Marcelo Queiroga — Foto: Cristiano Mariz/O Globo
Marcelo Queiroga — Foto: Cristiano Mariz/O Globo

The federal government is mulling over a provisional measure — a legal act that allows the president to enact an interim law prior to Congress voting — aiming at increasing competition in the health insurance market, by the creation of an “open health” system. It is inspired by the open banking platform — a system conceived by the Central Bank to give greater transparency to the banking sector.

Health Minister Marcelo Queiroga told Valor that the idea was formulated from conversations with Central Bank President Roberto Campos Neto and has already had the approval of President Jair Bolsonaro in recent weeks to implement the plan in the country.

The measure is still being developed in Brasília, but the main idea is that, similarly to what is being implemented in stages in Brazil with the banks, there will be greater transparency in the health insurance sector. A large, extensive national registry of data on patients and indicators on supplementary health would be created to be shared between operators and patients.

According to the Mr. Queiroga, the sharing of client data, through the “open health” platform, would allow an operator to offer a cheaper plan for a patient who uses few hospitals or healthcare services.

Government officials also explain that, in the future, the intention is to facilitate the portability of beneficiaries from one plan to another, which currently takes about 90 days.

Mr. Queiroga believes that if there is more competition and supply of health plans, Brazil’s public healthcare system (SUS) can stop being overloaded and part of its public migrate to the private sector.

The “open health” is inspired by a model adopted in the financial market in Australia and is inserted in the general guidelines approved by the National Council of Supplementary Health (Consu) at the end of last year. It is supposed to encourage a greater offer of health services, stimulate the appearance of more operators in the sector, and reduce the prices in this market in the future.

The Consu, in turn, is a collegiate body formed by ministers Queiroga, Paulo Guedes (Economy), Anderson Torres (Justice) and Ciro Nogueira (Chief of Staff).

In the evaluation of the health ministry, there is room for the entry of more companies in the supplementary health segment, because there were more than 2,000 health plan operators in the country at the beginning of the 2000’s, when the National Agency for Supplementary Health (ANS) was created.

Last Monday, Valor released a study conducted by CADE, the antitrust watchdog, which indicates that the number of health insurance companies dropped 47% between 2011 and 2020. This trend of market concentration over the last decade has been criticized by ministers.

President of the Brazilian Association of Health Plans (Abramge), Renato Casarotti says he has seen the Minister of Health mention many times the benefits of “open health” in public events in the sector. The entity, however, has not yet been called to a specific meeting on the matter.

“The idea is good, it is timely with the General Law of Data Protection, of information belonging to the beholder. The logic makes a lot of sense,” says Mr. Casarotti. “The important thing is to understand how this fits into the health sector, which is a little different from the banking sector.”

According to him, there are two main issues that tend to limit at some level the impacts of the federal government’s proposal. The first is that medical information about patients is still “very fragmented” in Brazil, without the existence of a single medical record.

“In the health sector, there is data with the doctors, hospitals, laboratories, operators, that still don’t talk to each other,” he said. “If the single medical record existed, then ‘open health’ would make perfect sense.”

Source: Valor international

https://valorinternational.globo.com/

Mont Capital Asset : Gestão Profissional dos seus Investimentos

Monte Capital Management has acquired three quarters held by the Yosemite fund in Invepar, the parent company of the São Paulo International Airport, in Guarulhos. Together with FI-FGTS, the investment arm of the Workers’ Severance Fund, which owns a quarter of Yosemite, Monte will take a 25% stake in the infrastructure holding company, whose remaining capital is held by pension funds Petros, Previ and Funcef, with equal-sized stakes.

The arrival of a new partner in Invepar has been speculated since OAS left the group, in 2019, and the Yosemite fund was created with former creditors of the construction company. In the market, the assessment is that the infrastructure company was “leaderless” without OAS and that it would need a partner with a strategic view of the sector to return to growth.

The restructuring of Yosemite, led by Sinchro Partners, included the sale of 100% of the remaining economic rights of bondholders (former creditors of OAS) abroad, packaged in equity linked notes. Monte Equity Partners, another company of the group Monte, already held most of the bonds.

In addition, Monte injected capital into the fund for payment of creditors in Brazil. The amounts were not disclosed.

Under the new shareholding structure, Yosemite is expected to pick two names for Invepar’s board of directors. Julio Zogbi, a co-founder of the asset management company, said he sees good prospects for Guarulhos this year, “both in terms of growth and of attracting new investors.”

The airport is the group’s main business. With the sale of assets, Invepar has managed to restructure its debt after two years marked by several difficulties, including a request for cancellation of the contract of the Yellow Line in Rio de Janeiro’s subway system and the pandemic.

At the end of last year, the group transferred the MetrôRio concession to its creditors, Mubadala and Farallon, which reduced its debt. The company’s debt with Farallon and Mubadala, which exceeded R$2.5 billion, fell to less than R$800 million, according to its financial statements.

Invepar may also transfer the Yellow Line to the creditors to pay off the debt, but this will still depend on a favorable decision for the company in the legal battle with the City Hall of Rio de Janeiro.

With the deal, Monte, which already operates highways, will also enter the airport segment with Guarulhos. The holding company also has four other highways and a stake in Rio’s light rail system.

The airport sector is seen today as Invepar’s main chance to return to growth. Since the end of last year, Invepar had been looking for a partner for the Guarulhos Airport – the effort to sell its stake in Yosemite and selecting a new partner had been running independently. The group had hired Goldman Sachs to finds interested parties, which could be operators such as CCR, international groups or investment funds.

Invepar’s plan, with the arrival of a new partner, is to create a platform to invest in airports and possibly take part in auctions.

Monte controls the concessions Bahia Norte, in Bahia, and Rota dos Coqueiros and Rota do Atlântico, in Pernambuco, through Monte Rodovias. Sources say that the company has made a bid for Concessionária Litoral Norte (CLN), in Bahia, which is going through a competitive sales process. The highway, controlled by Invepar, has 183 kilometers and connects the city of Lauro de Freitas, Bahia, to the border with the state of Sergipe.

Monte declined to comment on the potential purchase of CLN, but said it is studying 15 potential acquisition targets at the moment, mostly in the Northeast region. The company, which gave up going public last year, tapped the debt market to fund itself and raised R$200 million through two bond issues.

Fábio Bonini, chief financial officer of Monte Rodovias, says that the company is getting ready to compete in the auction of state highways in Pernambuco. “We are ready to make a good proposal,” he told Valor.

For larger auctions, such as those of federal highways BR 232 and BR 101, the company will need a new capital injection. “When there is a new window, we can talk about an IPO again. At the moment, the debt market is heated.”

Source: Valor international

https://valorinternational.globo.com/

Potential investors in the offshore wind power segment are waiting for regulatory definitions from the federal government to start the race for new projects in Brazil’s waters with the usual legal certainty of the electricity sector.

The Brazilian Wind Power Association (Abeeólica) says it is eager to see the regulatory guidelines for offshore wind contracting, as investors in the international market are interested in Brazil. The entity helps in the economic and regulatory structuring to receive the investments and believes that in 2023 it will be possible to make the first competition viable.

“What we did in 2021 and will continue to do in 2022 is to arrange the economic and regulatory structure to receive the offshore investments. We already have companies in Brazil and 46 GW of projects under analysis by [federal environmental agency] Ibama. We will provide structure so to hold auctions in the near future, which I imagine will be in 2023,” said Elbia Gannoum, head of Abeeólica.

The Ministry of Mines and Energy (MME) is working with the Chief of Staff Office to consolidate contributions for the establishment of the first offshore wind power regulation in Brazil. “The work is likely to be concluded by the end of this month,” the ministry informed.

Some companies have actively collaborated in the discussions for the definition of the legislation to be adopted in the country, such as Neoenergia, whose majority shareholder is the Spanish company Iberdrola. With a defined legal framework, the expectation is that projects will move forward.

“We have three projects in the initial phase of licensing studies with the possibility of reaching a capacity of up to 9,000 MW,” the company said in a note.

Even big oil companies are looking to Brazil. Shell Energy has been evaluating the country’s offshore wind potential using its knowledge of the sea environment and with the deployment of those plants outside Brazil, and is also waiting for the regulation of the sector.

“Shell expects to soon report the start of environmental licensing of offshore wind complexes with Ibama, a field in which regulation is already known to entrepreneurs,” said Gabriela Oliveira, renewable energy generation project development manager at Shell Energy.

Ibama has 23 requests for environmental permits under analysis, totaling more than 46 GW of power. However, the institute confirmed that only two have presented Environmental Impact Studies and Environmental Impact Reports (EIA/Rima). The agency has requested further information for the others.

Ana Karina Souza, partner for energy at law firm Machado Meyer Advogados, adds that the projects would have many challenges to be implemented without a stronger intention of the federal government to hold auctions in the regulated market. This gives room to doubts whether the projects would be viable in the free market.

“We have a technology that cannot be developed because of a void, of a regulatory gray area,” she said.

Other structural conditions still need to be overcome. Brazil needs to fix the infrastructure of ports and transmission, since the projects have a very large scale, and the recovery of the economy needs to come with strength so that investments accelerate.

Source: Valor international

https://valorinternational.globo.com/

Carlos Sequeira — Foto: Divulgação

A drop in the Ibovespa index, attractively priced shares, flush with cash and less indebted companies. The combination of these factors led to a strong growth in the opening of share buyback programs, especially in the second half of the year, when stocks fell the most.

According to Brazil’s securities market authority CVM’s database on the subject, from January to December last year there were 108 programs opened, against 75 in the previous year, an increase of 44%, and December, with 18, was the month with the most buybacks.

January seems to maintain last year’s pace, with eight announcements in the first 17 days of 2022.

“The Brazilian stock market had a very important sell-off, going to around 100,000 points from 130,000 points in a few months,” said Carlos Eduardo Sequeira, head of research and analysis for Latin America at BTG Pactual.

The Ibovespa closed 2021 down 11.93%.

He adds that the value of the stock market, as a whole, is at levels considered attractive, trading below the historical average. “Companies design their budgets for the coming year at this time in December. They must have felt comfortable making their announcements, as well as taking advantage of the fact that stocks are cheap,” he said.

Buybacks are a way for public companies to give more resources to shareholders. The repurchased stocks reduce the amount in circulation and, therefore, increase the participation of investors in the distribution of dividends. The tool is also used to show confidence to the market that prices will rise.

That was the case of logistics company Sequoia. In the announcement of the buyback program, this month, the company made it clear that it considers its stocks cheap. “In the view of the company’s management, the current value of its shares does not reflect the real value of its assets combined with the prospects of profitability and generation of future results,” it says in the document.

Bradesco, which usually is not very fond of buybacks, started to use them more actively last year, amid pressure on financial sector shares caused by the pandemic and increased competition. When the bank announced the measure in April, it said it would adopt buybacks as an instrument to manage its capital level and as a complement to shareholder remuneration.

“Large companies, like Vale and banks, regularly leave their programs active, for when needed. Other companies, on the other hand, had a strong drop in prices and repurchased the shares for a cheaper amount,” said Rodrigo Moliterno, head of equities at Veedha Investimentos.

Construction was one of the sectors that most announced buybacks in 2021, in line with the performance of the segment’s shares, which fell 31%, said Rafael Passos, a partner at Ajax Capital. However, he notes that other activities linked to the domestic economy also underperformed. “Local companies suffered a lot. The same happened with consumption. Several, including retail, announced buybacks. Consumption had a devaluation of 26% in the stock market,” he said.

Antonio Marcos Samad Júnior, CEO of the proprietary desk Axia Investing, points out that the inflation and high interest rate scenario added to the elections “punished” many companies as investor fled. “Many companies are trading below their equity value, which makes no sense if the company is in good financial health.”

In addition to the downward prices, the fact that companies are capitalized contributed to the buyback drive. In 2021, many companies went to the market and are with comfortable financial statements positions, Mr. Sequeira said. For this reason, he states that it is “not surprising” that the wave of announcements will extend into 2022. “The consolidated debt of listed companies or the size of leverage has fallen a lot in recent years.”

A survey by BTG with 200 companies listed on the B3 suggests net debt ratio at 3 times in 2015, when the country entered into recession. The bank estimates that the indicator has fallen to close to 1.2 times last year.

In addition, companies have been pricing this year’s elections, which tends to drive volatility in the stock market. “After the election, I am reasonably confident that the Ibovespa will trade at higher values than today, regardless of who wins [for president],” said Mr. Sequeira, with BTG.

Mr. Moliterno, with Veedha, also believes that buybacks will continue at strong levels, and that companies may end programs already unveiled and start new ones if stocks remain at low prices. “It is natural, since we have had a very sharp drop in the stock market. Companies are likely to keep their programs active as a way to protect themselves from sharper swings.”

Companies can buy back up to 10% of the total outstanding shares, but the programs are not always that comprehensive. Nor does the company have to buy back the entire amount announced. In general, announcements state the maximum amount that can be repurchased. “The volume rose in 2021 compared to 2020 and is likely to increase again this year,” said Mr. Sequeira, with BTG, without detailing the amount purchased.

For Enrico Cozzolino, a partner and head of analysis at Levante Ideias de Investimento, there is no one better than the company itself to know if its stock is cheap. “The company may have a lot of cash on hand and instead of allocating the capital in an investment with daily liquidity, but a bad one, it can buy shares thinking of the more attractive ROE [return on equity],” he said.

Source: Valor international

https://valorinternational.globo.com/

A cruzada inócua e cara de Bolsonaro contra o BNDES

The Brazilian Development Bank (BNDES) will invest up to R$2.5 billion in infrastructure funds, which will be selected through a competitive process. The state-owned bank opens a call for proposals this Monday to choose up to five funds. A maximum of R$500 million will be allocated to each of them. The bank expects, however, to draw at least R$5 billion more from the private sector through the effort.

Asset managers interested in receiving funds will have until March 4 to submit their proposals. The choice will be made by the bank, which will evaluate the fund’s investment thesis, governance and costs, as well as the manager and the team involved. The selection is expected to be concluded by the first half of this year.

It is a new investment mechanism of the bank. “The BNDES’s central objective is to increase its instruments for operating in infrastructure. We already have direct investments, financing, and now we want to allocate resources through funds,” said Bruno Laskowsky, head of shareholding, capital market and indirect credit at BNDES.

The plan is to boost both debt funds, destined to finance projects and companies, and equity funds, which will directly invest in the capital of the businesses. Of the five chosen, up to two will be debt funds and three equity funds.

The BNDES will give priority to investments in basic sanitation and urban mobility, segments that have a greater social impact. There is also a preference for funds from institutional investors (who manage third-party money) and with criteria for measuring social and environmental impact.

Mr. Laskowsky highlights two other focuses sought by the BNDES. The first is “project finance” operations, that is, in which the project is capable of “self-financing,” providing its cash flow as a guarantee. “We want to privilege the risk-taking of the project, and not necessarily the risk of the larger guarantor.”

The second goal is to lengthen the term of the loans. “We are looking for structures that follow the long-term timing of infrastructure projects, which is more like 15, 20 years, while the term of bank loans in general is 7, 8 years,” he said.

For this, the idea is that the funds are closed-end, with a minimum term of eight years, and up to 15 years (equity funds) and 20 years (debt funds), said Filipe Borsato, head of fund investments at BNDES. “The idea is, in the short term, to serve these companies and projects benefited, but also, in the long term, to bring institutional investors to the country and give them more security to put funds into infrastructure projects in Brazil,” he said.

The idea is for the BNDES to be a “relevant minority shareholder” in these funds, and for the allocation decision – that is, which projects or companies will receive the investments – to be made by the private-sector manager, the executives highlight.

“The choice of specific projects will be made by private-sector managers, not by the BNDES. Typically, the term for the allocation of funds is three to six years, so the benefited projects will be structured and selected over the next few years. It is not something thought out for the projects of 2022,” Mr. Borsato said.

For this reason, the fact that the process takes place in an election year will not be a problem, and potential changes in the bank’s direction is not a concern, Mr. Laskowsky said.

“We are talking about 15, 20-year projects. This goes beyond any administration. And the country has a huge gap in infrastructure. The math done when it comes to thinking about investments is: there are people prepared to execute the works, there are good project structurers, there is financing and there is demand. These factors are not trivial. Stability helps a lot, of course, but the central theme here is not electoral volatility,” he said.

As for BNDESPar the move is part of its “capital recycling” process, Mr. Laskowsky said. Since 2019, the development bank’s equity arm has been disposing of its shares in companies such as meatpacker JBS, paper and pulp maker Klabin and mining giant Vale, among others. The idea, the executive said, is to rebuild the portfolio having as guidelines innovation, environmental and social impact.

The investment in infrastructure funds will be a first experience in this investment model, which may be extended to other areas of BNDES’s operations. “This is the first call. We will understand how the process will work out. But one possibility is to give guidance, which could be annual, biannual, or triennial, and the bank will make subsequent calls in different strategic sectors, not just infrastructure,” he said.

Source: Valor international

https://valorinternational.globo.com/

The Brazilian Government reduces energy load requirement for entry into the Free  energy Market, starting in the second half of 2019 | Viridis

The free power market, a segment in which consumers with high demand negotiate directly with generation companies and traders, may generate R$6.3 billion in investments in 10 years to draw customers, a projection by consultancy Thymos Energia made at Valor’s request shows.

The cost for companies to draw consumers who want to migrate from the regulated market to the free power market is higher than R$1,000, the consultancy said. However, the value is expected to fall to only R$100 as a result of a digitalization drive.

The calculation is based on the number of potential consumers that can migrate from the regulated market to the free market. In Brazil, there are about 87 million consumers. However, Alexandre Viana, a partner and head of consulting at Thymos, believes that about 63 million will change to the free market.

“The cost of drawing customers multiplied by the number of consumers who can migrate to the free market is equal to R$6.3 billion in investments in 10 years, excluding other injections that may come from generation and services,” he said.

The consultancy’s survey outlines a conservative, a baseline and an aggressive scenarios for electricity consumption and projects that the free power market will account for almost 73% of the total load of the National Interconnected System (SIN) in 2035, compared with 35.4% now.

This scenario takes into account that as of 2024 the free market will open fully to all consumers of high voltage, as proposed by the Ministry of Mines and Energy (MME), and THAT in 2026 the opening follows for low-voltage consumers.

“In 2035, this curve will stop growing because low income, public services and rural [clients] will have more difficulty migrating and will remain in the regulated market,” Mr. Viana said.

Bills in Congress on the modernization of the electric sector and regulations can speed up the migration of consumers, the executive added.

As for businesses, some power trading companies no longer want to only buy and sell energy and are expanding their operations by offering services to consumers and generation companies.

This is the case of 2W. With an eye on the liberalization of the market, the company is increasing the supply of renewable power to sell on the free market with the construction of two wind power farms, and has set aside funds for the acquisition of new customers.

“We see a more liberal market in the second half of this decade. For this, it is key to have generation assets so that we are not in the middle of the chain having to buy power from a generation company to sell it to the customer…We have R$150 million for customer acquisition cost to be able to tap the market and sell electricity from these farms,” CEO Claudio Ribeiro said.

Tradener follows a similar path. The company sells about 800 average megawatts and serves between 20% and 30% of its customer portfolio with its own generation. CEO Walfrido Avila said that the investment relies on better market conditions.

“We have 400 MW of projects, but we will do this in tandem with the economy. The interest rates are very high right now. This is bad for financing and this hinders investments,” he said.

For Alexandre Lopes, vice-president of the Brazilian Association of Power Trading Companies (Abraceel), this is a trend since the sector has been driving competitiveness in companies for more than 20 years and the expansion of the electric system.

“The free market has become the flagship of the expansion of electric power generation in Brazil, responsible for more than 70% of the plants under construction, mainly of renewable origin, aligned with national public policy and the global energy transition.”

Source: Valor international

https://valorinternational.globo.com/

GRA - Grupo Raça Agro | LinkedIn

After raising R$40 million with the issuance of agribusiness receivables certificates (CRA) at the end of 2021, Grupo Raça Agro, based in the state of Mato Grosso, wants to accelerate its expansion project in the segment of livestock inputs distribution. The company will invest the funds raised to increase its territorial presence and to more than double its number of stores by next year.

Today, the company’s structure is made up of 13 resellers, located in Mato Grosso and Mato Grosso do Sul, but, by March, the group will open seven more outlets, four in Mato Grosso and one in Mato Grosso do Sul, one in Goiás and one in Pará, states in which it does not yet operate.

With the investments (in the states with the biggest herds), Raça Agro expects to bring forward by three years its goal of earning R$500 million annually, initially scheduled for 2025 — in 2021, the group’s revenue was R$340 million. “Our plan is to spread the company nationwide. We want to expand throughout the Central-West region and, by 2023, also reach [the states of] Rondônia and Tocantins,” says the group´s CEO João Antônio Fagundes. The goal is to have 30 dealers by the end of next year.

The input distribution industry is still quite dispersed in Brazil, but competition has grown in recent years. With the expansion of its business, Raça Agro wants to anticipate the movement that is already taking place among resellers of agricultural inputs, a segment in which Nutrien, Lavoro (owned by Pátria Investimentos) and AgroGalaxy (controlled by Aqua Capital) have been central characters in the consolidation of the market through the purchase of small networks.

Mr. Fagundes says that the company has already been sought by a potential buyer. However, according to him, the company’s intention is not to be bought, but to become one of the main names in the marketing of products intended for livestock farmers, such as supplements, products for pastures and veterinary medicines.

“We are paying attention to other movements, alliances and acquisitions. The question is whether it makes sense to have a partner at this point. We also see no point in selling control. We still have the ability to add value, and these partnerships [such as the issuance of the CRA] show that it is possible,” he says. “And with the CRA, we’re just giving our first steps on [Brazilian exchange] B3.”

Source: Valor international

https://valorinternational.globo.com/

Human Rights Watch criticizes Bolsonaro

International human rights watchdog Human Rights Watch says in a report released Thursday that President Jair Bolsonaro threatens “the pillars of democracy in Brazil by attempting to undermine confidence in the electoral system, freedom of expression, and the independence of the judiciary.”

The document says this year’s elections will test the strength of Brazilian democracy in the face of the authoritarian threats made by Mr. Bolsonaro. The report also says that the right to vote and freedom of expression are at risk in the current administration, and it is necessary that democratic institutions such as the Federal Supreme Court (STF), the Superior Electoral Court (TSE), and Congress resist Mr. Bolsonaro’s attempts to deny Brazilians the right to elect their representatives.

ViajaNet is on block, sources say

The crisis caused by the pandemic put the travel agency business on the line, a scenario that has favored consolidations. After Flytour and Queensberry were bought by BeFly, sources say that another relevant player in the sector is on the block: ViajaNet, an online tourism agency that reported sales of R$1 billion in 2019.

Among the interested parties are groups linked to tourism, such as BeFly itself, which has shown an appetite for further consolidation, and Despegar, sources say. There are also online marketplaces on the list of potential buyers. The view is that ViajaNet already has strong partnerships for sales with this type of platform and there would be plenty of synergy – Magalu and Mercado Libre are two partner companies also on ViajaNet’s radar.

Cruise lines decide to extend season suspension until February 4

Cruise companies have decided to extend the suspension of the current cruise season in Brazil until February 4th. The information was released this Thursday by Clia Brasil, an arm of the international association that represents groups such as MSC and Costa.

Previously, the season suspension would be in effect until January 21. The sector’s decision to extend the period came after health regulator Anvisa asked the government, on Wednesday, to end the current season definitively because of the new Covid-19 cases.

The sector argues that the decision to extend the suspension aims to continue discussions with the authorities in order to align the necessary measures for the resumption of cruises.

Representatives of the Health and Tourism ministries and of the Chief of Staff Office will meet again in the coming days to discuss the situation of maritime cruises in the country, Tourism minister Gilson Machado Neto told Valor. The date of the meeting has not yet been set.

MSC takes over short-sea shipping company Log-in

The sale of control of Log-in to MSC (Mediterranean Shipping Company), completed on Thursday, is likely to boost the short-sea shipping company. The entry of the new partner —a global giant in long-haul shipping — opens up several opportunities for joint operations, Log-in’s CEO Marcio Arany said.

However, the executive emphasizes that this is not the complete incorporation of the Brazilian company, which will continue seeking results and expansion goals regardless of its new parent company.

With the public offering of shares held Wednesday, MSC (through its subsidiary SAS Shipping) will now hold 67% of the company’s capital. The shares were priced at R$25. As a result, the total disbursement is expected to reach $316 million.

Source: Valor international

https://valorinternational.globo.com/

Service Sector Images, Stock Photos & Vectors | Shutterstock

With an increase of 2.4% compared to October, the volume of the services sector surprised positively in November. The good news, however, should be viewed with caution, economists point out. In addition to having been preceded by declines in the previous two months, the November expansion was driven by segments that have presented volatile performances.

For 2022, at least in the short term, the omicron variant, inflation, slow job recovery and political uncertainty are among the factors that could act as “headwinds”, despite the gradual resumption of services provided to families and the new cash transfer program Auxílio Brasil.

The Monthly Survey of Services (PMS) released on Thursday by the Brazilian Institute of Geography and Statistics (IBGE) indicated that the volume of services of four of the five large groups increased in November compared to October (seasonally adjusted), opening space for double-digit growth in 2021, which would be a record in the annual result of the indicator series, which started in 2012.

The rise in services in November came above the median growth of 0.2% pointed out by Valor Data in a collection of projections with 26 consultancies and financial institutions, even surpassing the estimates’ ceiling of 1.5%.

Rodolpho Tobler, a researcher at the Fundação Getulio Vargas’s Brazilian Institute of Economics (Ibre-FGV), says that November certainly brought a positive result, but that it needs to be viewed with “certain caution”. Analysis of the indicator’s composition doesn’t seem to indicate a trend review, he says.

In September and October, the PMS indicated a drop in the volume of services of 0.6% and 1.6%, respectively, in the seasonally adjusted monthly variation. For Mr. Tobler, it’s not entirely clear what propelled the “information technology services” business to such a high in November. “I believe that we can return to that more fragile scenario from December onwards.”

In a statement released by XP, economist Rodolfo Margato also highlights the rise in information technology services, which increased 10.7% in November compared to October, in the seasonally adjusted series. This performance was one of the explanations for the difference in the estimate of a 0.2% increase expected by XP for the November PMS and the result of the survey released by the IBGE. Another area that came above expectations, he indicates, was “air transport services”, with an increase of 7.6% in November.

Mr. Margato points out, however, that these activities have not shown continuous growth. The information technology expansion in November followed a 0.4% contraction in October and a 0.1% drop in September. In air transport, the rise in November came after accumulated contraction of almost 14% in the previous two months. The PMS results for November were clearly positive, highlights Mr. Margato. He believes, however, that the pace of growth in the sector should be viewed with caution, “since a relevant part of the bullish surprise with the data for that month came from volatile segments in the monthly comparison.”

Mirela Hirakawa, economist at AZ Quest, also highlights the volatile components in service performance in November. For her, in December the indicator can still show a positive evolution, with the result of November having the effect of containing additional downward revisions for the 2021 GDP. AZ Quest currently projects an increase of 11% in the volume of services by PMS in 2021 and, to GDP, it maintains a growth of 4.4%.

Ms. Hirakawa points out that the November survey still shows recovery in services provided to families. These are activities that include accommodation and food, she explains, which are important for the GDP and which had its resumption favored by greater social mobility, with the advance of vaccination. There is, however, she says, additional apprehension in the short term due to the increase in cases of Covid-19, by the omicron variant. What is expected, she says, is an impact on services not only as a result of new restrictive measures on circulation but also as a result of the shortage of service professionals, with an increase in contamination.

Étore Sanchez, chief economist at Ativa Investimentos, also has the omicron on his radar for 2022. The movement of people is an important factor for the resumption of services, he says, and therefore, he still expects a marginally positive performance for the sector for December. With the performance of the November PMS, Ativa revised its GDP growth forecast for 2021 to 4.6% from 4.4%.

Even if an impact of a new wave of Covid-19 is expected, however, Ms. Hirakawa points out, the expectation is that the effects will be increasingly gradual due to adaptations in life and learning habits by the various levels of government. She recalls that in April 2020, under the impact of the first wave, the area of hotels and food services fell by 45.2%. In March last year, there was already a smaller drop, with a contraction of 29.6%, in the same comparison.

In addition to the advance of the vaccination against Covid-19, Goldman Sachs also expects that cash-transfer program Auxílio Brasil will also help in the continuity of the recovery of services in 2022. In the short term, however, the bank’s chief economist, Alberto Ramos, says that, in addition to the increase in cases of Covid-19, we should also think of high inflation, tighter domestic financial conditions, increased political noise and uncertainty and deteriorating consumer and business confidence as “headwinds”.

In the November 2021 PMS, services provided to families showed an increase of 2.8% compared to October, with the eighth consecutive positive rate in this comparison, accumulating growth of 60.4%. But, even with this accumulated increase, the segment in November 2021 still was at a level 11.8% below February 2020, before the pandemic.

A resumption of services provided to families, such as restaurants for example, to levels before the pandemic depends not only on health factors related to Covid-19, but also on the macroeconomic context, such as income and employment, highlighted Rodrigo Lobo, IBGE economist and manager of the PMS.

Mr. Lobo acknowledged that, just as the pandemic was a new factor affecting business in the sector, the macroeconomic context of February 2020 was different from that observed in November 2021. In practice, the economic environment affects the purchasing power of the population, he noted. The effect of the omicron variant on services, he says, will only be known effectively in March, when the January 2022 survey will be announced.

Source: Valor international

https://valorinternational.globo.com/

Lia Valls — Foto: Leo Pinheiro/Valor
Lia Valls — Foto: Leo Pinheiro/Valor

Brazilian exports grew 34% year over year in value in 2021, more than offsetting the 5% loss reported in the previous year. The growth led to a record shipment of $280.6 billion last year, but had uneven distribution by destinations. The increase in shipments was almost all directed to China, which grabbed a larger share of Brazilian exports compared with before the pandemic. The Chinese share of the values shipped by Brazil rose to 31.3% last year from 28.7% in 2019. Asia as a whole advanced four percentage points in the same period, reaching 46% in 2021.

Exports to the United States, European Union and South America also grew last year compared with 2019, but at a lower rate than China’s 38,5% rise over the same period or than the average of Brazilian shipments, according to federal government data. With this, the American share in the value of Brazilian exports fell to 11.1% from 13.4%. The European Union had a small reduction, to 13% from 13.6%, but now holds the lowest share since official records began, in 1997. South America’s share shrunk to 12.1% from 12.6%. This is not the lowest share ever because last year, as the region’s economy suffered more due to the pandemic, its share was 10.8%.

The Foreign Trade Indicator (Icomex), which is surveyed by Fundação Getulio Vargas’s Brazilian Institute of Economics (FGV/Ibre) and considers the volume alone, excluding the price effect, shows growth in shipments to China. Even as there were slowdowns or even falls in some periods, the survey suggests that shipments to China are on the rise considering data since 2008, said Lia Valls, a research associate at Ibre. The volume exported by Brazil to the Asian country grew more than 360% in 2021 versus 2008, the Icomex shows. On the other hand, the volume shipped to the United States fell 18.6%, while exports to Argentina and the European Union dropped 30% and 28%, respectively, in the same comparison.

It is important to highlight the effect of volumes, Ms. Valls said, because the value shipped by Brazil last year grew predominantly by the price factor, driven by key items like agricultural and metal commodities. Iron ore had a prominent role. Still according to Icomex, the average price of exports rose 29.3% year over year in 2021. In volume, shipments increased at a much slower pace, 3.2%.

Structural and cyclical issues explain Asia’s largest share in Brazilian exports, said Livio Ribeiro, a researcher at Ibre and a partner at BRCG Economic Consultants. “The most structural issue is that we are developing an export agenda that is very complementary to the Asian value chain. This is true for China, which leads many of the region’s productive processes, but it includes other countries on the continent, such as Korea, Malaysia, Singapore and even Indonesia,” he said. That’s why the increase in export value in 2021 was not evenly distributed among the blocs, according to him. “About 90% of that margin went almost entirely to China.”

Brazil’s tariff structure for exports to the European Union, Mr. Ribeiro compares, is not very different from China, considering the prominent role of agricultural and metal commodities. “But Asia has been buying the incremental [volume], and this makes sense when you consider that China and Asia have been growing above the global average and the eurozone countries have been growing less than the United States.”

The long-term path in volumes follows similar logic, Ms. Valls said. The European Union has had much lower growth than Asia and the United States since the 2008 financial crisis, she recalled. The picture is similar to the recovery seen over the past year, after the first cycle of the pandemic, Mr. Ribeiro said, which is already the broader factor of the scenario, as Asia overcame the health crisis more quickly with the first variants of Covid-19 and resumed economic growth with more vigor.

In relation to South America, the Argentina factor weighs the most. For economists, there is no prospect of a faster recovery in the values exported to the region if there is no more sustained recovery of the Argentine economy over time. At the same time, Mr. Ribeiro said, there is also a reorganization of the automotive sector, with many factories settled in Argentina, which does not favor Brazil.

Source: Valor international

https://valorinternational.globo.com/