Itaú buys broker to speed up retail expansion

Until the beginning of October last year, Itaú was forbidden by the Central Bank of Brazil to make new acquisitions in the investment segment, due to its agreement with asset management firm XP. Once the separation between the two companies was concluded, this interdiction no longer existed and Itaú unveiled Thursday the purchase of Ideal, another brokerage firm. The bank will pay R$651.3 million for 50.1% of the firm and, after five years, will be able to acquire the remaining slice.

Ideal Investimentos is expected to be the spearhead for Itaú Unibanco to enter businesses that it has not yet operated, according to Carlos Constantini, chief executive of the bank’s wealth management and services division. As the digital brokerage serves mainly institutional investors in high-frequency trading, the executive does not expect that there will be any barrier to the approval of the deal, either by antitrust regulator Cade or by the Central Bank, as it happened with the transaction with XP.

“We are not buying a client base [as was the case with XP]. Ideal is still going to make a move to build retail. We’re buying people’s knowledge and the technology. It’s not comparable,” Mr. Constantini said. “It’s more the expectation of building a business than buying a business and keep driving.”

It was the recent divorce from XP that also allowed Itaú to look at its surroundings. “It’s going to be an exciting year to get the pieces on the board and play. I don’t think it’s going to be big acquisitions, but from our point of view it’s an opportunity to look at the whole platform and different ways of serving the customer where the bank is not,” the executive said.

Arrangements in the “broker as a service” model, to offer partner-branded investments and reach new customer bases are among the plans for the acquisition. Retail companies, utilities and the corporate segment served by Itaú are the potential targets. It will also be on Ideal’s platform that Itaú intends to accelerate the service to independent financial advisers, which is largely responsible for XP’s climb. The fintech ended 2021 with R$815 billion under custody.

“When we look ahead, the digital brokerage will play an important role in serving retail clients, whether directly or through the use of third parties, such as independent financial advisers, or in environments outside the financial market, such as retailers,” Mr. Constantini says. He said that for some time he had already discussed with Ideal’s partners some kind of partnership, but the conversations naturally evolved into an acquisition. The purchase of the control and then the entire operation will effectively be subject to regulatory approvals.

Unlike the transaction with XP (in which there was a commitment from both parties), this is a right that can be exercised or not. In the transaction, both Ideal’s founding partners and the Kaszek fund will be diluted in proportion to Itaú’s capital contribution. The private equity manager invested R$100 million in the business in September 2020.

In the view of Filipe Medeiros, CEO of AAZW, a company that provides technology and consulting services to independent financial advisers, for an institution as big as Itaú, it was natural for it to make a move to advance in this market and the purchase of Ideal serves this purpose. “The independent advisory market, represented in large part by independent agents, is already too big not to be considered by brokers and banks that want to enter this sector,” he said.

For Carlos Macedo, an analyst at OHM Research, Ideal is complementary to Itaú’s existing business and allows the bank to compete on equal terms with XP, BTG and Nubank. “It is worth remembering that service revenues in the traditional model — charging for account maintenance, transfers, etc. — are a business model that tends to die,” he said. “Services that have a higher added value, such as investment advice, for example, should still be able to generate revenue for banks. It makes sense for Itaú to seek to expand its operations in this field, since its competitors are quite active.”

Renata Cardoso, a partner for banking and finance at law firm Lefosse, says it is not yet possible to know how the CADE and the Central Bank will evaluate the purchase of Ideal by Itaú, but she points out that the deal is part of a large movement of mergers and acquisitions (M&A) in the financial services sector. “Big banks are using these acquisitions as a way to renew their business, reinvent the way they operate, and even acquire and develop new technologies. It is something we will continue to see throughout 2022.”

“It emerges as a mantra of focus on clients. They are the ones who will gain the most from the deal, since Ideal will help us expand and standardize the offer for different channels,” Itaú CEO Milton Maluhy Filho said in a statement. Nilson Monteiro, Ideal’s CEO, will remain at the head of its operations, together with the other founding partners of the company. The management and conduction of Ideal’s business will remain independent from Itaú, which will become another institution served by the brokerage house.

Source: Valor international

https://valorinternational.globo.com/

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Brazilian firms raised record amount in 2021, Embraer sells subsidiaries in Portugal, Via buys logistics startup

Investing in Brazil : 5 Sectors to follow and invest in 2022 - Europartner

Brazilian companies raised R$596bn in domestic capital market in 2021, an all-time high

The Brazilian capital market had a landmark year. Companies in the country raised R$596 billion in 2021 considering equity, bonds and hybrid instruments, up 60% year over year and the highest amount since records began, said Anbima, the association of securities firms.

The companies also raised $24.8 billion abroad, down 4.7% year over year. Considering funds raised locally and abroad, Brazilian companies got R$734 billion.

In variable income, companies issued R$128.1 billion, which was not higher than the nominal result of 2010, of R$150.3 billion. However, the figure of 11 years ago includes a one-off move by oil giant Petrobras, which raised R$120.3 billion.

In fixed income and hybrid instruments, companies raised R$467.9 billion in 2021. This is another record. The bond market alone totaled R$253.4 billion, more than double that of 2020.

Embraer sells subsidiaries in Portugal to Aernnova Aerospace for $172m

Embraer unveiled on Wednesday that it has sold two subsidiaries in Portugal, Embraer Portugal Estruturas Metálicas (EEM) and Embraer Portugal Estruturas empósitos (EEC), to Spain’s Aernnova Aerospace for $172 million. Both companies supply components used in aircraft manufacture and, after the closing of the deal, scheduled for the first quarter, they will continue to supply parts to Embraer.

The sale is neutral for the company, says Citi. The bank questions whether the company has not created unnecessary complexity. Citi has a neutral recommendation for Embraer, with a $17.50 price target for American Depositary Receipts (ADRs) traded on the New York Stock Exchange (NYSE).

Via buys logistics startup CNT

Via, owner of Casas Bahia and Ponto, announced the acquisition of 100% of the capital stock of the logistics startup CNT, which specializes in complete offers for e-commerce operations, according to a statement to the market. The value of the transaction was not disclosed.

According to Via, the transaction value consists of a fixed and a variable portion, with the fixed portion implying a multiple of about 0.20 times the gross volume of goods (GMV) in 2021. The variable part is conditioned to the achievement of performance targets and the permanence of CNT’s main executives at the head of the business.

CNT is specialized in complete offers for e-commerce operations, multi marketplace and platforms in the “plug & play” model, and have been operating for 11 years in the provision of complete logistics services (fulfillment) and for four years in services in e-commerce (full commerce).

Source: Valor international

https://valorinternational.globo.com/

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Brazil to adopt unilateral retaliation in foreign trade

The Brazilian government will use an arsenal to apply unilateral retaliation against countries that were convicted of illegal measures on Brazilian exports, but use tricks to maintain restrictions, Valor has learned.

A provisional measure already approved in ministerial meetings, and currently in the Chief of Staff Office, authorizes the federal government to retaliate proportionally and unilaterally, in cases of litigation victories at the WTO, when the losing country makes the so-called “appeal in the void”.

This is what happened this week with India in the sugar dispute and with Indonesia at the end of 2020 in a dispute involving barriers to entry of chicken meat. Both countries appealed to the Appellate Body knowing that the mechanism is inoperative and cannot decide; hence the term “appeal in the void”. With that, in practice, they stop the Brazilian victory and maintain the measures considered illegal by the panel, which cost millions of dollars in losses to Brazilian producers.

India and Indonesia are thus potentially the first to be threatened when the provisional measure comes into force. Retaliation takes the form of surcharges on goods and services from the targeted countries, or suspension of intellectual property rights.

Sarquis JB Sarquis, secretary of Foreign Trade and Economic Affairs at the Foreign Affairs Ministry, known as Itamaraty, emphasized that “the current paralysis of the WTO Appellate Body is at the origin of the initiative conceived by Itamaraty, which aims both to protect the country’s legitimate commercial interests within the framework of the multilateral trading system and to promote the full functioning of the system based on the rules and fundamental principles of the WTO”.

“Once the WTO Appellate Body is back to normal, the initiative will have served its purpose,” he added.

In the same vein, the secretary of Foreign Trade at the Economy Ministry, Lucas Ferraz, stated: “We understand that it is a very important mechanism to face the current situation of appeals in a void. The Brazilian government is committed to the WTO reform process, as well as the timely restoration of its Appellate Body. We cannot condone the opportunistic use of the current situation, in clear detriment to our productive sector.”

Current WTO rules allow a country to apply trade retaliation if the convicted country fails to implement the recommendations of the Appellate Body, a kind of supreme court for international trade.

However, the Appellate Body is paralyzed, without any of its seven permanent judges, because Washington blocks the appointment of new arbitrators. As long as this legal fact (which no one had foreseen) persists, WTO members have the possibility to circumvent the condemnations established by the panel and avoid changing the measures considered irregular.

Brazil will now follow the example of the European Union, with the unilateral retaliation mechanism. As long as the Appellate Body does not function, and the convicted country does not participate in a parallel arbitration mechanism, Brasília will impose what negotiators call the precautionary principle to protect the interests of domestic producers.

A group of 25 WTO members, including the European Union (27 countries), tried to alleviate the problem of the Appellate Body blockade by creating a plurilateral parallel arbitration system. The disputes between its participants thus have a final decision. For example, the most recent dispute opened by Brazil, against the European Union, involving barriers to chicken meat in the European market, is guaranteed to have a decision implemented, because both participate in this plurilateral mechanism.

India and Indonesia do not participate in this plurilateral mechanism. In 2019, when Brazil denounced India for illegal policies to support the sugar sector, which affect international prices, the Itamaraty mentioned that expert estimates pointed to losses of up to $1.3 billion for Brazilian exporters per year.

In the case of Indonesia, calculations are that Brazil could sell up to 3,000 tonnes of chicken meat a year in the initial phase, if restrictions were lifted. But the Indonesian government has resisted for years.

Brazil won, without actually seen results, a dispute against the Asian country in 2017. A WTO panel found Brazil right that year. Indonesia had until July 2018 to implement the judges’ recommendations. It made some changes that Brazil considered insufficient.

Another panel was then formed to examine the implementation of the judges’ recommendations, and Brazil won again by proving that Indonesia maintained restrictions on Brazilian exports. Indonesia then appealed “to the void” in December 2020, knowing that the WTO Appellate Body does not work.

India and Indonesia are now among the countries that most subsidize agriculture in the world. And the paralysis of the WTO Appellate Body actually ends up benefiting them. “Brazil continues to work actively for the re-establishment of the Appellate Body and for the full development of WTO rules and reform, including in agriculture and subsidy disciplines, in accordance with terms and mandates established since the Uruguay Round,” said Mr. Sarquis.

The paralysis of the Appellate Body caused by the Americans “is very serious, it gives the impression that the U.S. no longer wants the WTO, as a system of rules and multilateral disciplines, agreed upon, applied, with a litigation process which obliges the losing party to comply” with the decision, notes Pascal Lamy, former WTO director-general.

He recalls that this obligation to respect decisions, under penalty of retaliation, is what distinguished the WTO from other organizations whose rules are more or less applied and in which the countries, when they lose a case before the International Court of Justice in The Hague, for example, keep the sovereignty to apply or not the result.

In Mr. Lamy’s view, the U.S. is obsessed with China and wants to be able to strike unilaterally without being tied to WTO rules and decisions of its Appellate Body. This American absence causes a degradation of the multilateral system, and more countries seek unilateral arsenals.

Source: Valor international

https://valorinternational.globo.com/

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E-commerce platforms pass on costs to customers

Veja o que você precisa para abrir um e-commerce

The rise in interest rates, the increase in logistics costs and the need for companies to recover some profitability have led Brazilian online marketplaces to raise prices. On such e-commerce platforms, product or service information is provided by multiple third parties, and they charge for the services they offer. They have already reported there was a reduction in shipping subsidies, reflecting an increase in the value paid by sellers, and a raise in commission rates.

Interest-free installments have also been reduced, and charges for fees that were previously exempt are expected to begin in the coming months. Some of these announcements have been made to sellers in recent weeks, and the measures vary from company to company, but involve most of the major platforms — Mercado Libre, Via and Amazon —, retailers told Valor.

According to consultants, this may be a sign of greater rationality in business management, after companies have lost a lot of market capitalization and after strong competition has affected the margins of some companies.

Those measures may increase final prices at a time when the inflation in the digital environment already exceeds the official inflation. Sellers say they will have to raise prices. Online inflation was 18.8% from January to October, above the Brazil’s benchmark inflation index IPCA or the General Market Price Index (IGP-M).

Sources say that some platforms have been guiding retailers to “improve” their prices so to adapt to these increases. Online marketplaces do not interfere in the commercial policy of the stores, but there is constant contact between them.

The most important change is coming from Mercado Libre, which communicated the changes to its partners on December 9. When contacted, the company confirmed the decision. Among the main changes in the rules is a reduction in the interest-free installment plans, and a reduction or elimination (depending on the retailer) of the freight subsidy Mercado Livre used to give to those who chose the platform for its deliveries. It will also take longer for the retailer to receive the money for the sale.

In a change announced this month, purchases of up to R$299 can be financed in up to nine interest-free installments. Between R$300 and R$1,499, the installment plan applies in 10 interest-free installments. Previously, in both situations, there was no fee charged in up to 12 installments.

Mercado Libre will also keep the shopkeeper’s resources in cash for longer. As of February, retailers with a reputation already calculated by the platform will receive the purchase price within five working days after delivery by the group. Previously, this happened in 48 hours.

Also since this month, there was an average increase of 3% in shipping costs that the shopkeeper pays for the free service on products up to 30 kilos. The subsidies have also been changed: retailers who sell for delivery within 24 hours, and with a good reputation on the website (green rating), now have a 10% subsidy on the shipping rate in 2022 instead of 40% in 2021. This change applies to new items starting at $79.

If the merchant’s reputation is not good, the company will no longer give discounts on the free shipping rate. It is a way for the company, in addition to reducing costs, to encourage sellers to have better grades.

Finally, there was also a change in the policy regarding financial investments. After February, the accounts of companies will no longer generate yields paid by Mercado Pago, the company’s payments arm. Funds held in accounts offered yields above the savings account.

For the company, the changes reflect the worsening economic situation. “We are living a very challenging outlook, with very strong interest rates and inflation, and with increases in costs such as energy and fuel, which affect the business. We intend to continue investing, but we are not unscathed by all this, so we have made some adjustments,” said Julia Rueff, head of the Mercado Libre’s online marketplace for Brazil.

Ms. Rueff believes that the company continues to have a competitive set of conditions compared to its rivals and sees no risk of losing sellers. So far, only Magazine Luiza and Americanas have not reported changes in rules. “These are adjustments to preserve our value proposition, and everything we offer and have been improving. We are a technology company, which demands hiring, investments,” she said.

“And if you analyze it well, this 3% increase in shipping costs, for example, for a much higher fuel inflation, we pass it on much less. So it was something studied and passed on to the store owners in advance.” In 2021, the company announced R$10 billion in investments in the country, more than double that of 2020.

Also in late 2021, Via (Casas Bahia and Ponto) informed storeowners about the withdrawal of discounts on their commission rate and also unveiled increases. The company exempted new sellers to draw more retailers and reduced the rates for others.

According to sellers consulted, Via raised this rate by up to five points compared to 2020. “They reduced [the rates] in part of 2021 to 2%, 3% to even 5%, and that was up to 14% previously. But as of this year, the overall rate [for all segments] went to 21%. For our lines, the commission went up to 18% from 14% on average,” said Jefferson Oliveira, head of Viabem, a healthcare products store.

Another change was the reduction of the interests-free installment plan. “They used to sell an R$100 product in 10 installments of R$10, without interest. Now, depending on the price of the product, they do only up to three times without interest. In six installments, they are charging 0.99% per month, a rate that they did not have last year,” the executive said.

“The commission with which Via worked before lasted for a long time. It is not sustainable, so they went up about five points now,” said Roberto Wajnsztok, a consultant at Origin5, which provides services with tenants. “In addition, investments have skyrocketed for a sector with weaker sales. Just look at Mercado Libre’s spending. It is necessary to give an answer to the market in the next earnings report.”

Amazon begins, in March, to charge fees to collect parcels, and as of June the company will implement fees for storage of products in the company’s centers and for removal of inventory (when the retailer picks up their products back at Amazon’s centers). The information has been passed on to retailers for several months. The company maintains its fees of 8% to 16%.

For Mr. Oliveira, it will be necessary to pass on part of these hikes to customers. “Our internal costs have also gone up, and that adds up to these changes in the rules,” he said.

For Gabriel Lima, CEO of the consulting firm ENext, Amazon and Mercado Libre could even pass on more of the impacts on costs, especially in logistics, with the rise in fuel. “Either they can still move more, or they prefer to maintain a strategy still competitive against Magazine Luiza and Americanas, which can also make their hikes at some point.”

Magazine Luiza says it has not changed its contract conditions, with commission rate at 12.8%, which can reach 16% when there is a request for early payment. But it sees a normalization process in the market, after the phase of lower rates. The company declined to say whether it will make adjustments in the short term. “What we see is a normalization in the conditions facing a market more pressured by inflation and interest rates. The platform needs to be sustainable and the ‘seller’ needs to be able to manage these costs and have their margins positive. It has to work both ways,” said Leandro Soares, executive director of Magazine’s online marketplace.

Source: Valor international

https://valorinternational.globo.com/

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Central Bank explains inflation target burst in 2021

O presidente do Banco Central, Roberto Campos Neto, durante lançamento do Novo Marco de Garantias.

The COVID-19 pandemic, the increase in the global price of commodities (primary goods with international price quotation) and the water crisis were the main reasons that justify the failure to meet the inflation target in 2021, the president of the Central Bank Roberto Campos Neto said. Due to a legal order, he sent this Tuesday (Jan. 11), a letter to the Minister of Economy Paulo Guedes, and to the National Monetary Council (CMN) justifying the official inflation of 10.06 percent in 2021, according to the Extended National Consumer Price Index (IPCA).

The official inflation target for last year was 3.75 percent, with a range of tolerance of 1.5 percentage point. The index, therefore, could vary from 2.25 to 5.25 percent. This was the sixth time, since the creation of the current inflation system, in which the president of the Central Bank had to justify the failure to meet the target.

According to Campos Neto, much of the high inflation in 2021 was a global phenomenon driven by the COVID-19 pandemic. The disease affected trade flows across the planet, creating bottlenecks in the distribution of products. According to him, the phenomenon affected not only emerging countries, but also developed economies.

“Pressures on commodity prices and on global production chains reflect the changes in consumption patterns caused by the pandemic, with a proportionately greater share of demand directed to goods,” Campos Neto wrote. “In fact, the significant acceleration of inflation in 2021 to levels above the targets was a global phenomenon, affecting most developed and emerging countries.”

The last time the president of the Central Bank justified the noncompliance with the inflation target was in 2017. However, inflation ended that year below the target floor, at 2.95 percent, against a minimum limit of 3 percent for the IPCA.

Source: Agência Brasil

https://agenciabrasil.ebc.com.br/en

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Brazil expands data centers driven by demand from cloud giants

Data Centers: tudo que você precisa saber - Olhar Digital

Given the increase in demand for cloud services and the expected improvement of the structure of Chinese providers in Brazil, companies specializing in building large data centers in the country, such as Ascenty, Equinix, Odata, Scala, say that 2021 was a year of high demand and 2022 will be no different.

Besides the increase in the structures of large U.S.-based providers (AWS, Google, Microsoft, IBM, Oracle and others), which contract operations in the interior of São Paulo and in Rio de Janeiro, the expansion plans include projections for operations of Chinese giants.

Huawei, which began offering cloud services in Brazil in 2016 using the structure of phone carrier Vivo before having its own data centers in 2019, is a client of companies that build data centers in the country. Huawei has two data centers in the city of São Paulo and has expansion plans for 2022. “We have an aggressive expansion plan, but we cannot unveil this to the market yet,” the company told Valor.

Tencent, one of the largest internet service providers in the world – owner of video game developer Riot Games, famous for the title League of Legends – opened its first cloud center in the country in November. Then, the Chinese company said that the data center in São Paulo will serve companies in Brazil and in other Latin American countries as part of a global network of Tencent Cloud’s data centers with footprint in 27 regions.

Brazil is also in sight of Alibaba’s cloud division. Sources say the country is key for Alibaba Cloud, which currently operates in 70 countries, including two data center infrastructures in the East and West coasts of the United States, but has no operations in Latin America.

Alibaba, China’s main provider of computing cloud infrastructure as a service, held the third largest share of the world market in 2020 (9.5%), data by consultancy Gartner show. The first one, AWS, held 40.8% of the market, followed by Microsoft with 19.2%. Huawei debuted in the ranking of the five largest providers in 2020, in the fifth position, with a 4.2% share, behind Google, the fourth place, with 6.1%.

Alibaba’s plans, however, have no date yet. The group operates in the country through online marketplace AliExpress and, more recently, through logistics company Cainiao, which started to meet AliExpress demands locally last year.

After the rush for business digitalization at the beginning of the pandemic, 2021 was a year of consolidation and expansion of projects, which raised the demand for outsourced data centers. “Companies’ digitization drive consolidated in 2021,” said Eduardo Carvalho, general director in Brazil at Equinix. “Despite the economy and the market, all market segments increased investments in cloud computing last year,” he said.

Companies’ data and applications migration to the cloud also reflects the search for cost reduction with machine maintenance, space to expand their operations and the concern with network resilience. “I visited a customer in the region of Avenida Paulista, in São Paulo, who put big servers in the office reception because he handled all the data infrastructure internally, but ran out of space,” said Marcos Siqueira, chief operating officer at Ascenty.

The company, which has the largest number of active data centers in the country – 18 since its foundation in 2010 – invested R$160 million to open two data centers in Hortolândia (São Paulo) and Rio de Janeiro. This year, it will open its fifth data center in Hortolândia.

To create resilience zones, with more than one data center as a safe haven, the expansion of Brazilian data centers has been concentrated in cities near the city of São Paulo, such as Barueri and Osasco, and the nearby countryside, such as Hortolândia, Vinhedo and Santana de Parnaíba.

Source: Valor international

https://valorinternational.globo.com/

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Drought in South region makes crop projections plunge

Drought | World Meteorological Organization

The drought in the South of Brazil, which has caused losses in crops in Paraná and Rio Grande do Sul, made the National Supply Company (Conab) on Tuesday to reduce its estimate for harvest of grains and fibers in 2021/22, to 284.39 million tonnes. Last month, when forecasts were positive, they were at 291.07 million tonnes.

Still, if the new number is correct, the harvest will be 12.5% higher than in 2020/21, with 252.79 million tonnes. This is supposed to happen because the planting area, already defined in the summer, grew 4.5% between the seasons, to 72.11 million hectares.

In the case of soybeans, the increase in area was 3.8%, which will probably guarantee a record-breaking harvest, even with the crop failure in the southern states. Conab’s projection is now for a harvest of 140.5 million tonnes, compared to 142.8 million last month, but 2.3% higher than in 2020/21.

For summer corn, whose estimates were for a recovery of production due to good prices, the forecast now is for a harvest of 24.8 million tonnes, only 0.3% higher than in 2020/21 and 14.7% lower than forecast last month.

Putting together the three crops of grain, the estimate is that the country will harvest 112.9 million tonnes in 2021/22, 29.7% more than the last cycle, when the main crop (winter) was punished by drought.

In the case of rice, whose production is concentrated in Rio Grande do Sul, the state company continues to estimate a production of 11.4 million tonnes because most crops are guaranteed with irrigation. This estimate represents a decrease of 3.2% compared to 2020/21.

For beans ¬— which also have three crops per season in Brazil — the expectation is a growth of 7.2%, to 3.08 million tonnes. This result is due to the expected increase in average yields for crops, which, like corn, were also severely affected in 2020/21 by drought and frost. In comparison with the previous report, Conab cut the estimate by 1.7% due to the problems in Paraná.

For cotton lint, Conab forecasts a harvest of 2.7 million tonnes, 14.8% more than last season and 3.7% more than last month’s forecast.

Finally, Conab made a downward correction in the projections for wheat, which has just been harvested. The agency now forecasts a harvest of 7.7 million tonnes, from 7.8 million last month. This figure represents an increase over the 2020/21 result of 23.2%, but a drop compared to initial estimates that topped 8.6 million tonnes.

Source: Valor international

https://valorinternational.globo.com/

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Ocean freights remain at record levels in Brazil driven by pandemic

A container ship docked in Santos — Foto: Ana Paula Paiva/Valor
A container ship docked in Santos — Foto: Ana Paula Paiva/Valor

After two years of pandemic, ocean freights remain at record levels in Brazil. On the one hand, the industry believes that prices in the short-term market have peaked and are unlikely to rise further. On the other hand, the persistence of the pandemic still generates a lot of uncertainty and makes forecasts difficult.

In Brazil, the routes most affected by price increases are those of imports from Asia and of exports to the United States. In the last two months, the routes to Europe have also seen sharp growth. The impact, however, is widespread, since the crisis is the result of a global disruption in maritime trade.

Since 2020, cargo transport has been going through a “perfect storm”: staff cuts due to the virus infection; port closures or congestion; and delays in cargo release. All this in the midst of a skyrocketing demand for consumer goods – in many countries fueled by government stimulus. This mismatch has led to a generalized shortage of containers and ships, travel delays and unprecedented price rises.

On the China-Brazil import route, freight rates began to climb as early as the second half of 2020, but it was last year that they reached an all-time high, around $10,000 per TEU (20-foot equivalent units of containers). The price closed 2021 at an average of $9,700 per TEU – an increase of 62% compared to the previous year and 397% higher than in January 2020, according to a survey by the National Confederation of Industry (CNI).

In the case of export routes to the United States, price increases accelerated in the second half of 2021. The freight to the East Coast of North America ended last year at $9,300 per TEU, more than five times the price charged a year ago. In the route to the Gulf Coast of the United States, the price closed 2021 at $7,700, compared with $1,400 in December 2020, CNI said.

These values refer to the short-term market, and do not include prices of bilateral contracts (signed between shipping companies and customers). In this type of agreement, companies that need to transport their products get more stability and protection for moments of price swings. If the entire market is considered, prices drop substantially. For example, in the Asia-Brazil import route, the average freight was $5,794 per TEU in November 2021, according to Logcomex’s calculation.

Prices in the spot market seem to have already peaked “both in exports and imports,” said Luigi Ferrini, senior vice president in Brazil at Hapag-Lloyd, a shipping company. At this moment, groups that are renewing long-term contracts are the ones feeling prices growth. Renegotiations have included price increases seen in 2021.

Andrew Lorimer, executive director at the consulting firm Datamar, believes that there is still room for some price increases. “It could still get a little worse. The main drivers of the crisis today are Chinese supply and U.S. demand, where the problems are likely to persist. In China, we have seen halts because of the omicron variant. And in the U.S., there are still logistical bottlenecks, a huge congestion at the East Coast ports,” he said.

The industry is also already seeing an accommodation of prices, although at a level considered high, said Matheus de Castro, an infrastructure specialist at CNI. “It is challenging to bring a perspective of resumption of normality, due to the behavior of the pandemic. But we are starting to see stabilization, although at prices five, six times higher than before the pandemic.”

Lower consumer spending in Brazil, paradoxically, has contributed to stabilization by helping to balance the supply/demand ratio, said Rafael Dantas, commercial director at the logistics company Asia Shipping. “[Consumer spending] has already peaked. We believe that the volume will fall this year. This is already happening in practice. December was not as heated as 2020, demand is slowing down. So, for us, the situation is almost normal.”

He also highlights, however, the uncertainties brought by the new wave of the pandemic in the world – especially in China, where social distancing measures are more drastic.

Rafael Gehrke, with Logcomex, believes that it will be possible to have a clearer vision about the potential stabilization of prices as of the second quarter, when the effects of the Chinese New Year will be over, at the beginning of February – a holiday that has a great impact on the cargo movement, with an increase in trips before and after the date, when the activities in the country are halted.

“From the second quarter on, other factors may also be clearer, such as the reaction of the local demand in Brazil or a potential increase in interest rates in the U.S., which may slow consumer spending a little,” he said.

Analysts say that it is difficult to predict at which level the freights will stabilize once the scenario calms down. Mr. Castro, with CNI, says that it is difficult to imagine that prices will return to the level seen in the last decade. Mr. Ferrini, with Hapag Lloyd, says that prices are likely to stop at some point between the current level and those seen before the pandemic.

Despite the difficulty of projection, Mr. Lorimer, with Datamar, considers the current prices unsustainable. “A good part of last year’s inflation has to do with the cost of transportation, which impacts everyone. Many products, such as those of lower value, don’t even sustain themselves with such high freight.”

Source: Valor international

https://valorinternational.globo.com/

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Votorantim-CPPIB deal values Cesp at R$9.1bn

Votorantim e canadense CPPIB miram energia solar e podem investir em transmissão - Época Negócios | Empresa

The minority shareholders of Cesp, a São Paulo-based power generating company, managed to improve the conditions of the deal that will merge assets of Votorantim and the Canadian pension fund CPPIB.

Led by Felipe Dutra, from the activist management firm Squadra, the independent committee set by Cesp to negotiate the deal recommended to the board of directors that the power generation utility be valued at R$9.1 billion in the exchange ratio, the equivalent of R$27.93 per unit.

The committee’s recommendation was accepted by Cesp’s board, which approved it on Friday and has just released a notice of material fact about the transaction. With the change, Cesp’s minority shareholders will hold 30.63% of the company resulting from the union of assets. In the original proposal, they would keep 29.9%.

The new evaluation of Cesp implies a 5.9% improvement in comparison to the suggestion made at the end of October by the controlling shareholders. At the time, the power utility was evaluated at R$26.76, with an equity value of R$8.6 billion.=

“According to the math we did last week, considering the internal rate of return to 8%, GSF [Generation Shift Factor], long-term price and reference date [end of 2021], Cesp would be valued at just R$28, which suggests a fair exchange ratio,” said Antonio Junqueira, with Citi, in a preliminary comment sent to asset managers. The analyst also praised the independent committee’s work. “Very good work by the committee. They respected the minority shareholders and really aligned all the variables.”

After the approval of the exchange ratio, Cesp must now call a general meeting of shareholders to consider the matter. As Votorantim and the Canadian pension fund will be able to vote, the deal is virtually approved. The merger is expected to be completed by February.

The creation of the new company, a renewable power giant that will be listed on the exchange B3, is advanced. The first stage has already been concluded, with the union of the electricity assets of VTRM (a joint venture with the Canadians that had control of Cesp and wind power assets) and Votorantim Energia.

In the first stage of the deal, the Canadian pension fund injected R$1.5 billion into VTRM. Votorantim offered the assets of Votorantim Energia, which were valued at R$2.8 billion. Now, the Cesp-VTRM, which will create the new company with a name still undisclosed, remains to be done.

The independent committee also increased the valuation of the assets of Votorantim Energia, to R$2.8 billion from R$ 2.5 billion. With the changes, the power company is born valued at almost R$17.9 billion. The amount considers Cesp’s equity (R$9.1 billion), Votorantim Energia’s assets (R$2.8 billion), those of VTRM (R$4.5 billion) and the Canadian fund’s injection (R$1.5 billion).

Votorantim will hold 37.74% of the new business, while CPPIB will keep 31.94%. The remainder will remain with Cesp’s current minority shareholders, which includes asset management firms such as Squadra (owner of 19.4% of the preferred shares and 12.3% of the total capital) and Truxt.

Source: Valor international

https://valorinternational.globo.com/

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