions about the risks of shortages in the fuel market. The main concern of the market is diesel. Sources in the sector, however, rule out the risk of a systemic and generalized shortage, although supply may face problems in some regions.
As the prices gap widened, imports by regional distributors and smaller importers fell. Thus, the biggest distributors and Petrobras itself have been responsible for supplying the market, which are still importing. Some regions have faced greater difficulty in meeting the total demand by smaller distributors. According to sources, the issues are registered in Vitória (Espírito Santo), which is supplied by short-sea shipping, some cities in Goiás and Minas Gerais and places in the Northeast regions.
“What happens is that on a given day a gas station or a consumer can run out of product, or no longer be served by the distributor that normally serves them and start being supplied by some other,” said Sérgio Araújo, head of the Brazilian Association of Fuel Importers (Abicom).
Sources linked to major distributors say that occasional supply problems have occurred mainly at service stations that do not have supply loyalty agreements. The large distributors have managed to maintain imports and make an average, in the final prices, between the costs of fuel purchases at Petrobras’s refineries and purchases abroad. “Although with less surplus, the volumes always meet the demand,” said an executive who asked not to be named.
A reduction in the demand for diesel in the domestic market in recent weeks, due to seasonal factors, has also helped to stave off supply problems, sources said. Valeria Lima, head of downstream at the Brazilian Petroleum Institute (IBP), said that there is no risk of shortage, but the market is “very small.” Carla Ferreira, an analyst with the Institute in Strategic Studies of Petroleum, Natural Gas and Biofuels (Ineep), says that specific problems may require a reorganization of players.
There are also reports that some customers of the Mataripe refinery (Bahia) are no longer buying products from the refinery, in search of better prices in units operated by Petrobras in other states of the Northest region, such as the Abreu e Lima Refinery (Rnest), in Pernambuco. The Mataripe refinery was privatized at the end of last year and is currently operated by Mubadala’s Acelen.
The distance of almost 800 kilometers between Acelen’s refineries and Petrobras’s units has been covered by trucks from clients seeking the lower prices charged by the state-owned company, especially in this first week of May, sources say. “If the gap in prices is maintained, there is no doubt that this inversion of logistic flows will be accentuated,” says a source, who points out, however, that there are limits to this type of operation, since Rnest itself is not capable of meeting all consumption in the Northeast region.
The production of the national refineries cannot supply the entire demand in Brazil. According to data from the National Petroleum Agency (ANP), in March, Brazil imported 23.7% of the diesel consumed in the country. Of the imported volume, 46% was brought into the country by Petrobras itself and 54% by other companies. In the same month, considering the supply by local refineries, Petrobras was responsible for delivering 82% of the diesel consumed in the country to the distributors, and the Mataripe Refinery, for 9.7%, with the remainder coming from smaller companies.
According to Marcus D’Elia, the managing partner of the consulting firm Leggio, Petrobras has sought to increase the utilization of its own refineries, which has exceeded 90% in recent months. “This puts a little more product on the market, but does not solve the difference between demand and supply, which is structural. Today, effectively maintaining the country’s supply depends on imports, which are discouraged with a gap between fuel prices. Imports continue to occur, but, in a structural way, in the medium and long term this will always embed a risk,” he said.
The most acute situation occurs with diesel, a fuel sold by Petrobras to distributors with a difference of 26% in relation to international prices, according to calculations by consultancy StoneX. Abicom, on the other hand, calculates that the diesel price has an average difference of 24% in relation to international prices. Specialists explain that the international market is going through an unusual moment, in which the price of diesel has skyrocketed in relation to oil prices. “We are living an atypical moment, due to the variation in world demand, logistic issues and the variation in the level of stocks,” said Mr. Araújo, with Abicom.
In the case of gasoline, Ativa Investimentos points out that the gap between prices went to 19.1% on Wednesday from 14.9% on Friday. StoneX estimates that the gasoline sold by Petrobras is 6%, on average, below international prices, and Abicom calculates that prices are 12% below international prices, requiring an increase of R$0.54 a liter, on average.
Petrobras’s last adjustment was made on March 11, when the company raised diesel prices by 24.9%, and gasoline prices by 18.7%, in addition to a 16% increase in liquefied petroleum gas (LPG).
José Mauro Ferreira Coelho — Foto: Leo Pinheiro/Valor
Since then, President Jair Bolsonaro’s dissatisfaction with price increases led to a change of command in the state-owned company, with the replacement of CEO Joaquim Silva e Luna by José Mauro Coelho on April 14.
Sources linked to Petrobras say that the company is unlikely to pass on the current price gap immediately to consumers. “Petrobras follows the policy of parity regarding the average prices over the last 12 months, it is normal to have periods in which the gap is wider. This month, due to the volatility of the exchange rate, there was an escalation,” said Ilan Arbetman, an analyst at Ativa Investimentos.
The government has been monitoring the situation. In a virtual event on Tuesday, the deputy executive secretary of the Ministry of Mines and Energy (MME), Pietro Mendes, said that, in the case of diesel, a monitoring desk was created to collect information from distributors. He ruled out supply problems in May.
“The government needs a plan for this kind of situation. It is not just a question of price policy, but of guaranteeing supply,” said Edmar Almeida, a professor at the Energy Institute at the Pontifical Catholic University in Rio (PUC-Rio).
In a note, Petrobras said that the sales prices seek a balance with the international market, following the upward and downward variations, but avoiding immediately passing on to prices the external volatility and changes in the exchange rate caused by broader factors. “Pricing decisions are based on technical and independent analyses based on the external and internal scenarios of the oil and oil products market, and there is no interference from the calendar of disclosure of results.”
MSD says molnupiravir showed 89% efficacy against deaths in infected patients who started treatment up to five days after the onset of symptoms. — Foto: Divulgação/MSD
The Brazilian Health Regulatory Agency (Anvisa) approved, after a meeting on Wednesday, the emergency use of the drug molnupiravir, produced by U.S-based pharmaceutical company Merck Sharp & Dohme (MSD), effective against Covid-19.
MSD told Valor that the drug showed 89% efficacy against deaths in infected patients who started treatment up to five days after the onset of symptoms. The dosage for adult patients is 800 mg (four 200 mg capsules) to be taken orally, every 12 hours, for five days, with or without food.
In a statement, Anvisa said that molnupiravir is an oral antiviral drug that, in clinical trials, “showed beneficial effects in mild and moderate adult patients, with the ability to reduce hospitalizations and deaths.” For home use, it works to reduce the chances of the Sars-CoV-2 virus multiplying and reproducing in the body. In practice, the mechanism of action prevents the virus from replicating within the human body.
The drug has already been approved in the United States (by FDA), in Europe (EMA), in Japan, in the UK, in Australia, and also by the World Health Organization, and is in use in 17 countries. MSD told Valor that the drug is already being used in 30 countries.
According to the head of Anvisa, Meiruze Freitas, who was the rapporteur of the process and voted for its approval, it is important to have therapeutic options for certain clinical conditions, especially in individuals who are at high risk of developing the severe forms of Covid-19. The initial target audience, therefore, would be the elderly and people with comorbidities. Ms. Freitas, however, pointed out that molnupiravir is not a substitute for the Covid-19 vaccines, which remain the best option for preventing the disease.
According to Anvisa, the drug is for adult use, with sale on prescription, and is not recommended during pregnancy, breastfeeding, and for women who may become pregnant and who are not using effective contraceptives. Laboratory studies in animals, Anvisa said, have shown that high doses of molnupiravir can affect fetal growth and development. The agency also does not recommend use for more than five days in a row or preventive use. MSD, however, says it is conducting promising studies regarding prophylaxis with the drug, the results of which are expected to be published later this year.
In addition, the Oswaldo Cruz Foundation (Fiocruz) has signed a cooperation agreement with MSD to exclusively distribute molnupiravir to the Brazilian health care system (SUS) and perform the technological transfer of the drug.
According to Marco Krieger, Fiocruz’s vice president of Production and Innovation in Health, the agreement aims to take the drug to basic health units by the end of the first half – which depends on decisions by the Ministry of Health – and to advance in its reverse engineering, not only to have local production in the future, but also to explore the platform, with great potential for efficiency against other arboviruses infections, such as dengue and chikungunya. The agreement had been in the works for a year and two months and was signed Wednesday.
Policymakers also affirmed that the future steps of the monetary policy may be adjusted to ensure the convergence of inflation to its targets — Foto: Beto Nociti/BCB
The Central Bank’s Monetary Policy Committee (Copom) raised the policy interest Selic rate by 100 basis points and signaled an extension of the monetary tightening cycle for its next meeting. “For its next meeting, the Committee foresees as likely an extension of the cycle, with an adjustment of lower magnitude,” the Central Bank said in a note. The Copom raised the benchmark interest rate to 12.75% a year from 11.75%.
According to the document, the committee notes that “heightened uncertainty of the current scenario, the advanced stage of the current monetary policy cycle, and its impacts yet to be observed require additional caution in its actions.”
The policymakers also affirmed that the future steps of the monetary policy may be adjusted to ensure the convergence of inflation to its targets “and will depend on the evolution of economic activity, the balance of risks and inflation expectations and projections for the relevant horizon of monetary policy.”
In its decision, Copom maintained its assessment that risks exist in both directions for inflation and highlighted the persistence of global inflationary pressures and uncertainty regarding the future of the country’s fiscal framework among the factors that would push prices upwards.
On the other hand, a possible reversal, even if only partial, of the increase in commodity prices in reais and a sharper-than-projected slowdown in economic activity could impact the price index in the opposite direction.
In the March meeting, the Central Bank had outlined two scenarios for oil. Wednesday, the monetary authority opted for keeping the alternative scenario as the main one — in it, the barrel ends this year at $100 and increases 2% a year starting in January 2023.
The Copom also evaluated that the external environment continued to deteriorate. “Inflationary pressures arising from the pandemic period have intensified due to supply problems related to the new wave of Covid-19 in China and the war in Ukraine. The repricing of monetary policy in advanced countries increases uncertainty and generates additional volatility, particularly in emerging countries,” it said. In relation to the Brazilian economic activity, the monetary authority stated that growth is in line with what was expected.
The Copom reiterated that consumer inflation continued to surprise negatively. “These surprises occurred both in the more volatile components and on the items associated with core inflation,” it pointed out.
Read the English version of Copom’s full statement distributed by the Central Bank:
In its 246th meeting, the Copom unanimously decided to increase the Selic rate to 12.75% p.a.
The following observations provide an update of the Copom’s scenario:
The global environment has deteriorated further. Inflationary pressures arising from the pandemic period have intensified due to supply problems related to the new wave of Covid-19 in China and the war in Ukraine. The repricing of monetary policy in advanced countries increases uncertainty and generates additional volatility, particularly in emerging economies;
Turning to the Brazilian economy, the set of indicators released since the previous Copom meeting suggests a rate of growth in line with the Committee’s expectations;
Consumer inflation continued to surprise negatively. These surprises occurred both in the more volatile components and on the items associated with core inflation;
The various measures of underlying inflation are above the range compatible with meeting the inflation target;
Inflation expectations for 2022 and 2023 collected by the Focus survey are around 7.9%, and 4.1%, respectively; and
In the reference scenario, the interest rate path is extracted from the Focus survey, and the exchange rate starts at USD/BRL 4.95* and evolves according to the purchasing power parity (PPP). The Committee decided to keep the assumption that oil prices follow approximately the futures market curve until the end of 2022, ending the year at USD 100/barrel, and then start increasing 2% per year in January 2023. The energy flag is assumed to be “yellow” in December of 2022 and 2023. In this scenario, Copom’s inflation projections stand at 7.3% for 2022 and 3.4% for 2023. Inflation projections for administered prices are 6.4% for 2022 and 5.7% for 2023. The Committee judges that the uncertainty in its assumptions and projections is higher than usual.
The Committee emphasizes that risks to its scenarios remain in both directions. Among the upside risks for the inflationary scenario and inflation expectations, it should be emphasized (i) a greater persistence of global inflationary pressures; and (ii) an increase in the risk premium due to the uncertainty about the country’s future fiscal framework, partially incorporated in inflation expectations and asset prices. Among the downside risks, it should be noted (i) a possible reversion, even if partial, of the increase in the price of international commodities measured in local currency; and (ii) a greater deceleration of economic activity than projected. The Committee assesses that the uncertain and volatile current scenario requires serenity when evaluating the risks.
Taking into account the assessed scenarios, the balance of risks, and the broad array of available information, the Copom unanimously decided to increase the Selic rate by 1.00 p.p. to 12.75% p.a. The Committee judges that this decision reflects the uncertainty around its scenarios for prospective inflation, an even higher-than-usual variance in the balance of risks and is consistent with the convergence of inflation to its target throughout the relevant horizon for monetary policy, which includes 2023. Without compromising its fundamental objective of ensuring price stability, this decision also implies smoothing of economic fluctuations and fosters full employment.
The Committee considers that, given its inflation projections and the risk of a deanchoring of long-term expectations, it is appropriate to continue advancing in the process of monetary tightening significantly into even more restrictive territory. The Committee emphasizes that it will persist in its strategy until the disinflation process consolidates and anchors expectations around its targets.
For its next meeting, the Committee foresees as likely an extension of the cycle, with an adjustment of lower magnitude. The Committee stresses that the heightened uncertainty of the current scenario, the advanced stage of the current monetary policy cycle, and its impacts yet to be observed require additional caution in its actions. The Copom emphasizes that its future policy steps could be adjusted to ensure the convergence of inflation towards its targets and will depend on the evolution of economic activity, the balance of risks, and inflation expectations and projections for the relevant horizon for monetary policy.
The following members of the Committee voted for this decision: Roberto de Oliveira Campos Neto (Governor), Bruno Serra Fernandes, Carolina de Assis Barros, Diogo Abry Guillen, Fernanda Magalhães Rumenos Guardado, Maurício Costa de Moura, Otávio Ribeiro Damaso, Paulo Sérgio Neves de Souza and Renato Dias de Brito Gomes.
*Value obtained according to the usual procedure of rounding the average USD/BRL exchange rate observed on the five business days ending on the last day of the week before the Copom meeting.
Note: This press release represents the Copom’s best effort to provide an English version of its policy statement. In case of any inconsistency, the original version in Portuguese prevails.
Brazilian delegation has prepared proposal to extend the flexibility that may eventually be agreed upon against Covid-19 — Foto: Tânia Rêgo/Agência Brasil
Brazil will propose that flexibilities for patent breaking and technology transfer for the production of anti-Covid vaccines be extended to medicines and treatments against tropical and endemic diseases, sources say. The proposal will be formally presented to the more than 160 members of the World Trade Organization (WTO) next week.
The so-called Quad – the European Union (EU), the United States, India, and South Africa – has defined an agreement to facilitate the breaking of patents to combat Covid-19, which will continue to be negotiated now with the other countries. But this comes at a time when the pandemic has already slowed in several countries.
Africa’s largest anti-Covid vaccine factory is downsizing due to a lack of demand for doses. India’s Serum Institute, the world’s largest vaccine producer, stopped manufacturing Covishield, its version of the Oxford/AstraZeneca vaccine, last December, claiming it had 200 million doses in stock, as reported by Financial Times.
At the WTO, the agreement text limits “eligible members” to developing countries and only to those that exported less than 10% of the world’s Covid-19 vaccine sales in 2021. Brazil considers that it will be eligible, all the more so because it does not even appear on the list of exporters.
Now, ahead of the conference of trade ministers scheduled for June in Geneva, the Brazilian delegation has prepared a proposal to extend the flexibility that may eventually be agreed upon against Covid-19.
“Technology and know-how transfer are important tools for building capacities to combat Covid-19 and beyond,” the Brazilian text says. “Transfer of technology initiatives designed for Covid-19 can and should be used to create capabilities for other health emergencies, particularly those endemic to developing countries and that receive less attention from global research and development frameworks.”
Thus, for Brazil, the use of TRIPS (Agreement on Trade-Related Aspects of Intellectual Property Rights) flexibilities, voluntary licensing agreements and other solutions involving intellectual property rights “must be accompanied by a political commitment to support initiatives to transfer technology and know-how to developing countries to combat not only Covid-19, but also other health crises.”
The Brazilian government argues that one lesson learned from the Covid-19 pandemic is that inequity in access to health products, notably vaccines, therapies and diagnostics, and unequal capacities among countries to prevent and respond to a health emergency are a threat to all. “Addressing these inequities and capacity imbalances will amount to ensuring that the world as a whole will be safer and better prepared to face other health crises,” the text says.
It notes that, alongside Covid-19, other health emergencies place a heavy burden on the developing world and inflict devastating health, social and economic consequences. It mentions estimates that tuberculosis, malaria and HIV/AIDS will have caused more than 2.8 million deaths by 2020, mainly in developing countries. The WHO estimates that neglected tropical diseases affect the health and livelihoods of more than 1.5 billion people around the world.
“Encouraging medical research and development for diseases that disproportionately affect people in developing countries is a particular challenge,” the Brazilian text says. It mentions a 2015 analysis, which found that poverty-related and neglected diseases account for 14% of the global disease burden, but attract only 1.3% of global research and development spending.
The conclusion is that the trade and health initiative at the WTO should not be indifferent to these issues. “The scope of the WTO discussions must be broad enough to consider not only abstract future health threats, but also current endemic challenges and poverty-related diseases in the context of the developing world. In other words, the discussions need to respond to other health emergencies,” the text adds.
Brazil recalls that the transfer and dissemination of technology is a central objective of the multilateral trade system inscribed in the TRIPS Agreement. This document recognizes, in its objectives and principles (articles 7 and 8), that the protection and enforcement of intellectual property rights must contribute to the promotion of technological innovation and to the transfer and dissemination of technology. The agreement also created a legal obligation for developed countries to provide incentives to companies and institutions in their territories to promote and encourage technology transfer to the least developed countries to enable them to create a sound and viable technological base.
A balanced and comprehensive outcome on trade and health at the WTO should recognize and incorporate this perspective, the Brazilian delegation says. According to a source, the Brazilian proposal has been well-received by other countries.
/i.s3.glbimg.com/v1/AUTH_37554604729d4b2f9f3eb9ad8a691345/internal_photos/bs/2022/i/A/vxlK2DR6W68n3qKe7HWA/plantacao-fecoagro-rs.png)
/i.s3.glbimg.com/v1/AUTH_37554604729d4b2f9f3eb9ad8a691345/internal_photos/bs/2022/e/5/LyoVLgThAv9a62EVB7hA/petrobras-leo-pinheiro-valor.png)
/i.s3.glbimg.com/v1/AUTH_37554604729d4b2f9f3eb9ad8a691345/internal_photos/bs/2022/3/2/TS5dsxRI6rMl9EnmWdqg/06leg-100-abre5-e1-img01.jpg)
/i.s3.glbimg.com/v1/AUTH_37554604729d4b2f9f3eb9ad8a691345/internal_photos/bs/2021/m/s/XJsnYfT2CDh8boq6MXbQ/nubank-divulgacao.jpg)
/i.s3.glbimg.com/v1/AUTH_37554604729d4b2f9f3eb9ad8a691345/internal_photos/bs/2022/y/N/SiWMXiSdqAQz2REcApag/08emp-100-petrob-b4-img01.jpg)
/i.s3.glbimg.com/v1/AUTH_37554604729d4b2f9f3eb9ad8a691345/internal_photos/bs/2022/z/v/UjLvU2QAytdyBRdYUeLw/molnupiravir-divulgacao-msd.png)
/i.s3.glbimg.com/v1/AUTH_37554604729d4b2f9f3eb9ad8a691345/internal_photos/bs/2022/E/A/w48sBjTMS8PWKdgqn85A/37942236145-819f179f73-o.jpg)
/i.s3.glbimg.com/v1/AUTH_37554604729d4b2f9f3eb9ad8a691345/internal_photos/bs/2022/y/A/oAYwo4QaarE96qwb1Gsw/vacina-credito-tania-rego-agencia-brasil.png)