Pix’s acceptance reaches record level in January

Seguro-PIX: bancos oferecem proteção em caso de sequestro | 1 Bilhão | iG

The acceptance of Central Bank´s instant-payment system Pix as a means of payment in the largest online stores in the country reached a record level of 64.4% in January, according to a study by consultancy Gmattos, obtained by Valor. A year ago, this percentage was only 16.9%. If the growth rate is maintained, it is possible that, in the coming months, the instant payment instrument will reach or even surpass banking bar-coded bills known as “boletos” in the ranking of the most available payment methods in e-commerce.

Today, Pix, launched in November 2020 by the Central Bank, occupies the third position on the list, behind credit cards (accepted in 98.3% of stores) and boletos (74.6% accepted). The study, conducted since January 2021, analyzed 59 online stores, which together account for 85% of the country’s e-commerce.

Co-founder and CEO of Gmattos, Gastão Mattos explains that the advance of Pix does not necessarily mean that there will be a drop in the acceptance of boletos. “In contact with the stores, we realized that the boleto fills a necessary space. A part of the people would stay on the margin of consumption without this option.”

The level of boleto penetration in e-commerce remained relatively stable throughout the year. Research shows that, so far, the more affected means of payment was, in fact, debt. The modality was available by 37.3% of the brands analyzed in January 2021, a level that dropped to 30.5% last month. “Pix is beating debt because the usability is much better in e-commerce”, says Mr. Mattos.

According to Mr. Mattos, the acceptance of Pix in e-commerce could reach that of the boleto in the coming months, possibly until May. It is necessary to consider, however, that from now on the growth of the modality tends to slow down. “There are already 120 million keys enabled and this is the main subject of this industry. If the store hasn’t put this option in place yet, it’s probably because they have some non-trivial difficulty in doing it.”

In his view, security problems involving instant payment, such as key leakage, are “certainly negative”, but not strong enough “to shake the reliability of the payment”. Last week, the Central Bank reported the third data breach in six months, raising concerns about the modality’s security.

On the other hand, among the factors that can help keep the availability of Pix growing, he cites the agenda of new features to be implemented by the monetary authority, such as installment payments. In addition, he also highlights the differentials that shopkeepers are offering to those who opt for instant payment, such as discounts of up to 10% of the cash value.

The credit card, historically a major driver of e-commerce, continues in the first position in the ranking. Features such as interest-free installments and points in frequent flyer programs encourage consumers to use it, says the consultancy.

Source: Valor International

https://valorinternational.globo.com

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Hapvida, Intermédica merger to generate R$1.4bn additional EBITDA

Nova Hapvida Intermédica estima sinergias de R$ 1,38 bilhão até 2024 | Brazil Journal

The merger between health plan operators Hapvida and NotreDame Intermédica (GNDI) will generate a R$1.4 billion increase in the combined company’s EBTIDA until 2024. Of this amount, 40% of synergies will be captured this year, and most of the gains will come from the increase in revenue with the creation of a medical plan with national coverage. The estimate is that the sale of this new national plan can bring an increase of R$800 million in recurring EBITDA in three years.

Currently, the two vertical health operators have regional operations. Hapvida is strong in the North and Northeast regions, and Intermédica has a greater presence in the Southeast region. This presence in specific markets keeps them from selling their health insurance plans to large companies that have employees distributed throughout the country.

This market is served by Unimeds, Bradesco, SulAmérica, and Amil, which work with an accredited network. Hapvida and Intermédica operate with their own network. Of the 27 capitals of the country in which the companies are present, they have vertical units in 19 of them.

Intermédica estimates that, currently, around 40% of its offers are rejected due to the lack of a product with national coverage. This represents about 1 million users that could be captured over the next three years and lead to a 2.1% increase in market share for the combined company. In the current scenario, the operators together have around 18% of market share.

“We believe that in two months, this new product with national coverage will be on the market,” said Irlau Machado, president of NotreDame Intermédica. “Over the last few months, we have been working with our integration teams, refining data to offer this product soon,” added Jorge Pinheiro, president of Hapvida.

Both executives will share the chairmanship of the board of directors of the combined company and each will continue to carry out the day-to-day activities of their respective health operators for the next three years – a period in which the healthcare sector will still undergo a process of consolidation. “We don’t want to discourage the current moment of the two companies, which continue with their growth agendas, regardless of the merger,” highlighted Mr. Pinheiro.

The increase in revenue will also come from expanding the offer of individual plans in the country, which is scarce in São Paulo, and from cross-selling products such as dental insurance hospital services. The two operators together have 84 hospitals, some of which have idle capacity. In 2021, Intermédica’s revenue from hospital services was R$1.2 billion.

The cost line, with the renegotiation of supply contracts, should bring savings of R$241 million. In terms of expenses, savings of R$339 million are expected — totaling an impact of R$580 million on EBITDA.

According to the executives, synergies should exceed the amount of R$1.4 billion, announced yesterday. That’s because the companies still have not measured all the revenue opportunities, since the merger was approved in December. Tax gains from the merger were not accounted for, nor were future acquisitions. “There is a truckload of opportunities for more synergies,” said Mr. Pinheiro.

Another relevant gain not yet accounted for is the reduction in medical costs. The two executives are committed to predictive health solutions through diagnostic medicine. The goal is to integrate, through artificial intelligence, the data obtained in the exams carried out in the operators’ own laboratories. And, with that, to trace the trends of risk of emergence and worsening of diseases, adoption of the best medical treatments, in addition to monitoring chronic patients. Hapvida has around 200 laboratory units and GNDI has been investing to expand this division.

The announced synergies were slightly below market forecasts, but most of the projections considered the fiscal gain, which was not accounted for by the operators. The companies’ papers closed yesterday’s trading session with a drop of 4.67%.

Next Friday, the shares of the two operators will be integrated and on Monday the shares of Intermédica will no longer be traded on the stock exchange B3.

Source: Valor International

https://valorinternational.globo.com

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Government to inject credit in small companies, special advisor says

7 Glorious Advantages of Being a Small Business

The government intends to inject credit into micro and small companies in 2022, special advisor to the Economy Ministry Guilherme Afif Domingos told Valor. He expects volumes to continue growing. From April 2020 until now, R$146.9 billion have been released, according to data from Portal do Empreendedor, a gateway to small independent businesses.

“It will be the time and the turn of the guarantee funds”, he said. Credit expansion will be supported by these instruments, which serve to cover banks’ losses in the event of default.

According to Mr. Afif, the Brazilian National Bank of Social Development (BNDES) will specialize in the management of specific guarantee funds for certain types of companies – credit to startups, for example.

In addition, there are plans to make permanent the resources of the Guarantee Funds of Operations (FGO), which in the last two years covered losses on loans from the Program of Support to Micro and Small Businesses (Pronampe), and from the Investment Guarantee Fund (FGI), which did the same in relation to Emergency Program for Credit Access (Peac).

These two funds received contributions in 2020 and 2021, as part of measures to fight the pandemic, but now they need to return the money to the Treasury. However, the maintenance of resources in the FGO and FGI is discussed, since Pronampe was converted from an emergency program into a permanent policy and there are plans to extend the Peac Maquininhas, the receivable guarantee modality.

The bill 3.188/21, authored by Senator Jorginho Mello (Liberal Party, PL of Santa Catarina state), under analysis in the Senate, goes in that direction. The proposal still needs to go through the Chamber of Deputies.

According to Mr. Afif, the FGO can be replenished with the funds that return from operations carried out in the last two years.

There are doubts in the technical area, for example, about how this resource should be treated in relation to the spending cap.

The continuity of the FGO is necessary to guarantee the expansion of credit for micro and small companies in 2022, said the president of the Brazilian Development Association (ABDE), Jeanette Lontra. The organization brings together development institutions, from BNDES to regional development agencies and credit cooperatives.

“It is in these countercyclical periods that the national development system shows its importance,” said Ms. Lontra. The amount contracted by micro and small companies in these institutions grew 118% during the pandemic, she said. The national development system made R$62.5 billion available to Pronampe.

According to Mr. Afif, guarantee funds make credit available to micro and small companies because they circumvent a problem that this public faces: lack of guarantees to be offered to financial institutions. It was based on this diagnosis that he, at the head of Sebrae (small-business support service), created the Guarantee Fund for Micro and Small Businesses (Fampe), 25 years ago. The formula proved to be right during the pandemic, with the performance of FGO and FGI.

Mr. Afif smiled when asked how much the hike in basic interest rates would derail plans to strengthen credit. “Microentrepreneurs have always worked with high interest rates,” he said. The creation of guarantee funds works in the opposite direction, that of reducing the cost of operations. “The spread goes down because the risk is lower.”

Source: Valor International

https://valorinternational.globo.com

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Cash transfer programs gain strength

Understanding Cash Transfers | NYU Steinhardt

Cash transfer programs are taking up more space in the government’s welfare budget. The change gained strength with the pandemic and tends to continue at least this year, with cash transfer program Auxílio Brasil. At the same time, some public policy experts warn that the federal government has paid less attention to social programs that are considered more complex to execute, compared to those that distribute income directly.

Between 2018 and 2021, the share of direct transfer programs within the welfare budget rose to 48.3% from 34.8%, according to figures obtained by Valor from the Transparency Portal. The big hike came in 2020, in the first year of the pandemic, when emergency aid caused direct transfers to exceed R$300 billion. The number fell back in 2021 but remains much higher than before the pandemic.

“The forecasted expense with Auxílio Brasil [for 2022] is almost equal to the expense of social programs in 2021,” says the Senate’s agency Independent Fiscal Institution (IFI) in its latest Fiscal Monitoring Report. This year’s budget foresees R$89.1 billion for Auxílio Brasil, against R$90 billion last year, considering Auxílio Brasil itself, the emergency aid, and former program Bolsa Família. But the IFI points out that “the amount [for 2022] represents a significant advance over” the R$38.1 billion spent on Bolsa Família in 2019.

“At least during the pandemic, cash transfers gained relevance, while in other components of social policies there was a drop in resources when they were most needed,” says Marcelo Neri, director of FGV Social, the Center for Social Policy at the Fundação Getulio Vagas. He mentions two examples of policies that have lost resources in recent years: one aimed at homeless people, whose expenses went to R$ 52 million in 2020 from R$94 million in 2017; and the other is to combat child labor, whose expenses went to zero in 2020 from R$69.9 million in 2017.

But he also sees problems in the way the cash transfer policy has been implemented. “It’s a generosity that happens in a kind of erratic, impulsive way, which is not good because stability and predictability are more to the poor than to any other segment,” he says, regarding the transition of social programs in recent years and the uncertainty about the situation of Auxílio Brasil next year. Currently, the payments are forecasted until the end of 2022 only.

FGV establishes R$261 per month per person as the poverty line in Brazil. According to Mr. Neri’s calculations, the number of people below this line increased to 27.6 million in October last year from 23 million before the pandemic.

This is because the R$400 minimum per family of Auxílio Brasil “does not take into account the size or the degree of poverty” of the family group. “Besides, there was a weakening of the health and education conditionalities that are so necessary,” he says. “In short, social policy loses focus and durability.”

Rafael Osório, from the Institute for Applied Economic Research (Ipea), recalls that “the fiscal situation got much worse as of 2016,” which caused several social programs to be canceled or lose importance, such as Literate Brazil and the Food Acquisition Program.

“There is a big fiscal constraint, and it is of no use pretending that it doesn’t exist. But it would be important for the options to be clearer, and this doesn’t always happen,” he says. “The society needs to understand that there are priorities, that you can’t do everything at once right now.”

Naercio Menezes Filho, professor of the Ruth Cardoso Chair at business school Insper, says, “if we think of a global budget, there are so many bad programs to cut before we get to the social area, such as subsidies for rich families in other states, sector funds.”

Still, he argues that direct transfers “are the most effective thing the government can do.” According to Mr. Menezes Filho, this type of program brings benefits on several fronts, such as poverty reduction, improved health, education, and family consumption indicators, while not reducing job offers for mothers.

But he also states that the cash transfer programs implemented in Brazil in recent years are only enough to lift families out of extreme poverty. For the Insper professor, it is necessary to go a step further, making these families overcome poverty as well. “A family that can’t buy clothes, pay for transport or rent generates a lot of stress, and this stress is transferred to the child who can’t develop his cognitive skills properly.”

However, he recognizes that the values in this case “would be high”, reaching R$ 2,000 per month for a family in São Paulo, for example.

In a study done for Millenium Institute and anticipated to Valor, researchers Vinícius Botelho, Fernando Veloso and Marcos Mendes say that “Auxílio Brasil has brought few advances in the social agenda” of the country. According to them, the program does not “create mechanisms that guarantee that low-income families acquire conditions to provide for their sustenance in the long term.”

“Although there was an expectation that cash transfer programs would allow the intergenerational overcoming of poverty, mainly through health and education, their effects in this direction were quite limited,” they say.

For the group, “it is crucial that the social protection agenda be resumed in Brazil”, with short-term poverty reduction and “long-term solutions”. “All this within a budget that does not overburden public accounts,” they say, pointing out that “Auxílio Brasil will have a cost 2.5 times greater” than that of Bolsa Família “with limited gains in terms of poverty reduction and inequality.”

Economy Minister Paulo Guedes often defends the importance of cash transfer to combat poverty, citing the concept of basic income developed by American economist Milton Friedman. “It is better [to do] cash transfer to the most fragile than to create a ministry, which passes the money to another ministry, which gives money to a public bank, which will give money to an agent, which will then pass it on to the most fragile,” he said last week.

The presidential message sent by Jair Bolsonaro (PL, Liberal Party) to Congress last week said that “through Auxílio Brasil, the government will continue to prioritize the integration of various public policies of welfare, health, education, and employment so that the citizen is guaranteed not only the cash transfer but also achieve socioeconomic emancipation and autonomy and exercise full citizenship.”

Source: Valor International

https://valorinternational.globo.com

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The R$1.3bn ‘good bacteria’ seek new markets

Luiz Chacon Filho — Foto: Claudio Belli/Valor
Luiz Chacon Filho — Foto: Claudio Belli/Valor

In the mid-1990s, a 21-year-old boy approached the management of chocolate manufacturer Lacta offering the use of bacteria as a solution to a problem in the production line. “You’re crazy,” was what he heard. Sometime later, however, the then tie salesman Luiz Chacon heard a very different reaction from the same executives. “Set up a company and we will buy it from you.”

Some 25 years later, with revenues of R$800 million in 2021, two factories, a research center, and 600 employees, including 70 researchers, Superbac still faces the initial challenge of showing the benefits that biotechnology offers with the “good bacteria”. With 90% of its revenue coming from agribusiness, the company plans to return to its origin and grow in segments such as sanitation, oil and gas, and retail. The projection for this year is a growth of 60% and revenues of R$1.3 billion.

“We are a process substitution company. There is no genius on our part. What we do is replicate what nature already does, in an accelerated way,” says Mr. Chacon. He adds that biotechnology allows to reduce or replace the use of chemicals and pollutants with sustainable alternatives using bacteria. “Being a pioneer is positive, but it imposes the challenge of changing the customer’s habit by new technology. This is costly and takes time.”

Mr. Chacon has a degree in business administration and no background in biology. He says he looked for experts from the University of São Paulo to find out which bacteria could solve Lacta’s problem. Then he started to culture the suggested bacteria in a homemade way in an office downtown he shared with a real estate broker.

When he closed his first contract with Lacta, Mr. Chacon looked for a company that could produce biotech products with scale and stability. He found a supplier in Wisconsin, in the United States, and started to import everything he sold in Brazil. “It is a region in the United States that concentrated brewers, who had experience in fermentation,” he recalls. In the 2000s and with the first contributions from angel investors, Mr. Chacon bought the American company.

The next step was to define a segment that would allow him to gain scale and start generating revenue. The option was to buy a small family-owned fertilizer company in the municipality of Mandaguari, in the state Paraná, in 2015, and start the construction of the research center in an area in front of the new plant.

To sustain the expansion over the years, Mr. Chacon went on to make successive capital raises, but always kept control of the company. Today Superbac is a privately held company, with audited earnings reports, a board of directors with professional members, and major partners such as Temasek, Singapore’s sovereign wealth fund, and the family office of the Pfeffer family.

Going public is not ruled out, but it is not a short-term alternative and is unlikely to be carried out in Brazil. The American market already has biotechnology companies with open capital and can price the sector better, Mr. Chacon says.

With the end of the construction of the R$200 million research center, and well positioned in agribusiness, Mr. Chacon defined 2022 as the beginning of diversification. The goal is to reduce dependence on fertilizers to 65% to 70% of revenues in three years. And in 10 years to have at least half of the revenue coming from other sectors.

“Thanks to agribusiness, in six years we went to revenues of R$800 million from R$20 million. Now it is time to expand into other sectors. The solutions already exist, and I have the scale to meet the new demand with the same strength as agribusiness.”

Today the company is in charge of all the sewage treatment of three cities in Israel, including Jerusalem.

Source: Valor International

https://valorinternational.globo.com

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Manufacturing industry worsens deficit; exports lose sophistication

Helping the manufacturing industry rebound from the pandemic | World Economic Forum

While the trade balance as a whole ended 2021 with a record surplus, the manufacturing industry saw its deficit deepen to $53.3 billion, the worst result since 2014. In the pre-pandemic period, in 2019, the negative balance was $42 billion, according to data from the Institute for Industrial Development Studies (IEDI).

In another type of calculation, by product class, a survey by the Brazilian Foreign Trade Association (AEB) shows that the deficit in manufactured goods reached $111 billion last year, the worst since at least 2000. The difference is almost $40 billion compared to 2019, when the deficit in this calculation was $82.7 billion.

The deficit in the manufacturing industry last year deepened even with the 26.3% increase in sector exports compared to 2020. In comparison with 2019, there was also a rise: 14%. Imports, however, grew at a faster pace. From 2020 to last year, it was up 35.1%.

“It is also necessary to point out that there is a low basis for comparison,” points out economist Rafael Cagnin, with IEDI. Even before the pandemic, he recalls, in 2019, exports from the manufacturing industry fell by 5.2% against the previous year, under the effects of the trade conflict between the U.S. and China and the already weakened Argentine economy.

More than the size of the deficit, says Mr. Cagnin, what is more, worrying is the sharp deterioration in sectors with greater technological intensity, important not only for providing economic dynamism but also for greater insertion in global production chains. IEDI’s series since 1997 shows that in 2013 the manufacturing industry had the worst deficit ($65.3 billion).

In that year, the medium-high and high-tech sectors accounted for 36.1% of total manufacturing industry exports. Last year the share was 27.6%. In these two technological bands are the aircraft, pharmaceutical, automobile and electrical machinery and material industries, among others.

High technology, specifically, highlights Mr. Cagnin, fell to 3.9% from 6.4% in the same period. In this group, he says, the aircraft industry is still experiencing the overall effects of the Covid-19 pandemic. The scenario shows, however, that the loss of space on the scale had already been happening before.

Mr. Cagnin draws attention to a kind of “mirroring” in the data related to the composition of the import and export agenda according to technological intensity. While 72.4% of manufacturing industry exports are of low and medium-low technological intensity goods and less than 30% are of high and medium-high technology, the opposite is true for imports. In the list of imports, 71.6% are typical goods from the medium-high and high technology industry, and the rest are medium-low and low technology.

“This pattern reflects lags in technology and innovation that have become more pronounced in recent years and that could become even more pronounced,” warns Mr. Cagnin. He recalls that the world is currently undergoing a process of transformation, such as digitalization, which redefines the technological standards that are used in the rest of the world and result in greater competitiveness.

For Mr. Cagnin, integrating into global value chains is crucial to keep in line with this evolution. For this, he says, an environment of modernization and technological innovation is needed, as well as conditions for this insertion. It is necessary, he argues, to advance in the competitiveness and trade integration agenda, which involves the discussion of old and unresolved issues (tax overhaul, for example), as well as new debates related to the technological race and the policies aimed at it.

Trade integration, says Mr. Cagnin, demands a commercial opening that should generate not only imports but also exports. An opening that goes beyond tariff issues, but that allows the country to be in harmony with various regulations, such as phytosanitary and technical standards, traceability mechanisms, seals, and certifications. “There is an opportunity to advance in this integration and set foot in the changing world.”

For Livio Ribeiro, a researcher at the Fundação Getulio Vargas’s Brazilian Institute of Economics (Ibre-FGV) and a partner at the BRCG consultancy, the IEDI data show that Brazil’s strategic position in terms of sectors, comparative advantages, and value-added research and development is very limited to specific segments that have a more global reach. “Furthermore, in the aggregate, our export-oriented manufacturing industry has an overly regional tone. In addition, there is a mid-chain industry that is not competitive in the world and is increasingly less competitive in our region.” A reflection of this, he says, is the loss of market in South America to Asian countries.

For Mr. Ribeiro, it is necessary to assess which sectors may be able to compete and could be the target of a policy in this respect. However, he says, this needs to be done carefully, which allows the sector to walk in its own ways. The evaluation, he defends, should consider the industry in a broad way, with a view to the best cost-benefit for the country.

The data compiled by AEB, based on a survey by the Foundation for Foreign Trade Studies Center (Funcex), also show that the loss of share of manufactured goods in total Brazilian exports is a long-standing phenomenon. In 2011, they accounted for 36.1% of shipments, a share that dropped to 27.4% last year. It was the basic products that advanced in the period, to 59.4% from 47.8% of Brazilian exports, almost seven percentage points more than in 2019. Semi-manufactured products had a very similar share, to 13, 2% in 2021 from 14.1% in 2011.

AEB’s president José Augusto de Castro points out that the share of manufactured goods was the lowest since 2000. The greater shipment of basic goods, a class made up mainly of agricultural and metallic commodities, is due to the high Brazilian productivity in these sectors, which has provided robust trade surpluses for the country. He argues, however, that greater conditions of competitiveness are needed to stimulate the export of manufactured goods with higher added value, which would also contribute to the generation of more jobs in the country.

Haroldo Ferreira, executive president of footwear industry association Abicalçados, says that exports contributed to the recovery of the sector last year. According to the association, the shipment of Brazilian shoes rose 32% in volume in 2021 compared to the previous year. In values, the high was 36%. The biggest foreign market was the U.S.

Daiane Santos, an economist at Funcex, points out that it is necessary to look at the main export destinations for manufactured goods. China, despite being Brazil’s main trading partner, with 31% of Brazilian shipments in 2021, consumed only 2.3% of exported Brazilian manufactured goods. The main buyer of goods in this class was the United States, which absorbed 21.6% of manufactured goods. Argentina was left with 12.9%. In total Brazilian exports in 2021, the two countries had a share of 11% and 4%, respectively.

Source: Valor International

https://valorinternational.globo.com

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Petrobras analyzes opportunities to enter new markets

Política de Bolsonaro tornou Petrobras mais vulnerável a crises – RBA

Petrobras is analyzing opportunities in markets such as small nuclear power plants, geothermal energy and different types of wind and photovoltaic energy. While participating in the Latin America Investment Conference 2022, promoted by Credit Suisse on Thursday morning, the CEO of the state-owned company, Joaquim Silva e Luna, mentioned for the first time some of the areas that are under study by the company in the energy transition scenario. Side by side with the CFO and head of investor relations, Rodrigo Araujo, Mr. Silva e Luna also reiterated that the company maintains its intention to relaunch the processes of refinery sales that have been closed without success.

Mr. Araujo confirmed that the company’s idea is to relaunch the divestments of the Alberto Pasqualini Refinery (Refap), in Rio Grande do Sul, and for the Presidente Getúlio Vargas Refinery (Repar), in Paraná. The executive did not give details about the deadlines. Petrobras signed an agreement in 2019 with antitrust watchdog Cade to sell eight refining assets outside the Rio-São Paulo axis by the end of 2021. With the pandemic, however, the processes have been delayed.

With the changes in the energy market, Petrobras’ current focus is on “the best production with the lowest carbon level,” the CEO said. “We have a commitment, an ambition aligned with the Paris Agreement, in which we have a commitment to reduce emissions from our operations by 25% by 2030,” he said.

In the CFO’s view, the company has a competitive advantage in areas such as high technology and large-scale projects “We have to analyze what kind of investment we can make for the energy transition. I understand that petroleum will still be a source that will last for a long time,” added Mr. Araujo.

There are no specific resources allocated to new energy sources yet, but studies on the company’s entry into new markets are underway at the oil company’s research center.

The CEO said that Petrobras has an expected value for the decarbonization set as a whole and does not look specifically at one project. “We don’t think about any kind of investment without the clarity that it will have a return,” Mr. Silva e Luna added.

According to the executive, Petrobras has learned from past problems to strengthen governance. “We try to make technical collegiate decisions, building a collective will about our decisions and not letting external pressures influence them,” he said.

On fuel prices, Mr. Silva e Luna said that the company has social responsibility, but that it cannot make public policy. “Our focus is on generating value for our shareholders, investors, the federal government and for society in general,” he said.

According to him, Petrobras management is committed with the investors. In the last five years the company has paid more than R$1 trillion in taxes. According to the CFO, there is comfort with the leverage of the oil company in terms of capital structure. “We see possibility and dividend return much higher than in the past, to have a more consistent and robust distribution,” he said.

Source: Valor International

https://valorinternational.globo.com

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Pepkor buys Avenida for R$1bn

Pepkor compra Grupo Avenida, de vestuário, para crescer fora da África | Exame

Pepkor, the largest fashion retailer in South Africa, with more than 5,500 stores in ten countries, controlled by Steinhoff International, has acquired 87% of Grupo Avenida, one of the largest fashion chains in the Center-West and North of the country formed by 110 stores of Avenida fashion retailer and 20 of shoe retailer Giovanna Calçados.

The foreign company did not disclose the exact value of the deal, which was around R$1.1 billion. The stake was acquired from funds of the manager Kinea, which is leaving the company after almost eight years, and the founding family, which kept 13% and will continue to manage the operation.

Part of the capital will go into the company’s cash flow, with part going to expansion projects, especially in areas already explored by the group.

Pepkor will face challenges in Brazil, such as a complex tax system and a highly fragmented and still informal market in many regions. “They operate in markets that have gone through wars, and we will continue in management [for seven years]. I don’t think there should be any problems for them [to settle] here,” Christian Caseli, chairman of the board of Grupo Avenida, told Valor.

With no progress on the initial public offering plan, after the market worsened last year, and with Kinea interested in exiting the business, Grupo Avenida and Pepkor began lining up a deal in 2020.

The Caseli family — formed by Ailton Caseli, founder of the company, Christian, Rodrigo, and Giovanna — previously held 51% of the common shares and 45% of the total capital. They will stay in the management of the operation for seven years.

This move is the entry into the country of Pepkor and its parent company, owner of the furniture and appliances chain Conforama and mattress retailer Mattress Firm Group. Pepkor Holdings is South Africa’s largest apparel retailer, with a market capitalization of $5.3 billion.

“They have extensive knowledge of integration processes and synergy gains because they have led an expansion in Poland and Australia,” said Mr. Caseli. In 2003, Pepkor entered the Polish market through the acquisition of Pepco.

Avenida is one of the largest fashion retail chains in the Center-West and North of Brazil. In 2020, it had revenues of R$641.3 million, down 5.3% year-on-year, impacted by the post-pandemic crisis. It also had a net loss of R$51.1 million, versus a profit of R$25.3 million in 2019. Net debt remained stable at around R$161 million.

Grupo Avenida had preliminary sales of R$773 million ($146.90 million) in 2021.

The operation involving the sale of the leading chain in the Center-West is the first transaction of foreign groups in the most affordable fashion segment (and with greater scale) in almost 24 years. The American JC Penney entered the country in 1998 after buying a stake in Renner, and left Brazil in 2005. The Dutch C&A has been in the country since 1976. All the other publicly and privately held leaders (Pernambucanas, Renner, Riachuelo) have local control. Several other companies have tried to occupy the Brazilian market but failed. Competition is strong with the informal market and with Asian sites.

Source: Valor International

https://valorinternational.globo.com

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Inequality in rural areas may worsen, study shows

Hunger also affects people in the countryside in a dramatic way — Foto: Divulgação
Hunger also affects people in the countryside in a dramatic way — Foto: Divulgação

It is not new that, in Brazil, agricultural activities that generate billion-dollar results still share the corners of the country with extreme poverty. Just over 15% of the country’s rural population experienced severe deprivation in 2019, around 5 million people. Another 17.6 million people (52.9% of the total) were poor. A worrying picture, which may have become even darker with the economic degradation during the pandemic.

In order for the situation to improve, the study “Productive Inclusion in Rural and Inland Brazil”, prepared by researchers from the sustainability nucleus of the Brazilian Center for Analysis and Planning (Cebrap) in partnership with the Arymax and Tide Setubal Foundations and the Humanize Institute, proposes a long-term approach with public and private sector efforts.

The Household Budget Survey of the Brazilian Institute of Geography and Statistics (IBGE) shows that Brazil reduced the rate of people going hungry between 2004 and 2013, but the trend was reversed. In the last five years, the country has returned to the levels of food insecurity seen 15 years ago, according to data from the IBGE and the Brazilian Food and Nutrition Sovereignty and Security Research Network (Rede Penssan). In 2020 and 2021, the increase in severe food insecurity reached an average of 27.6%.

According to the group, the social problems in the countryside will not be solved with isolated actions of financing, technical assistance, digitalization and cooperatives. It is necessary to work on these different fronts to structure micro-producers. More than “teaching to fish”, the study defends the need to guarantee opportunities in the surroundings.

The research emphasizes that inequalities in the countryside are too complex a problem to be solved only by the government or the private sector. “It works better if we have coordination between these actors. The private sector has localized embryos and innovations, but it is far from being the rule. And it can’t be,” says researcher Arilson Favareto.

According to him, it is up to the government to stimulate, through fiscal policies, companies that prioritize the purchase of small producers, as in the biodiesel sector, in which a good part of the raw material comes from this group of farmers. The private sector, on the other hand, needs to understand that it is worth investing in the surroundings beyond the roads. The construction of schools, hospitals and commercial areas benefits the local economy, generates demand and also better qualifies the workforce, which can reduce costs later on.

Mr. Favareto says that the private sector is advancing in the environmental agenda, but social issues are in the background and can be aggravated in the process. The objective of the study, he reinforces, is not to demonize agribusiness, nor to encourage a dichotomous view. For example: if the mechanization of agricultural production is a reality, it is necessary to find ways out for the workers who lost their jobs along the way.

As modernization is an irreversible trend, according to him, it is necessary to create income alternatives in rural areas that are not directly associated with agribusiness. “There is, today, a faith that the strength of agribusiness will generate opportunities for everyone, but it will not. The trend is to save work. This problem will not be solved naturally,” he stresses. Mr. Favareto cites an article that identified a 67% drop in jobs in the sugar-alcohol sector between 2008 and 2018, to 213,400 from 652,900 employees.

Despite the fragility of the local economy in these more remote regions, 49% of the employed population residing in rural areas do not work in agricultural activity. In addition, 35% of those who work in agribusiness live in urban areas of municipalities. “It is necessary to look at the space and think about where the opportunities for inclusion of people through work are,” he says.

Finally, the researcher believes that the digitizalition of the segment also needs to be considered from a social point of view, so that there is no longer an abyss between large and small properties. The survey highlights that 71.8% of rural properties do not have internet access, according to the 2017 Agricultural Census. There are more than 3.6 million farms without internet connection.

In addition, much of the innovation for agribusiness is developed in the South-Central, focusing on the needs of producers in this region — only 7% of the almost 1,600 Brazilian agtechs are in the North and Northeast regions, according to the Radar Agtech 2021 report. “How will a researcher in the countryside of São Paulo develop a precise solution for a farmer in the up in Acre state? He won’t, it’s not his reality.”

According to the researcher, a strategy is needed to take agtechs to the peripheral regions of the country, as happened with large multinationals that opened operations in emerging countries to develop technologies suitable for those countries with very different conditions from rich nations, such as the United States and countries in Europe.

Source: Valor International

https://valorinternational.globo.com

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Political wing of government acts to zero taxes on gasoline

Gasoline Poisoning: Symptoms, Causes, Effects & More

The political wing of the government acted on Thursday to approve a Proposed Amendment to the Constitution (PEC) that would allow President Jair Bolsonaro (Liberal Party, PL) to zero taxes on all fuels, including gasoline, without having to compensate for the increase in other taxes. In addition, it authorizes a reduction in the Tax on Industrialized Products (IPI) and Tax on Financial Transactions (IOF) on any products without counterparts. The project contradicts the position of Economy minister Paulo Guedes, who is concerned about the impact of this measure on public accounts and who defended a tax exemption restricted to diesel oil, with a lower fiscal cost.

Deputy Christino Áureo (Progressive Party, PP- Rio de Janeiro) filed the PEC on Thursday at the request of a part of the government. The text, as revealed by Valor, was formulated in the Chief of Staff Office, controlled by minister Ciro Nogueira (Progressive Party, PP), and allows for a partial reduction or even zero taxes in 2022 and 2023 to counter one of the main criticisms of voters to the current administration: the high price of gasoline, cooking gas and diesel oil, because of Petrobras’ pricing policy.

The cost, according to economic sources, will be around R$54 billion per year, higher than the total investments planned for 2022. The exemption on gasoline alone would bring a loss of almost R$27 billion to the taxpayer: R$23.8 billion from social taxes PIS/Cofins and another R$3 billion from federal tax Cide. Diesel, on the other hand, would cost another R$18 billion. If Congress resumes the idea, already defended by President Bolsonaro, of cutting taxes on electricity, the impact would rise to up to R$75 billion. In addition, the PEC authorizes a cut in IPI and IOF, among other taxes that had not entered the waiver calculation.

Tax laws require that the reduction of one tax be offset by the increase of others, but a wing of the government decided to propose the PEC to circumvent this rule temporarily. The country has been living with a primary fiscal deficit for seven years and in 2021 it recorded a deficit of R$35 billion in the central government. For 2022, the estimate is a deficit of R$79.3 billion – and that is before the idea to exempt fuel.

The Ministry of Economy did not participate in the elaboration of the PEC, says a source. On the contrary, the ministry considers it bad and. In the opinion of the technicians, it would not even be necessary to change the Constitution. The cut could be authorized by a supplementary law (which would amend the Fiscal Responsibility Law to allow it to happen without the need to create other sources of revenue to compensate for the loss) and adjustments to the Budgetary Guidelines Law (LDO).

The option for a complementary law would also allow Mr. Guedes to pressure President Bolsonaro to veto “exaggerations” approved by lawmakers. On the other hand, a constitutional amendment, although it requires greater support to be approved, is enacted by Congress itself, without this alternative. “PEC is very bad,” said a member of the ministry. The so-called “PEC dos Precatórios” — regarding writs that represent federal debts from loss of court disputes, voted on in December — had the space for spending doubled by congressmen.

The content was also far from what was advocated by the economic area. Until the day before, the perception in the ministry was that the proposal would be expensive to the taxpayer to generate relief in prices that could quickly disappear when faced with a depreciation of the Real against the dollar or the price of oil. Mr. Guedes even publicly criticized the removal of taxes on gasoline at a time of transition to a low-carbon economy. Diesel tax release, on the other hand, was seen as acceptable, given the importance of the fuel in the country’s logistics, not to mention that it pleases one of the president’s bases of support, the truck drivers.

The version filed by Mr. Áureo allows the full release of fuel taxes in 2022 and 2023 without the need for compensation – it would be enough to present financial estimates and adjust the budget laws to the new rates. The endorsement would be for the federal government and also the states and municipalities, giving strength to Mr. Bolsonaro’s strategy of pushing the burden of the gasoline price to the governors who refuse to accept the reduction of ICMS.

On Thursday, the governors declared support for the bill proposed by Senator Jean Paul Prates (PT-RN) to change Petrobras’ fuel price policy, creating a tax on crude oil exports and a fund to stabilize prices in the domestic market. “The bill is born from the problem itself, from the extraordinary profit from the increase in fuel prices,” said the governor of Piauí, Wellington Dias (Workers Party, PT), who coordinates the Governors Forum. The discussion about the ICMS on fuels would be left only for the tax reform.

According to the bill, the reduction of taxes will only have to respect the requirements of presenting an estimate of the budget and fiscal impact of the measures adopted, to comply with the annual goals of fiscal result (which can be changed by law), and to be part of the budget laws (such as the annual budget and the multi-annual plan).

Mr. Áureo told Valor that the text is of his authorship, negotiated with the federal government and that he will wait to discuss the project. “I will continue my dialogue with the government and with productive sectors and society”, he said. The document data, however, show that it was written in the computer of a government technician, the assistant sub-secretary of Public Finance of the Chief of Staff’s Office, Oliveira Alves Pereira Filho, and sent to the deputy to officially present it.

Initially, the idea of the federal government was that Senator Alexandre Silveira (Social Democratic Party, PSD of Minas Gerais) would file the PEC in the Senate if he accepted to be the government’s leader. But he has signalized that he will refuse the leadership after pressure from colleagues and the changing of government’s strategy, with the process starting in the House, where the government’s base is stronger. Mr. Silveira, in turn, is preparing an alternative PEC for the Senate that would contemplate the fuel tax release, and also the use of Petrobras dividends to finance a social fund to balance prices.

The text needs the support of 171 deputies to start being processed. As the Constitution and Justice Commission (CCJ) is not expected to be opened until after Carnaval [March 1], it is most likely that the speaker of the Chamber of Deputies, Arthur Lira (Progressive Party, PP of Alagoas), will decide on admissibility on a floor vote. After that, a special commission would be created and a rapporteur appointed to discuss an updated version of the PEC, within a period of 11 to 40 sessions.

For the economist and consultant Adriano Pires, president of the Brazilian Center for Infrastructure (CBIE), the PEC will have almost no impact on consumers, the same way that occurred with the exoneration of the PIS and Cofins on cooking gas, in effect since March, and diesel, which was valid for three months in 2021. “The government zeroed the PIS and Cofins on diesel, but as the barrel kept rising and the exchange rate kept depreciating against the dollar, the price went up,” he said. He believes that the PEC will also face opposition from the rural caucus and the states that produce hydrous ethanol, which today has a lower PIS and Cofins than gasoline. “If the tax is reduced for both, ethanol will lose a lot of competitiveness,” he said.

(Edna Simão and Estevão Taiar, from Brasília, and Marta Watanabe, from São Paulo, contributed to this story)

Source: Valor International

https://valorinternational.globo.com

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